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6 Tips on Marketing Metrics
How do you show how marketing systematically contributes to shareholder value?
Marketing Value Metrics, the new book by Malcolm McDonald, Peter Mouncey and Stan Maklan, provides a metrics-based framework for developing and implementing marketing strategies that are measurable and accountable.
The key steps in the modelling process are described in detail, as are the procedures for applying it in practice. Here are 5 tips from the book to help you get started:
1. Ensure you have a robust marketing strategy that spells out clearly:
- A quantified marketing map of the markets you are serving, with key decision points clearly delineated.
- Proper needs-based segmentation at each key decision point.
- Comparative analysis of how well you meet these needs compared to your competitors.
- A summary of these analyses in a portfolio display showing the potential for your profit growth from each market over the next three years.
- Objectives and strategies based on this portfolio summary.
- An allocation of your scarce resources and a budget.
2. Ensure that this strategic plan will create shareholder value-added. To do this, do a risk assessment on each of your principal products for markets to ensure that your predicted net free cash flows over the next three years are realistic.
3. Ask your accountant to provide you with the amount of capital employed in your business and the cost of capital. Use this information to work with your Accountant to ensure that the aggregate of the risk-adjusted net free cash flows are positive - in other words, your strategic plan is creating shareholder value-added.
4. Now take the strategies for each of your products for markets from above (marketing strategies will be the 4 or 7 Ps designed to achieve each of your objectives) For each one, spell out quantitatively the changes/improvements required, who is responsible, by when, how much each will cost and how it will be measured.
5. Ensure you know approximately how much you need to invest in promotion to maintain your current position. (Let us call this "maintenance marketing expenditure".) The remainder can be classified as " investment promotional expenditure ". In carrying out net present value calculations, ensure you do the calculations on net free cash flows only for your investment expenditure. Use econometric models in these calculations where relevant.
6. Finalise the performance metrics plan in your marketing strategy
- Identify how each action in the strategy can be measured.
- Identify if the data for each metric is already available; planned; cannot be collected (with a cost/benefit & impact assessments).
- How frequently will the metric be updated.
- Is the metric a raw measure, or derived from other data?
- Who is responsible for this metric?
- Who needs to see the metric?
- Who is responsible for taking action if a metric indicates that a target is not being achieved?
Each of these tips is explained in detail in Marketing Value Metrics.