Marketing MetricsIlkka O. Lavas

Ilkka O. Lavas• 2 books about Entrepreneurship

and marketing• Partner, board member, investor• Portfolio of 12 businesses• Founder in 7 businesses• 10+ aquisitions done• 3 exits

• Young Entrepreneur of the year 2009 in Southern Finland –area

• 1153 fb connections, 1035 linkedin conns, twitter @lavas

• 34years, 2 boys, 1 wife

11.04.2023

Marketing

Is it mathematics or

is it art?

Marketing

Should it be managed by mathematics or

artists or

psychologists?

Management needs metrics“If you can’t measure it, you can’t manage it.” – Peter F. Drucker

• “When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind: it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science.”––William Thomson, Lord Kelvin, Popular Lectures and Addresses (1891–94)

Reason for measuring“...every metric, whether it is used explicitly to influence behavior, to evaluate future strategies, or simply to take stock, will affect actions and decisions.”

Marketing needs metrics to know what to do next.

What is Metric ?• A metric is a measuring system that quantifies a trend,

dynamic, or characteristic. • In virtually all disciplines, practitioners use metrics to

explain phenomena, diagnose causes, share findings, and project the results of future events.

• Throughout the worlds of science, business, and government, metrics encourage rigor and objectivity. They make it possible to compare observations across regions and time periods. They facilitate understanding and collaboration.• Philip Kotler, Nancy Lee, Paul W. Farris - Marketing

Strategy from the Masters

Metrics are needed• CEO’s and company Boards are looking for more

on costs. Costs are calculated in € or $• To know how spending on marketing contributes

to profits.• Marketers are under more and more pressure to

“show a return” on their activities.

Marketing ROI

Income

Marketing costs

=

Real EffectivityOf marketing

ROI = Return on Investment =ROMI = Return on Marketing Investment

Marketing ROI, another model

Marketing Spending ($)

Return on Marketing Investment (ROMI) =

[Incremental Revenue Attributable to Marketing ($) * Contribution Margin (%) - Marketing Spending ($)]

contribution margin is the marginal profit per unit sale

Example

• Company spends 100.000€ direct marketing campaign, and makes 500.000€ revenue. Contribution margin is 50%.

• (500000*50% - 100.000) / 100.000 = 1,5• Every 1 € spent on marketing brings 1,5 €

profit back.

Other marketing metricsActual Metric % Compared with

plan and/or prior year

% compared with competition

Sales Volume / value Market share

Marketing investment

Period costs Share of voice

Bottom line e.g economic profit Share of profit

Can you really manage your marketing channels with these metrics?

Other marketing metricsConsumer metric Measured by

Familiarity Salience, i.e. familiarity relative to the other brands in the consideration set.

Penetration Number of customers or the number of active customers as a per cent of the intended market

What they think about the brand

Brand preference as a per cent of preference of other brands within the consideration set or intention to buy or brand knowledge

What they feel Customer satisfaction as per cent average for consideration set about the brand

Loyalty This may be behavioural (share of category requirements, repeat buying, retention, churn) and / or intermediate (commitment, engagement or bonding)

Availability Distribution, e.g. weighted percentage of retail outlets carrying the brand

KPI• Every company needs their

own metrics• Define your own KPIs

(key performance indicators)

• How do you measure your success?

Example ThyssenKrupp

If you manage marketing, you need kpI:s and metrics• Yes, marketing can be measured

and therefore you can manage it.• Marketing is art but you measure it in numbers.

Therefore you need to talk to your IT about mathematics and statistics

• Sources: Marketing and the bottom line -The Marketing metrics to pump up cash flow

• Wikipedia http://en.wikipedia.org/wiki/Marketing_ROI

Thanks

• Follow me @lavas on Twitter• LinkedIn: http://www.linkedin.com/in/ilkkaolavas • www.ilkkaolavas.com • Facebook: http://www.facebook.com/ilkkaolavas