Market metrics
| Market metrics |
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Market metrics are a key indicator of how well the marketing efforts for the single product or service are delivering. Simply stated, marketing metrics are a means to analyze the effort vs results in a qualitative way enabling to make decisions for increasing productivity as well as profitability.
Market metrics are used in business planning and marketing monitoring to keep the marketing programme on track. Marketing metrics are hard to assemble. Different metrics are scattered all over large companies for different time periods, different customer and stakeholder segments and a multitude of purposes. Each market research firm supplies data efficiently, according to its own system. This keeps costs falling and makes the information affordable, but it does not make it commensurate[1].
It may be easier to commission new research than to locate reports that are gathering dust. It's essential to remember that marketing metrics operate across a variety of different channels, from email marketing and social media, to your website, you must make sure that you choose the appropriate marketing metrics for each channel. Metrics help the firm achieve its unique goals. This puts pressure on the board to explain what “success” will look like. Firms need multiple measures and these measures need to be relevant to the company's position[2].
Market metrics used by companies
The most common market metrics that companies use are[3]:
- Acquisition
The cost of acquisition is simply the total marketing spend dedicated to supporting the acquisition of new customers, divided by the number of customers acquired. It should be expressed both as an absolute number and as a percentage of the lifetime value of those customers acquired.
- Customer Satisfaction
The customer satisfaction metric is normally derived from primary research conducted with a sample of customers, where customers are asked to provide quantitative feedback about their overall satisfaction and with various views of their experience with a company. Some companies try to measure satisfaction of non-customers relying on brand image, but technically this is a different measure as it is perception, rather than reality based.
- Employee satisfaction
Employee Satisfaction is measured on an annual basis. The metric is typically derived from research conducted amongst employees, where employees are asked to provide quantitative feedback about their satisfaction with the company as well as with various aspects of their job experience. This includes evaluation of the environment, career advancement opportunities, compensation, executive team leadership, immediate management performance, internal communications, clarity of job requirements/objectives and understanding of the company strategy.
- Market size
Market size is the number or value of units sold to a market in a given period (year). Estimating market size can be difficult. Approaches include surveying manufacturers, surveying the channel/distribution route or surveys of end-users.
- Market share
Market share is the number or value of units sold in a given period for a manufacturer as a percentage of the total market size. It can be defined either as share of units sold or share of revenue. If the market size is known a company can presuppose its own market share based on its own sales data. It is possible to evaulate share of revenue using published accounts, but some care has to be taken as producer sale price is lower than the end-retail price and different businesses may have various channel costs. It is also uncommon for accounts to have disaggregated figures that would make share analysis possible[4].
- Return on Marketing Investment
ROMI is designed to quantify the return on the organization's total marketing spend. It is the equation that is going to take all the numbers (money spent on ads, shipping costs, discounts codes and give an accurate representation for marketing campaign. It should answer the question: for the marketing activities supported by the marketing budget, what would profit and expenses have been? The formula for calculating ROMI is:
ROMI = [(Incremental Revenue due to Marketing Activities * Gross Margin on those Revenues) – Costs of Marketing Activities]/Costs of Marketing Activities
Examples of Market metrics
- Conversion Rate: Conversion rate is a measure of how many people who visit a website or page actually complete an action. It is generally expressed as a percentage, representing the number of visitors who convert divided by the number of visitors who were exposed to the offer. For example, if a website has 1000 visitors and 10 of them completed a purchase, the conversion rate would be 1%.
- Cost Per Acquisition (CPA): CPA is a metric used to measure the marketing costs associated with acquiring a new customer. This metric is calculated by dividing the total cost of the marketing campaign by the number of customers acquired as a result of the campaign.
- Customer Lifetime Value (CLV): CLV is a measure of the total revenue that a customer will generate over the course of their relationship with a company. It is calculated by looking at the total revenue a customer generates over time, minus the cost of acquiring the customer and any other costs associated with servicing them.
- Customer Acquisition Cost (CAC): CAC is a measure of how much it costs to acquire a new customer. It is calculated by dividing the total cost of a marketing campaign by the number of customers acquired as a result of the campaign.
- Return on Investment (ROI): ROI is a measure of the profitability of a marketing campaign or other activity. It is calculated by dividing the total benefit of the activity by the total cost of the activity.
Advantages of Market metrics
Market metrics are essential for determining the success of a product or service. The following are some of the advantages of market metrics:
- They provide an easy-to-understand measure of the performance of a particular product or service. This includes its popularity among customers, its success in terms of sales, and its performance in terms of customer satisfaction.
- Market metrics can also be used to compare the performance of different products and services. This helps to identify which products and services are performing better than others, and can help to inform decisions about which products and services should be promoted more heavily.
- Market metrics can also provide insight into the effectiveness of marketing campaigns. By monitoring the performance of campaigns and comparing them to each other, marketers can identify which campaigns are more effective and target those campaigns more heavily.
- Finally, market metrics can help to identify opportunities for improvement. By monitoring the performance of products and services, marketers can identify areas that need improvement, and can then take steps to improve those areas.
Limitations of Market metrics
Market metrics are a valuable tool for measuring the success of a product or service, however there are certain limitations which should be taken into consideration when looking at the data. These limitations include:
- The metrics may be skewed by external factors, such as competitor activity or changes in the market, which can lead to inaccurate results.
- Market metrics are based on past performance, so they do not necessarily indicate future success.
- Market metrics do not take into account factors such as customer satisfaction, brand loyalty, or consumer sentiment, which can be important indicators of performance.
- Market metrics can also be difficult to interpret, as there are many different metrics and data points that need to be analyzed.
- Market metrics can be affected by short-term trends, so long-term trends should be taken into account when evaluating the data.
- Introducing other approaches related to Market metrics:
- Competitor Analysis: This approach is used to identify the strengths and weaknesses of the competition, analyze their strategies, and determine potential opportunities.
- Customer Segmentation: This approach helps to identify customer segments based on their demographics, interests, behavior, and other factors.
- Pricing Strategy: This approach helps to determine the pricing structure for the product or service being marketed, taking into consideration factors such as the target audience, competitive landscape, cost of production, and other elements.
- Marketing Mix: This approach involves the integration of various marketing channels such as advertising, public relations, direct marketing, and digital marketing, to achieve the desired marketing objectives.
- Return on Investment (ROI): This approach is used to measure the profitability of a marketing campaign by calculating the return on investment generated from the campaign.
In conclusion, Market metrics are a key tool to measure the effectiveness of marketing efforts and can be used in conjunction with other approaches such as competitor analysis, customer segmentation, pricing strategy, marketing mix, and return on investment (ROI). These approaches can help to gain a better understanding of the target market and create more effective marketing plans.
Footnotes
References
- Ambler T. (2000)., Business Strategy Review, Market Metrics, London
- Baker J. M. (2014)., Marketing Strategy and Management, Macmillan International Higher Education, London
- Farris P. (red.) (2017), Key Marketing Metrics, Pearson Education, United Kingdom
Author: Anna Marczyk
