Lecture 11

Measuring the Marketing Performance

 Learning Objectives

1 Explain some key measurement metrics and methods for measuring

marketing performance
 The 2 key issues in measuring
marketing performance
1. What do we need to measure ?
è Measurement Metrics

2. How do we measure them?

è Measurement Methods
 Learning Objective 1

Explain key measurement metrics of marketing

performance
 Marketing return on investment
(marketing ROI)
• One important marketing performance measure is
marketing return on investment (or marketing ROI).
• Marketing ROI is the net return from a marketing
investment divided by the costs of the marketing
investment. It measures the profits generated by
investments in marketing activities.
 Marketing return on investment
(marketing ROI)
A company can assess marketing ROI in terms of standard
marketing performance measures, such as:
• brand awareness: the extent to which consumers are
familiar with the distinctive qualities or image of a
particular brand of goods or services
• sales
• market share: Company sales divided by market sales.
 How to measure Marketing ROI?

Marketing ROI can be measured using Profit-and-loss

analysis
 Profit-and-loss statement
Analysis
• A statement that shows actual revenues less expenses
and net profit for an organization, product, or brand during
a specific planning period, typically a year.
• Basing on Profit-and-loss statement, marketers can
calculate Marketing Profitability Metrics such as:
- Net Marketing Contribution
- Marketing ROS
- Marketing ROI
Profit-and-loss statement
 Net marketing contribution
(NMC)
• A measure of marketing profitability that includes only
components of profitability controlled by marketing.
NMC = net sales - cost of goods sold - marketing expenses

Referring back to HD’s profit-and-loss statement given in Table A2.2,

we can calculate net marketing contribution for the product as:
NMC = net sales - cost of goods sold - marketing expenses
= +4 million = +100 million - 55 million - 41 million
 Marketing return on sales
(or marketing ROS)
• The percent of net sales attributable to the net marketing
contribution— calculated by dividing net marketing
contribution by net sales.
 Marketing return on sales
(or marketing ROS)
• Referring back to HD’s profit-and-loss statement given in
Table A2.2, we can calculate Marketing ROS as:
 Marketing return on investment
(or marketing ROI)
• A measure of the marketing productivity of a marketing
investment—calculated by dividing net marketing
contribution by marketing expenses.
 Marketing return on Investment
(or marketing ROI)
• Referring back to HD’s profit-and-loss statement given in
Table A2.2, we can calculate Marketing ROI as:
Figure 2.8 Marketing Return on Investment
 Profit-and-loss statement

• A statement that shows actual revenues less expenses

and net profit for an organization, product, or brand during
a specific planning period, typically a year.
• Basing on Profit-and-loss statement, marketers can
calculate Marketing Profitability Metrics such as:
- Net Marketing Contribution
- Marketing ROS
- Marketing ROI
Profit-and-loss statement
 Net marketing contribution
(NMC)
• A measure of marketing profitability that includes only
components of profitability controlled by marketing.
NMC = net sales - cost of goods sold - marketing expenses

Referring back to HD’s profit-and-loss statement given in Table A2.2,

we can calculate net marketing contribution for the product as:
NMC = net sales - cost of goods sold - marketing expenses
= +4 million = +100 million - 55 million - 41 million
 Marketing return on sales
(or marketing ROS)
• The percent of net sales attributable to the net marketing
contribution— calculated by dividing net marketing
contribution by net sales.
 Marketing return on sales
(or marketing ROS)
• Referring back to HD’s profit-and-loss statement given in
Table A2.2, we can calculate Marketing ROS as:
 Marketing return on investment
(or marketing ROI)
• A measure of the marketing productivity of a marketing
investment—calculated by dividing net marketing
contribution by marketing expenses.
 Marketing return on Investment
(or marketing ROI)
• Referring back to HD’s profit-and-loss statement given in
Table A2.2, we can calculate Marketing ROI as:
 Customer-centered measures of
marketing impact
• customer acquisition: gaining of new customers
• customer engagement: the ongoing interactions between
company and customer
• customer satisfaction: The extent to which a product’s
perceived performance matches a buyer’s expectations.
• customer retention: retaining current customers
• customer lifetime value: The value of the entire stream of
purchases a customer makes over a lifetime of patronage.
• customer equity: The total combined customer lifetime values
of all of the company’s customers.
 How to measure CLV ?

Watch the video:

 How to measure Customer Satisfaction?

Watch the video:

 Other metrics

• Cost per lead

• Lead conversion rate
• Total marketing cost per order.
References
• KOTLER, P. and ARMSTRONG, G. (2016) Principles of Marketing.7th Ed
London: Pearson.
• MCDONALD, M. and WILSON, H. (2016) Marketing Plans: How to Prepare
Them, How to Use Them. 8th Ed. Chichester: John Riley and Sons