12.

Review
Marketing Metrics
Key objectives for today
 Summarize what have we accomplished

 The main topics

 Question types

 Practice exam
What have we accomplished?
After taking this course now you:
 Understand the diversity of metrics used by marketing
managers
 Are able to critically evaluate metrics (and assumptions
behind them) – separate wheat from the chaff
 Are able to select KPIs and diagnostics for overall
performance and in relation to specific marketing
disciplines (4Ps, individual tactics)
 Develop a measurement plan for marketing in your
future jobs (in brand management, consulting, marketing
research/analytics)
 Main topics organized in a
hierarchical flow (always adequate?)

Marketing Attitudinal Market Financial

actions outcomes outcomes outcomes

Rust, R. T., Ambler, T., Carpenter, G. S., Kumar,V., & Srivastava, R. K. (2004). Measuring marketing productivity:
Current knowledge and future directions. Journal of Marketing, 68(4): 76-89.
 Main metrics organized hierarchy-
free
• W1 PRODUCT PLACE
Intro W5 W6

W4 W7

W2-3

W11 W8

PRICE
W10
W9

• W12
Review PROMOTION
 W1: Introduction

MR as a course vs. metrics course

Typical market research course Metrics

Focus on methods (surveys,

Focus on the metrics themselves
experiments, qualitative)

Research process, statistical

Strategic use of information
techniques, reporting best practice

Academic orientation: measurement

Professional orientation: how to
theory (e.g. , scale development),
inform decision making
statistical theory (e.g., sampling
pragmatically
theory)

Complicated calculations Relatively simple!

 W1: Introduction

Professional dynamics in marketing

Provider Client

• Marketing department • Higher management

• CMO
• Brand managers Uncertainty

• Outside vendors (ad • Those commissioning

agencies, etc.) the vendors

?
Foundation of
theoretical METRICS!
knowledge base
 W1: Introduction

What is an insight?
 But defining what an insight is in marketing
can be tricky:

 An insight is usually not obvious nor

evident;
 An insight usually comes from connecting
multiple findings;
 An insight often requires a leap of
interpretation;
 An insight requires thinking.
 W2: Market share

Market share
 Construction:

Own sales (# , $)
Market share (%) 
Total market sales (# , $)

◦ Where do you think numbers are coming from?

◦ Relatively easy calculation – but always remember
to use benchmarks
◦ Value/dollar share – sales expressed in money
terms
◦ Volume/unit share – sales expressed in # of
products
 W2: Market share

Relative share
 Purpose
◦ To assess strength vs. largest competitor (dominance or
concentration in market)
◦ To construct the BCG grid
Firm strength

Question marks need to be

As they have future analysed carefully to
growth potential, determine if they are worth
invest to maintain the investment required to
dominant position grow market share

Extract profits and Such businesses are

invest as little as candidates for
possible divestiture

Market
attractiveness
 W2: Market share

Penetration (brand, market, share)

 Construction
Brand buyers (# )
Brand penetration (%) 
Total population (# )

Category buyers (# )
Market penetration (%) 
Total population (# )

Brand penetration (%) Brand buyers (# )

Penetration share (%)  
Market penetration (%) Category buyers (# )

How is this different from market share? From BDI/CDI?

 W3: Share of heart/mind

Share of heart/mind metrics

 Hierarchy of effects is expressed in many
forms:
•

• AIDA: Attention  Interest  Desire  Action (sales

model from early 1900s)
• DAGMAR (Defining Advertising Goals for Measured
Advertising Results, 1960s):
Awareness  Conviction  Comprehension  Action
 W3: Share of heart/mind

FCB grid
 Not all situations follow the same “LearnFeelDo” model (such
as AIDA) – as a result objective setting becomes unreliable
 A better strategic tool: the FCB-grid
Thinking Feeling

involvement
High LearnFeelDo
FeelLearnDo
involvement (AIDA)
Low

DoLearnFeel DoFeelLearn

Vaughn, R. (1980). How advertising works: A planning model. Journal of Advertising Research, 20(5): 27-33.
 W4: Margins/profits

Margins
 Purpose:
◦ To have a basic understanding of profitability
(the “value” of sales)

 Construction:
Unit margin ($)  Selling price per unit ($) - Cost per unit ($)

Selling price per unit ($) - Cost per unit ($)

Margin (%) 
Selling price per unit ($)
Total sales revenue ($) - Total cost ($)
Margin (%) 
Total sales revenue ($)
 W4: Margins/profits

Break-even analysis
 Purpose:
◦ To provide a rough indicator of the earnings impact of marketing activity
◦ “Break-even” point is the sales level where neither a profit, nor a loss is made
◦ “Contribution” a portion of sales revenue that is not consumed by variable costs
and so “contributes” to the coverage of fixed costs – at break-even contribution
fully covers fixed costs
◦ Contribution margin (%) is the fraction of the sales price that contributes
toward covering fixed costs
 W4: Margins/profits

