The Marketing Value Metrics model and process

Identifying the most appropriate metrics for measuring the impact of marketing is obviously fundamental. As Binet and Field (2007) point ou...

Identifying the most appropriate metrics for measuring the impact of marketing is obviously fundamental. As Binet and Field (2007) point out, marketers have tended to focus on those that are directly related to their inputs and outputs – advertising to sales ratios, share of voice, image and attitudes, for example. These are not usually the measures that demonstrate the value added by marketing in terms of improving the overall performance, profitability, generation of customer or shareholder value of the business. However, this requires rather more than simply replacing one set of metrics for another; it requires a thorough review of the metrics strategy in the context of business goals and the company’s position in the market. Answering the key question ‘What do I need to spend in order to achieve an x per cent increase in profit?’ requires a forensic analysis process to identify whether the current, and planned, direction of marketing activity is aligned with the goals or expectations of the company.

A further issue is that marketing often does not directly control activities essential to enabling goals it sets to be achieved. Often, there is no process in place to identify what these ‘other’ actions are, who is responsible for them, what impact these actions have on achieving, or not achieving, goals set by marketing, and what measures should be in place to monitor whether these actions are contributing in line with expectations. It is no good if promises made by advertising are not experienced by customers. The customers’ experience of the promise is normally generated by production, logistics, sales and customer service processes. An example of this ‘inner-connectivity’ has been described by Graham Booth, Supply Chain Director of
Tesco, shown in Figure 5.1.

Interconnectivity

The issue is whether the actions necessary by logistics will match the promise for delivery made by marketing, and achieve the sales targets set by the sales department. ‘Inner-connectivity’ needs to ensure that all the internal partners in defining and matching the promise are agreed on what is achievable. Maybe an improvement in delivery times is vital to achieving competitive advantage, as perhaps identified through market research conducted to define customer needs and the current perceptions of customer service. For many organizations this will need to involve the external suppliers responsible for delivery to the final customer.

We believe that strategic marketing incorporates sales, customer service and new product development processes. Marketing considers all touch points with the customer, but often the customer experiences generated at these touch points are controlled by functions other than marketing.

A further issue is that, where efficiencies are concerned, marketers are often focused on those solely related to campaigns, and channel management. However, this is only part of the story, and little thought is given by marketers when developing strategy to consider internal efficiencies that could increase the organization’s competitive position in the market.

Marketers therefore need to ensure that all necessary resources and functions within the organization are focused on achieving the marketing-related goals within the corporate plan – and that the metric suite covers all the key activities. The challenge implied here is that marketers need to develop and implement a framework that can address the following key questions related to measuring performance:

● What measures are appropriate, and essential, for different audiences within the organization to track the impact of marketing-related activity?

● What key gaps are there in the information currently collected that inhibit or prevent the appropriate measurement of marketing-related activity, and how should filling these gaps be prioritized?

● Which metrics are essential to tracking the performance within core target markets?

● Can the needs of consumers in the market be defined and prioritized, together with the metrics that will be appropriate to tracking performance against competitors in meeting these needs?

● Which key resources are necessary if marketing strategies are to be successful and how should the results of deploying them be measured?

● What are the appropriate actions that should be invested in by the company to achieve marketing goals?

● Where can efficiencies be identified that will contribute towards improving the competitive position of the organization, and how can the impact of these be measured?

● What should be an appropriate budget to achieve the goals set for marketing, and can we measure the ‘leverage’ from investing in different activities?

● What metrics would be appropriate in measuring the impact of marketing on achieving the business goals of the organization?

There is no doubt that these can be difficult questions to answer. They are also quite sophisticated, and we believe that many organizations would struggle to provide effective answers, if such questions were to be asked, as they should be, by their board. While it is increasingly likely that boards will demand greater accountability from marketing, they may well simplify the above to a more basic list of questions for the marketing director to answer:

● How much are you spending?

● What are you spending it on?

● When will you spend it?

● What return are you forecasting?

● And when can we expect it?

These are essentially financially orientated measures, so the answers need to be developed in association with, and agreed by, finance. Also, these questions do not help the board gain an understanding of what the organization expects to achieve in the market as a result of this spend, for example the expected impact on market share. The task for marketers is to convince the board that, by asking different questions, they will be able to gain a much better understanding of what value marketing is adding to the business. There is the need for a ‘meeting of minds’ on the most effective measures to use at board level. As Figure 5.2 shows, the terms often used by marketing to measure success are rather different from the finance-based
terminology that the board focuses on when determining whether expenditure has been worthwhile.

