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1.8 Where are the “Top Ten” Metrics?

Working on this book we received many requests to provide a short list of the “key” or “top ten” marketing metrics. The intuition behind this request is that readers (managers and students) want to be able to focus their attention on the “most important” metrics.

Although some readers have read the earlier editions from cover to cover, it is safe to say none of the authors have had that pleasure. We view the book as a reference book—something to keep on the shelf and use when confronted with a new or less familiar metric. The list of metrics covered is therefore long so as to be useful for those occasions. It is not aimed to be a guide to the X number of metrics you must apply to monitor marketing. It is this view of the book as a reference guide that helps explain why we do not rate or rank the long list of metrics. We see you pulling the book from the shelf as needed, rather than us pushing our preferred metrics upon you.

Specifically, the reasons for us not providing the short list of “really important” metrics are as follows.

First, we believe that any ranking of marketing metrics from most to least useful should depend on the type of business under consideration. Thus what metrics you prefer depend upon what you need them for. For example, marketers of business-to-business products and services that go to market through a direct sales force don’t need metrics that measure retail availability or dealer productivity.

Also, even what might begin as a short list tends to expand rapidly as metrics come in matched sets. For example, if customer lifetime value is important to your business (let’s say, financial services), then you are also likely to use measures of retention and acquisition costs. The same notion applies to retail, media, sales force, and Web traffic metrics. If some of these are important to you, others in the same general categories are likely to be rated as useful, too.

Third, businesses don’t always have access (at a reasonable cost) to the metrics they would like to have. Inevitably, some of the rankings presented will reflect the cost of obtaining the data that underlie the particular metrics. Some metrics may be interesting to know but cost more to obtain than the value of the information they provide. The size of the organization will thus matter. Small organizations will use metrics that are cheaper to obtain; whereas larger organizations are more likely to be able to realize the full value from expensive, proprietary, or custom-created metrics. The same goes for stages in the product life cycle. Managers of newly launched products often have different concerns and metrics to monitor them than mature products.

Fourth, we believe that some metrics currently ranked lower by managers will ultimately prove to be very useful, after managers fully understand the pros and cons of a particular metric. For example, advocates believe that Economic Value Added (EVA) is the “gold standard” of profitability metrics, but when we discuss it with many managers, it ranks far below other financial performance measures such as ROI. We believe one reason for the low ranking of EVA is that this metric is less applicable at the “operating level” than for overall corporate performance. So even within the same business, depending on where a manager sits in the organization, some metrics are more relevant than others. Also, like EVA, many metrics that we have included are relatively new to marketing, and many managers don’t understand them well or know how they might be relevant to their particular business. Customer Lifetime Value is another metric that is gaining acceptance, but is still unfamiliar to many managers. If all these metrics were perfectly understood, there would be no need for a book of this type.

We included the results of our survey of marketing managers in the second edition so that readers could learn what metrics other managers thought were potentially useful. However, we are now less convinced that the survey results are useful, because metric use and understanding remains an awfully long way from where we want to be. In this third edition we have therefore concentrated on adding more metrics and explaining some metrics in greater detail. Deleting the managerial survey results from the second edition gave us the space to do this.

Here we simply note the key points from the survey. These were that managers value the profit related metrics, net profit, ROI, and margin most highly, even though these metrics had less to do with day-to-day marketing decisions. We presume this is because those are the metrics they are asked about by those who control budgets. Customer satisfaction was the most popular “non-financial” metric. Sales related metrics, such as Sales Total also proved popular.

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