Break-even analysis
 Construction – on volume basis
How to calculate break-even:
Fixed costs ($)
Break - even volume (# ) 
Contribution per unit ($)
How to calculate contribution needed for break-even:
Contribution per unit ($)  Selling price per unit ($) - Variable cost per unit ($)
Contribution per unit ($)
Contribution margin (%) 
Selling price per unit ($)
 W4: Margins/profits

Break-even analysis
 Construction – on volume basis
How to calculate break-even:
Fixed costs ($)
Break - even volume (# ) 
Contribution per unit ($)
How to calculate contribution needed for break-even:
Contribution per unit ($)  Selling price per unit ($) - Variable cost per unit ($)
Contribution per unit ($)
Contribution margin (%) 
Selling price per unit ($)
 W5: Product/brand mgmt

Methods for data collection

Classic test market Simulation test

 Select a small town demographically  Create concept boards (explaining new

similar to entire population product in detail)
 Launch the new product on a small scale  Use concept boards as stimulus in
 Observe trial rate (actual sales behavior) simple experiment/survey

 Project sales to entire population  Adjust statistically for biases

 Calculate projected sales to population
 W5: Product/brand mgmt

Volumetric projections
– construction in a simulation test

Trial rate (%)

80% 30%
Adjusted trial rate (%) =
(Definites(%)*.8+Probables(%)*.3)*
Awareness (%)* Repeat rate (%) =
Distribution (%) based on estimation

Projected trial population (#) = Projected repeat buyers (#) =

Target in general population (#)* Projected trial population (#)*
Adjusted trial rate (%) Repeat rate (%)

Projected trial volume (#) = Projected repeat volume (#) =

Projected trial population (#)* Projected repeat buyers (#)*
Units per purchase (#) Units per purchase (#)*
Repeat occasions (#)

Projected total volume (#) = Projected trial volume (#) + Projected repeat volume (#)
 W5: Product/brand mgmt

Brand equity
 Purpose:
◦ Measure the intangible value brands represent for
firms and consumers
◦ Business’ long-term objective is sustainable
competitive advantage, the marketing function’s long-
term objective is strong brands (which secure present
and future consumer demand)
◦ Brands are marketing assets even if they are not
necessarily accounted for as such in financial
accounting

Do these remind you of previous metrics?

How are these different?
 W5: Product/brand mgmt

Brand equity
 Construction
Three main types:
1. The premium that consumers would pay above the
generic (source: consumer research)
2. Trait-based models (examples: Aaker,Y&R) (source:
consumer research) – ALSO REMEMBER SHARE
OF HEART METRICS HERE
3. Models that have a financial valuation component
(Interbrand, MB BrandZ) (source: consumer
research and financial data)
 W6: Customer profitability

Customer profit
 Purpose:
◦ To identify the “best customers” in terms of
financial worth within a specified time period
◦ To dissect/de-average profitability on the
consumer level
 W6: Customer profitability

Customer profit
 Construction:
Customer profit ($)  Revenues earned from customer ($) - Costs associated with customer ($)

◦ Calculation can be based on individuals

◦ Or with large number of customers: groups
(quartiles, deciles based on profitability)
 W6: Customer profitability

Customer Lifetime Value (CLV)

 Construction: 
Margin ($) * (Retention rate (%)) t
◦ General formula CLV ($)  
t 1 (1  Discount rate (%)) t

◦ Simplified formula
Retention rate (%)
CLV ($)  Margin ($) *
1  Discount rate (%) - Retention rate (%)

Use if the following assumptions are met:

- Infinite time horizon
- Margins are constant
- Retention rates are constant

Discount rate is the “opportunity cost of capital” (typically the

prevailing interest you could get from a bank)
 W7: Sales/channel mgmt

Metrics for designing and managing

the sales force

Perfor- Compen- Forward

Territories Goals
mance sation sales

Metrics of Setting sales Salesperson Setting Using “sales

sales goals by effectiveness incentives pipeline” data
coverage previous measures to forecast
performance sales
or market
potential
 W7: Sales/channel mgmt

Channel metrics:
numeric distribution
Other Convenience
grocery stores Stores
(2,925) (50,000)

741 stores 834 stores 2,700 225 45,000 5,000

(all carry) (all carry) carry do not carry do not
carry carry

   
Number of outlets carrying brand (# )
Numeric distribution (%)  
Total number of outlets (# )

741  834  2,700  45,000 49,275

   90%
741  834  2,925  50,000 54,500
 W7: Sales/channel mgmt

Channel metrics:
All Commodity Volume (ACV)
Other Convenience
grocery stores Stores
(50B) (25B)

Total
   
grocery 24B 30B 48B 2B 23B 2B
sales

Total sales of outlets carrying brand ($) 125B

ACV (%)    97%
Total sales of all outlets ($) 129B

Total
cola 72M 90M 144M 6M 161M 14M
sales
Total category sales of outlets carrying brand ($) 467M
PCV (%)    96%
Total category sales of all outlets ($) 487M

PCV (%) 96%

Category Performance Ratio (%)    99%
ACV (%) 97%
 W8: Pricing

Methods of pricing
Internal External
Cost plus / Competition-
Target pricing based