Different languages

Overview of the Marketing Value Metrics model

The Marketing Value Metrics model is designed to help organizations answer the questions listed above. At its heart are tried-and-tested business process and strategy analysis tools, but these are applied within an overall framework developed to identify the suite of key metrics that are specific to a particular organization, recognizing that even competing companies within a particular market have set different goals and strategies. The resulting model can be applied within organizations to help prioritize scarce resources, set targets and measure outcomes.

The key objective is therefore to develop an appropriate suite of metrics, customized for the specific organization, which can be used to track the impact of marketing on achieving business goals and identify the resources necessary to achieve objectives within a market. In particular, the aim is to identify the subset of these metrics that should be reported at board level in order to demonstrate the impact that marketing has on building shareholder value. This not only creates greater accountability, but it also helps demystify the role of marketing by linking resource allocation to outcomes in a language that boards can relate to.

Also implicit within the model are the following critical elements in a measurement strategy:
● Metric: what should be measured, including definitions. Some metrics will be direct measurements (eg response and conversion levels for a direct marketing campaign), and others might be derived or modelled (eg customer satisfaction scores).

● Data: how the necessary facts will be collected, the format, and who is responsible for this process.

● Target: the planned level of future performance in a defined time frame.

● Result: the actual level achieved in the defined time frame.

These elements need to be discussed and agreed for each step in the model process. The Marketing Value Metrics model is shown in Figure 5.3. The model is divided into the following key components:

● corporate performance – forecasts and actual results;

● market segments – objectives for each one, and outcomes achieved as strategy is implemented;

● impact factors – necessary in developing an appropriate strategy and as a framework to track response;

● marketing and other actions – what the organization plans to do to achieve the strategy;

Marketing Value Metrics model

● budget resources – what resources and expenditure are necessary to deliver the strategy.

The grey arrows show the flow for identifying what needs to be done in future to achieve corporate goals. The black arrows track what actually happens as the strategy is implemented in order to achieve the defined goals. Both flows identify, and contain, key metrics to measure the overall performance of the organization and changes over time in the market.

The model also provides companies with an audit process, which enables management to track whether there is alignment between marketing plans – comprising strategy and actions – and corporate goals, and ensure that all the appropriate performance and market tracking measures are in place. It also provides management with a checklist to help easily identify whether plans cover all necessary factors.

The key points for each of these stages in the model are as follows.

Corporate performance

This component captures the goals, and associated metrics, at corporate level that relate to marketing activities and the associated measures of marketing’s impact on achieving objectives. Some might already be included within a board-level dashboard, balanced scorecard or other key indices reviewed regularly at board level. They cover current targets, results and future forecasts of performance. These may be at corporate, business unit, subsidiary, geographic or divisional level – whatever is most appropriate for the company. In our experience few  organizations include all those that are vital in measuring the impact of marketing. While targets and forecasts are not always the same in some organizations, we are assuming that they are the same thing for the purposes of the model. Once targets or forecasts have been agreed, then it is the responsibility of all relevant functions and activities to respond in achieving them. Ambitious targets need an equally ambitious response from marketing. Also, different targets require different responses, for example ‘profit improvement’ and ‘rapid market share growth’ targets probably cannot be delivered via the same marketing strategies.

Market segments

All markets can, we believe, be divided into segments. Segmentation helps an organization identify target groups to enable appropriate objectives to be set, resources to be effectively deployed where the value added, for the consumer and the business, can be maximized, and outcomes defined. The metrics here cover segment profiles, needs, trends, sales forecasts, revenues, margins and so on. However, there are many definitions of what constitutes segmentation. The definition used in the Marketing Metrics model is as follows:

Groups of individuals, or organizations, who have the same or similar needs which will be satisfied by the same or similar offers. Segments are:
● Identifiable and recognizable (by the members of a segment)
● Independently existing (if your organization did not exist, the segment would still be there)
● Measurable (even if difficult to do so)
● Substantial (big enough to be worth investing in)
● Externally accessible and actionable (eg can they be promoted to through channels).
(McDonald, 2012)

The metrics for measuring segments are divided into two groups: 

1) Those that define and track the segment over time, for example segment members’ needs and wants; attitudes/opinions; demographic, geographic, geodemographic and psychographic profiles; media consumption; purchase occasions/channels; etc. These are the factors that exist in the market, independent of organizations selling to members in the segment. 

