Friday, June 08, 2007

So Many Measures, So Little Time

I’ve been collating lists of marketing performance metrics from different sources, which is exactly as much fun as it sounds. One result that struck me was how little overlap I found: on two big lists of just over 100 metrics each, there were only 24 in common. These were fundamental concepts like market share, customer lifetime value, gross rating points, and clickthrough rate. Oddly enough, some metrics that I consider very basic were totally absent, such as number of campaigns and average campaign size. (These are used to measure staff productivity and degree of targeting.) I think the lesson here is that there is an infinite number of possible metrics, and what’s important is finding or inventing the right ones for each situation. A related lesson is that there is no agreed-upon standard set of metrics to start from.

I also found I could divide the metrics into three fundamental groups. Two were pretty much expected: corporate metrics related to financial results, customers and market position (i.e., brand value); and execution metrics related to advertising, retail, salesforce, Internet, dealers, etc. The third group, which took me a while to recognize, was product metrics: development cost, customer needs, number of SKUs, repair cost, revenue per unit, and so on. Most discussions of the topic don’t treat product metrics as a distinct category, but it’s clearly different from the other two. Of course, many product attributes are not controlled by marketing, particularly in the short term. But it’s still important to know about them since they can have a major impact on marketing results.

Incidentally, this brings up another dimension that I’ve found missing in most discussions, which often classify metrics in a sequence of increasing sophistication, such as activity measures, results measures and leading indicators. Such schemes have no place for metrics based on external factors such as competitor behavior, customer needs, or economic conditions--even though such metrics are present in the metrics lists. Such items are by definition beyond the control of the marketers being measured, so in a sense it’s wrong to consider them as marketing performance metrics. But they definitely impact marketing results, so, like product attributes, they are needed as explanatory factors in any analysis.

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