Consumer
demand-
based

Auction-
based

Value-based
 W8: Pricing

Price elasticity of demand

 Purpose:
◦ To understand market responsiveness to a small change in price

 Construction:
Quantity 2 (# )  Quantity 1 (# )
Change in quantity (%) Quantity 1 (# )
Price elasticity of demand (I)   
Change in price (%) Price 2 (# )  Price 1 (# )
Price 1 (# )
Quantity 2 (# )  Quantity 1 (# ) Price 1 (# ) Price 1 (# )
 *  Slope(%) *
Price 2 (# )  Price 1 (# ) Quantity 1 (# ) Quantity 1 (# )

Slope
 W8: Pricing

Price elasticity of demand

Elastic portion of demand curve

PED >1

Inelastic portion of demand curve

PED < 1

Elasticity varies not only between different goods, but also along the demand
curve for any specific good using a straight-line demand curve.

PRICE ELASTICITY OF DEMAND WILL GO FROM INFINITY TO ZERO

WITH UNIT ELASTICITY IN THE MIDDLE
 W9: Sales promotions

Sales promotions metrics

Very
effective
raising short
term sales

Can be
detrimental
to brand
equity
Measures:
• Share of heart metrics/brand equity • Promotional lift
• Percent sale on deal • Promotional profitability
• Pass-through
• Price waterfall
 W9: Sales promotions

Baseline sales, incremental

sales, promotional lift
 Purpose:
◦ To benchmark and measure the short-term effects of
sales promotions
 Construction:
 Baseline sales ($, # )  Expected sales results, excluding effects of marketing effort

 Incremental sales ($, # )  Total sales ($, # ) - Baseline sales ($, # )

Incremental sales from promotions ($, # )  Total incremental sales ($, # ) -
- Incremental sales from advertising ($, # ) -
- Incremental sales from other marketing communication activities ($, # )
Incremental sales from promotions ($, # )
 Promotional lift (%) 
Baseline sales ($, # )
 W10: Advertising/digital

Advertising and digital metrics

 General advertising metrics
◦ Creative
◦ Media
 Impression=exposure=OTS
 Reach and frequency Measures of “media weight”
 GRPs
 CPMs
 Share of voice
 Digital metrics
◦ Digital advertising
 Click-through rate
 Conversion rate
◦ Web analytics
 Visits and unique visitors
 Abandonment and bounce rate

Creative metrics
Awareness
• Unaided ad awareness (first
mention: “Top of mind”) (When
thinking about the category do they
mention this brand advertising without
prompting?)
• Aided ad awareness (Do they
remember advertising for this brand list?)
• Advertising recognition (Have they
seen this specific ad? SHOW STIMULUS)
• Advertising branding (Which brand is
this advertising for?)
NOTE: WE CAN’T COLLECT AD
AWARENESS IN A COPYTEST.
WHY?
W10: Advertising/digital
Attitudes
• Message take-away (Unaidedly or
aidedly: what strategic message do
they think the ad conveys?)
• Standout (Is it salient in the clutter
of other ads?)
• Likability (Do they like this
advertising?)
• Knowledge (Is it persuasive?)
• Diagnostics (Is it humorous, boring,
exciting, etc.?)
• Brand impact (Does it influence
brand perceptions, purchase
intentions, WOM?)
 W10: Advertising/digital

Media metrics: Impressions, reach,

frequency
 Impressions do not tell you how many
times someone may have seen the ad…
Reach (# , %)  Unduplicated individuals who had the OTS the ad
Frequency (# )  The number of times an individual saw the ad

Impressions (# )  Reach (# ) * Average frequency (# )

 Impressions
Frequency  
  

Reach
 W10: Advertising/digital

Digital metrics
1 3
Audience Site-side • Visits and unique visitors
Measurement Analytics • Abandonment and bounce rate

2
Campaign
Evaluation

Ad-serving

 Click-through rate
 Conversion rate

Brand impact
 W11: Finance

Return on marketing investment

 Purpose
◦ To measure the rate at which spending on
marketing contributes to profits
◦ Note that the simplest formula we use here is
based on the single-period ROI formula we
discussed (no multi-period cashflows are
discounted)
 Construction
Return on marketing investment (ROMI) (%) 
Incremental revenue attributable to marketing ($) * Contribution margin (%) - Marketing spending ($)

Marketing spending ($)
 W11: Finance

Problems
 Linking marketing to finance is ill-advised where
it would be the most interesting

“I notice increasing reluctance

on the part of marketing
executives to use judgment;
they are coming to rely too
much on research, and they
use it as a drunkard uses a
lamp post for support, rather
than for illumination.”
David Ogilvy

Areas where it would be important, but Areas where it is easy to use

near-impossible to do (brand-building financial calculations, but not really
advertising, radical innovations) interesting (DM, sales promos, etc.)
Question types
 Conceptual questions:
 12, multiple choice questions 30 marks
 Relating to core concepts and metrics
 Based on lectures – no content that is in the book
BUT NOT in the lectures will be included

 Calculation problems:
 7 calculation problems, 30 marks
 Formula sheet provided