2) Those that measure the performance of your business within a segment in terms of the organization’s goals. Metrics might include market share, sales volumes, gross margin, brand image, customer value, etc. The metrics will also need to include those that benchmark your organization against the needs and attitudes of customers, and against the performance of key competitors operating in this segment.

Impact factors

Marketing needs to develop strategies as a response to the analysis of each segment of interest to the organization. The tool used in the model, and described in the chapter, is an impact factor analysis. Three types of impact factors are considered within the model:

1 Qualifying factors are those factors, and associated levels of performance, that all organizations operating in a market are expected to deliver from a consumer’s perspective. Unless a company can provide these at the expected level it is unlikely to prosper in the market.
2 Critical success factors are the factors that really matter to consumers in a market – they focus on important customer needs. They attract attention in the market and help you win, and retain customers. Focusing on improving performance against these creates positive and powerful advantage over competitors. Improving performance against these factors should lead to increased market share.
3 Productivity factors are essentially about reducing costs. Productivity factors are actions that the organization needs to take internally to become more efficient and focused in delivering the overall strategy for each segment. This can include increasing output, by leveraging economies of scale.

Impact factors help identify the appropriate strategies for each market segment, and the anticipated response from consumers. Metrics can be set for each set of impact factors.

Identifying actions, setting budgets and establishing linkages

The impact factors analysis enables the overall strategy for each segment to be defined. The next step is therefore to agree the actions that will enable the strategy to be successfully delivered for each segment to help achieve the overall goals. As illustrated in Figure 5.1, these actions may include ones currently outside the control of marketing but essential to achieving the goals that marketing is responsible for.

Actions are likely to consume resources, either internally or externally. There might be the need to argue for a reallocation of internal resources already allocated to other plans, or an investment in an increase in resources if this makes financial sense in terms of achieving the overall goals of the organization. External actions might be additional expenditure on market research or advertising. This analysis enables an appropriate budget, or spending plan over a longer time frame, to be derived. This spending plan should also include the ‘gearing’, or return, expected from allocating these resources in terms of increased market share, increases in sales
revenues, improved gross margin, etc.

This process enables a detailed plan to be constructed for each segment. These can then be developed into a plan for the market as a whole and the identification of the appropriate metrics to track progress and changes over time in the market.

Finalizing the metrics strategy

The final step in the model is to draw together the metrics from the earlier stages and finalize the overall measurement strategy. This step includes identifying any metrics that are not currently in place, and deciding how to address these gaps. The strategy also needs to finalize issues such as who will be responsible for each measure, who will be responsible for taking action if the measure indicates that agreed progress is not being achieved, and who will see each metric.

Implementing the Marketing Value Metrics model

The model described above needs an appropriate process to enable each component to be thoroughly considered if the final strategy is to be both actionable and corporately acceptable. The method for implementing the model has been developed by working through the full process with a small number of organizations operating in different market sectors. The key objective of the process is to identify the metrics appropriate for the organization to track:

● the impact of marketing strategy;
● performance against forecast;
● that agreed actions are on target;
● changes in the market and activities of competitors.

It is also important to establish in the context of the model what the term ‘marketing’ covers and the planning ‘time frame’. The definitions of these are as follows:

● Marketing: as mentioned earlier, the definition of ‘marketing’ covered in the process needs to include all market or customer-facing activities – marketing, sales, customer service, new  product development, websites, etc. However, as also mentioned earlier, delivering against the promises made by marketing is almost always reliant on collaboration with other parts of the company, which will need to be responsible for implementing actions outside the direct control of marketing. Therefore the discussions need to be wide ranging, and some of the metrics identified in the strategy will be measuring the performance of other business areas.

