Marketing Metrics – MRKT 355

Metric
Measurement system; quantifies a trend, dynamic, or characteristic
How do metrics help?
Explain Phenomenon
Diagnose Causes
Share findings
Project results for future events
Reasons metrics are needed in marketing
Shift toward more quantitative; Business is becoming more competitive
Trends as a result/cause of quantitative marketing
Direct marketing, Social media, and Web marketing
Stage 1 of Marketing Accountability
Denial: Marketing is more Art than Science
Stage 2 of Marketing Accountability
Fear: Will I loose my job?
Stage 3 of Marketing Accountability
Confusion: What do I measure?
Stage 4 of Marketing Accountability
Self-Promotion: Look at these charts
Stage 5 of Marketing Accountability
Accountability: Revenue results from Marketing
Kinds of Metrics
Dashboard and Triangulated
Dashboard
combination of many types of metrics; data is approximate for some metrics while some may be highly specialized
Primary demand
performance as growth with the market
Selective demand
performance as a captured share from competition
Unit Market Share Formula
Unit Sales (#) / Total Market Unit Sales (#)
Revenue Market Share Formula
Sales Revenue ($) / Total Market Sales Revenue ($)
Relative Market Share
Brand’s Market Share ($,#) / Largest Competitor’s Market Share ($,#)
What is Relative Market Share used for?
Benchmark against largest competitor
Brand Development Index Formula
[Brand Sales to Group (#) / Households in the Group (#)] / [Total Brand Sales (#) / Total Households (#)]
What does Brand Development Index measure?
How well the brand is performing among a segment of customers relative to all customers per-capita consumption in a segment versus per capita in the market
Category Development Index Formula
[Category sales in group (#) / Households in the group (#)] / [Total Category sales (#) / Total Households (#)]
Why do we measure Category Development Index?
Useful for understanding a specific customer segment — strong vs weak demographic or geographic
Market Penetration Formula
Customers who have purchased a product in the category (#) / Total Population (#)
Brand Penetration Formula
Customers who have purchased the brand (#) / Total Population (#)
Penetration Share formula
Brand Penetration / Market Penetration
Full Penetration Share Formula
Customers who have purchased the brand / Customers who have purchased a product in the category
Share of Requirements is equivalent to:
Loyalty
Unit Share of Requirements Formula
Brand Purchases (#) / Total Category Purchases by Brand Buyers (#)
Revenue Share of Requirements Formula
Brand Purchases ($) / Total Category Purchases by Brand Buyers ($)
Measurements of Loyalty
Share of Requirements
Sole Usage
Repeat Rate
Repurchases Rate
Sole Usage measures:
Die hard customers
Repeat Rate measures:
Customers in a given period who are also customers in the following period
Repurchase Rate measures:
Customers of a brand who repurchase that brand on their next purchase occasion
Heavy Usage Index Formula Full
Avg. Total Purchases in Category by Brand Customers (#,$) / Average Total Purchases in Category by all Customers for that Category (#,$)
Heavy Usage Index Formula condensed
Market Share (%) / [Penetration Share (%) * Share of Requirements (%)]
Net Promoter Formula
Percentage of Promoters (%) – Percentage of Detractors (%)
Willingness to Search measures:
Percentage of customers willing to delay purchases, change stores or reduce purchase quantity to avoid switching brands
Unit Margin formula
Selling Price per Unit ($) – Cost per Unit ($)
Margin (%) formula
[Total sales revenue ($) – Total cost ($)] / Total Sales Revenue ($)
Single Product Margin formula
Unit Margin ($) / Selling Price per Unit ($)
Multiple Product Margin formula
Weighted average margin of each product
Supplier Selling Price formula
Customer Selling Price ($) – Customer Margin ($)
Customer Selling Price formula
Supplier Selling Price ($) / [1 – Customer Margin (%)]
Average Price per Unit formula
Revenue ($) / Units Sold (#)
Expanded Average Price per Unit formula
[(Avg. Price of SKU1 x SKU1 percentage of sales) + (Avg. Price of SKUn x SKUn percentage of sales)…
Statistical Unit
Standard size mix; not actual mix of sizes
Statistical Unit example
Same product packaged in various sizes; think pop in cans, bottles, and liters
Total Costs formula
Fixed Costs ($) + Variable Costs ($)
Total Variable Costs formula
Unit Volume (#) * Variable Costs per Unit ($)
Total Selling (Marketing) Costs Formula
Total Fixed Selling Costs ($) + Total Variable Selling Costs ($)
Total Variable Selling Costs formula
Revenue ($) * Variable Selling Cost (%)
Contribution per Unit formula
Selling Price per Unit ($) – Variable Cost per unit
Contribution Margin (%) formula
Contribution per Unit ($) / Selling Price per Unit ($)
What is break-even?
Sales amount (either Unit or Revenue) that is required to cover total costs
Break-Even Volume (#) formula
Fixed Costs ($) / Contribution per Unit ($)
Break-Even Revenue ($) formula
Break-even Volume (#) * Price per Unit ($)
Alternative Break-Even Revenue formula
Fixed Costs ($) / Contribution Margin (%)
Target Volume (#) formula
[Fixed Costs ($) + Target Profits ($)] / Contribution per Unit ($)
Target Revenue ($) formula
Target Volume (#) * Selling Price per Unit ($)
Target Revenue ($) formula 2
[Fixed Costs ($) + Target Profits ($)] / Contribution Margin (%)
Measurements for new products
Trial, Repeat, Penetration
Trial Rate (%) formula
First time triers in Period t (#) / Total Population (#)
First time Triers in Period t (#) formula
Total Population (#) * Trial Rate (%)
Penetration t (#) formula
[Penetration in t-1 (#) * Repeat Rate Period t (%)] + First Time Triers in Period t (#)
Projection of Sales t (# –Volume Projection) formula
Penetration t (#) x Average Frequency of Purchase (#) x Average Units of Purchase (#)
Adjusted Trial Rate (%) formula
Trial Rate (%) x Awareness (%) x ACV (%)
[[AVC = Distribution penetration]]
Trial Population (#) formula
Target population (#) * Adjusted Trial Rate (%)
Trial Volume (#) formula
Trial Population (#) * Units per Purchase (#)
Industry average expectations for “Definitely Buy & Will Buy” and “Probably buy”
80% and 30%
Trial Volume formula expanded
Target Population (#) x [(.80xDefinitely Buy (#) + .30xProbably Buy (#)) x Awareness (%) x ACV (%)] x Units per Purchase (#)
Repeat Buyers (#) formula
Trial Population (#) * Repeat Rate (%)
Repeat Volume (#) formula
Repeat Buyers (#) x Repeat Unit Volume per customer (#) x Repeat Occasions (#)
Total Volume (#) formula
Trial Volume (#) + Repeat Volume (#)
Measurements of Growth
Percentage year-on-year growth; Compound Annual Growth Rate
Year on Year Growth formula
[Difference between Year 2 and Year 1] divided by Year 1; new-old over old
CAGR formula
{[Ending Value/Starting Value]^(1/number of years)} – 1
Cannibalization Rate formula
Sales lost from existing products / Sales of New Product
What does Fair Share Draw mean?
The new product will capture sales from existing products in direct proportion to the market shares held
Metrics for Brand Equity
Brand Equity Ten (Aaker)
Brand Asset Valuator (Young & Rubicam)
Brand Equity Index (Moran)
Brand Valuation Model (Interbrand)->Used in class
Aaker model for Brand Equity
Evaluation and analysis of 11 measurements and characteristics
Moran Brand Equity Index formula
Effective Market Share (%) x Relative Price (I) x Durability (%)
Brand Asset Valuator – Y & R components
Differentiation, Relevance, Esteem, Knowledge
Interbrand Brand Valuation Model
Uses financial data on revenues and earnings to project value contributed by the brand; discount the future earnings basis the brand strengths and risks
Purpose of Conjoint Utilities
Measure consumer preference for an attribute then combine the valuation of multiple attributes to measure the overall choice
Cluster Analysis
Technique that calculates difference between customers and forms segmentation groups by minimizing differences within each group and maximizing the differences between groups
Customer Counts
# of customers
Recency
Length of time since the customer’ last purchase
Retention rate
Ratio of number of customers retained
***Define the customer properly
Customer Profit formula
Revenues Earned – Cost of Maintaining Customer
CLV
Customer Lifetime Value
Customer Lifetime Value measures:
Present value of future cash flows attributed to the customer relationship
Customer Lifetime Value formula
Margin ($) * [Retention Rate (%) / (1 + Discount rate (%) – Retention Rate (%))]
IMPORTANT TO KNOW ABOUT CLV:
Per customer calculation, NOT entire population
Prospect Lifetime Value ($) formula
Acquisition Rate (%) x [Initial Margin ($) + CLV ($)] – Acquisition Spending ($)

-Initial Margin = Margin from first time people purchased

Average Acquisition Cost ($) formula
Acquisition Spending ($) / Number of Customers Acquired (#)*

*Not total customers; ONLY those who are acquired for specific promotion

Average Retention Costs ($) formula
Retention Spending ($) / Number of Customers Retained (#)