● Time frame: the focus is on those metrics that will measure performance against goals in the strategic plan’s three- to five-year time frame. The metrics strategy therefore has a medium-term focus. This means that, although tactical, or operational-marketing, measures may be included in the overall framework, the model is concerned with measuring the cumulative impact of shorter-term strategy, such as that resulting from marketing communications campaigns, in terms of impact on achieving the medium-term goals for each segment (eg performance in the market, such as an increase in market share) and any consequential effect on corporate goals (eg increases in the value of intangible assets such as brand or customer equity). Tracking of short-term strategy, such as the effect of an advertising campaign, is often restricted to the period of activity, whereas the impact may be felt for longer and in other areas of the business. Measurement strategies need to reflect the whole time frame over which any impact can be expected to occur and take into account the wider consequences. Another example is that a direct mail campaign to sell a book through that channel may increase sales through other outlets, such as bookshops.

Overall, the positioning of the model process is illustrated in Figure 5.4 by the right-hand triangle, the model zone, covering the market positioning and the value proposition that has been identified as the most appropriate for the particular segment in that market. Once the metrics strategy has been identified through the model, the subsequent step is to apply the measures in the left-hand triangle, the measurement zone, to track performance.

The process for applying the model, summarized in this chapter, and explained in more detail over subsequent chapters describing each stage, will also help organizations:
● identify which metrics are already used or available;
● develop a framework for using currently available data to develop new metrics;
● identify gaps in data collection that prevent key metrics being implemented;

● identify any other issues with data collection or developing necessary metrics.
Map of Marketing Domain

The implementation process used to identify the appropriate metrics strategy for the organization is shown in Figure 5.5. It is based around a series of four workshops conducted within the organization; this process was originally developed and tested at Cranfield with industry partners.

Workshop 1

This workshop has two objectives. The first is to identify those current corporate level metrics that might be expected to be influenced by marketing activity, and the second is to develop a set of metrics for the key segments in the organization’s market.

Corporate metrics

Those likely to be influenced by marketing activity might include measures such as gross sales, market share, gross margin, loyalty, customer satisfaction, brand equity/ image, etc. The reporting might be by total market or by key market segments. The metrics might be those included within the ‘Customer’ section of a standard four business- perspective balanced scorecard model. The discussion should also lead to possible gaps in the current measures being identified. For example, in one of the pilot studies, a balanced scorecard reported at board level simply contained the monthly spend on advertising against budget, but no outcomes of this expenditure either as forecasts or as outcomes – were included. As the model is designed to help meet medium-term targets, the corporate-level goals for the current year and each of the measures over the following three years need to be identified. At this stage in the process, the key objective is simply to list the current metrics and the targets set for them over this three-year period. This list needs to be revisited at the end of the process to see if any other metrics should be recommended at board level, and to ascertain whether the application of the model has identified links between the actions proposed and the corporate measures (the black arrows in the model).

Marketing Value Metrics model process

Market segment metrics

We will discuss in more detail how markets can be divided into a number of key, differentiated segments, to enable the organization to focus its resources more effectively. However, to apply the model to all segments in one go would be overly complex. Therefore organizations applying the model are advised to start by focusing on two segments in the initial application in order to gain a detailed, and manageable, understanding of the overall process, and then repeat it for remaining segments over time. In most situations, organizations don’t try to cover an entire market. The objective of segmentation is to identify those segments likely to be most attractive when consumer needs/profiles are matched to the capabilities and goals of the organization. This means that once an organization has analysed the market and divided it into segments, using the methodology described below, a few key segments will be the focus of future attention, perhaps at the expense of others that the organization decides are no longer of prime interest. So the second objective of the first workshop is to focus on two market segments and identify the metrics that are critical, firstly, to tracking the segment in the market over time and, secondly, to measuring the performance of the organization against the goals set for each segment. It is recommended that the selected segments for the first application of the model are those likely to be of most value to the future success of the organization. Selected initial segments could be of three types:
● ones that are currently delivering a high level of value, and forecast to continue to do so;
● one that is identified as currently delivering poor returns but is considered as offering high future potential;

● one that the organization considers has potential but an appropriate strategy to deliver value has yet to be identified.

Workshop 2

Once the segments have been identified and a full analysis of the two selected segments has been undertaken, the next step is to ensure that the strategies for achieving the goals defined in the marketing plan are appropriate, and that the key metrics necessary to track performance towards achieving these goals have been identified. The focus in the second workshop is on how to use an impact factor analysis to help develop effective strategies for each segment, and identify the metrics necessary to track performance of the strategy.

Workshop 3

Once the strategy for each segment has been confirmed, and the necessary metric set identified using the impact factor analysis framework described earlier, the next steps, covered in the third workshop, are:
● Identify the actions necessary to deliver the strategy. Some of these actions might be under the control of marketing (eg developing and implementing a specific direct marketing campaign), but others may be within the responsibilities of other departments (eg improving customer satisfaction either through changes in the logistics chain or through revised call centre goals).
● Agree the budgets necessary to fund the agreed actions. 

● Estimate the likely impact of these actions, in financial terms, and identify those actions that are forecast to give a disproportionately high return on investment – that is, those with a high ‘gearing’.

● Identify and agree the appropriate metrics to track the actions, budget funding and impact in achieving goals.

Workshop 4

The objective of the final workshop is to finalize the list of metrics and develop an outline plan for implementing the agreed measurement strategy, for example who will be exposed to different metrics, who will be responsible for collecting the data and producing the metrics, and who will be responsible for corrective action if a metric indicates that performance is below target.

The workshop team

As described earlier, the implementation of the model process within the workshops is through a team of appropriate individuals drawn from relevant functions across the organization. Therefore identifying the key members of this team, and deciding whether or not to have an independent facilitator or to appoint one of the team to lead the discussions, is vitally important to the success of the process. Success is not achieved merely in terms of developing a set of metrics; it is also about agreeing the implementation, which in turn relies on the organization having bought into the process and seeing the value to be gained, particularly important at board level. 

Experience gained in the pilot applications suggests that, for the workshops to be effective, this team needs to be kept small – but it is vital that its members are individuals who play key roles in the marketing, financial and business processes within the organization. It is also important that the members are sufficiently empowered by senior management to develop a strategy that stands a fair chance of being implemented. 

For example, in one of the pilot studies the team presented their recommended strategy to the main board; in another the sponsor reported to the board and was a key, and influential, member of the senior management team. The workshop team should comprise no more than six to eight members. Based on the pilots, suggested key team members are:

● market research manager;
● corporate planning manager;
● corporate finance manager;
● customer database manager;
● market planning manager;
● finance manager (with responsibility for marketing);
● marketing communications/advertising manager;
● senior marketing manager (to act as champion of the process);
● customer service (or operations) manager;
● brand, product or customer segment manager. 

In some companies, a logistics specialist as a key team member might also be appropriate.
Good facilitation will be essential to success. This means that all participants are adequately briefed at the outset; the workshops are run objectively; goals are clearly defined; discussions remain focused on the themes and objectives described for each workshop, all members are treated as equal participants; evidence provided by members is discussed and approved by the whole team; opinions are challenged; the principles of effective brainstorming are adhered to; the conclusions from each stage are clearly summarized; and actions/tasks are clearly identified at the end of each workshop and allocated to the appropriate members of the team.

As will be seen in the subsequent chapters, in addition to developing a marketing metrics strategy appropriate for the organization a further key role of the team is to identify responsibility within the strategy for:

● collecting the data to ensure the metrics can be defined;

● undertaking the measures;

● taking action if the metrics show that performance is not on target.

Figure 5.5 identifies that team members are also responsible for subsequently reviewing and, if possible, testing the agreed metrics identified in each workshop. This includes identifying whether the data necessary to develop the agreed metrics are currently available and, if not, assessing whether this might be possible in the future.

COMMENTS

Name

Analytics Case Study Content Experience How-To Mobile Marketing Social Media Strategy Strategy
false
ltr
item
The Digital Media Strategy Blog: The Marketing Value Metrics model and process
The Marketing Value Metrics model and process
https://4.bp.blogspot.com/-NvaSnFuV_rA/Vat0EHpCuKI/AAAAAAAABS4/EqwisISfAYo/s400/Interconnectivity.png
https://4.bp.blogspot.com/-NvaSnFuV_rA/Vat0EHpCuKI/AAAAAAAABS4/EqwisISfAYo/s72-c/Interconnectivity.png
The Digital Media Strategy Blog
http://social-media-strategy-template.blogspot.com/2015/07/the-marketing-value-metrics-model-and-process.html
http://social-media-strategy-template.blogspot.com/
http://social-media-strategy-template.blogspot.com/
http://social-media-strategy-template.blogspot.com/2015/07/the-marketing-value-metrics-model-and-process.html
true
5221119051567202753
UTF-8
Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy