The First 10 Metrics – Part I Where Intelligent Marketing Begins
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We have spent a great deal of time We have spent a great deal of time talking about why metrics are i important, but before we start t t b tb f t t talking about the specific metrics, we need to cover 1 more thing quickly…. quickly
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It’s what we call the Roadmap to Implementing Analytic Marketing Analytic Marketing
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So let’s go back to the question we asked a few lectures back….. k d f l b k “Where Do We Start?”
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Designing the Road to the Future ¾ ¾
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Define a clear game plan An initial assessment of the current state is useful t t t i f l Ask what metrics you currently use How does the organization use data for decision making? If we give you data, do you “do the right thing”?
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Diagnosis ¾
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What are the gaps and opportunities? There are most likely multiple options or p pathways that you could y y take This is where we need to think about risks and think about risks and returns: of all the options, what are the easy wins that will give the highest impact with the lowest effort and cost?
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Opportunities ¾
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The answer to the questions of the Diagnosis stage are th the opportunities of this t iti f thi stage So once the opportunities are identified, go after the easiest to get the quick win Quick wins are the one‐time Quick wins are the one time proof of concepts, what we do in the next stage is create repeatability t t bilit
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Focus on the Tools ¾
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Define the metrics and scorecard for success Develop capabilities to support ongoing marketing activities In other words, build the infrastructure so that the quick win becomes the quick win becomes the regular win Infrastructure for repeatability
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Formalize the Process ¾
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Frequent reviews to evaluate performance and chance course where h h necessary Automate the process once you have repeatability and results
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How long does it take?
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An analytical marketing approach will deliver incredible performance ill d li i dibl f improvements, we have seen that p from previous examples
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And we know that results talk…. A d k th t lt t lk So the only question left…. yq
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Do you want to be a winner and h have respect rather than be t th th b questioned about the value of what you do?
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A Story Before We Start
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When I first started teaching marketing measurement to k ti tt executives, I was told quite rudely that I “didn’t understand.”
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“Marketing Marketing is creative and you can is creative and you can’tt measure creativity,” I was told.
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So I asked a question So I asked a question of the executives –
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“How many of you outsource the y y creative component of your marketing?”
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72% of the executives % f h i outsourced the creative
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What does that tell us?
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Marketing organizations are not in th the creative content business, but ti t tb i b t instead manage the process of marketing.
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Now, I know that most organizations and marketers struggle to measure d k t t l t their marketing activities given the g g hundreds of possible metrics.
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II have consulted for Fortune 100 have consulted for Fortune 100 companies that have scorecards with more than 50 metrics, which ih h i hi h took a great deal of time to put g p together and provided no value to the organization the organization. http://emagine‐group.com
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Why?
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There is too much data and these d t d data do not provide managers with t id ith information they need to make decisions.
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You need a simple approach to think th through which metrics are h hi h ti important for a specific marketing activity
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Linking Marketing Activities to Metrics
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In the 1960s, the standard marketing behavioral impact model k ti b h i l i t d l was published. It was called the purchasing funnel.
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The idea was that different marketing activities take the g customer through the stages of awareness evaluation trial and awareness, evaluation, trial and loyalty
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In other words, marketing activities are designed to “funnel” customers d i d t “f l” t from awareness to ultimately y becoming loyal customers.
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Awareness Marketing ¾
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Awareness marketing comes in many forms – TV advertising, billboards, sports sponsorship, , p p p, naming rights to stadiums Awareness & branding are intimately related A brand is a consumer perception of a particular product or service and may encompass the whole th h l company The perception is driven by marketing experience with marketing, experience with the product & recommendations from friends and colleagues g
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Awareness Marketing ¾
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But in the purchasing cycle, awareness is furthest from th the customer purchase t h There is also a significant time delay between awareness marketing & actual sales Financial metrics are not Financial metrics are not useful in measuring awareness & brand marketing k ti
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Awareness Marketing ¾
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We use brand awareness surveys to track customer awareness across geographies and over time Typical metrics measure the effectiveness of awareness marketing like number of attendees at events attendees at events, eyeballs on a a website & media impressions
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Tiger Wood’s win in the 2005 g Masters received $10.4 million of TV exposure for Nike exposure for Nike
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Jeff Gordon received $9.9 million of $ exposure for DuPont brand when he won the 2005 Daytona 500 won the 2005 Daytona 500
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The problem is these metrics do not connect to purchase intent and do tt h i t t dd not capture the effectiveness of the marketing.
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Brand Awareness Metric Ability to Recall a Product or Service
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Top of Mind Recall means that in the p purchasing cycle, your g y ,y product/service will be one of the first the consumer thinks about to first the consumer thinks about to consider purchasing
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How is it measured? By asking By asking
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For (product/service), what is the / first name you think of? y For (product/service), what other For (product/service) what other names have you heard of?
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These questions uncover the unaided reception of your id d i f p product/service and the relative / ranking of brands relative to it
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These questions are the starting These questions are the starting point and should be refined for the specific campaigns with follow‐on ifi i ith f ll q questions to uncover brand and messaging impact and intent to act (purchasing intent) (purchasing intent).
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Let’s look at bottled water
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Pure water is an odorless, tasteless liquid made from molecules of 2 q hydrogen atoms and 1 oxygen atom (H2O) and approximately 70% of the (H2O) and approximately 70% of the Earth is cover in water
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The point – p as far as products go, p g , water is pretty much on the low end of complexity and fairly abundant of complexity and fairly abundant
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But then there are bottled water B t th th b ttl d t brands… how many can you name?
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Why spend Rs. 20 a bottle for the b d d brand and not drink the generic di k h i store brand when the products are p identical?
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“It’s really different – y my water y comes from a mountain spring high in the Alps ” in the Alps.”
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Do you really think there is a guy h d di i hand dipping millions of bottles a illi f b ttl month into a stream to fill those bottles?
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Bottled water emphasizes the power Bottled water emphasizes the power of brand – the product embodies a f li feeling, an experience, and i d p perception of repeatable quality p p q y that the customer is willing to pay a premium for premium for. http://emagine‐group.com
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Brand equity, the value of a brand, is q y, , difficult to express in a financial value. value
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One way is to take all the assets of the company and subtract it from p y the market valuation of the company based on stock price the company based on stock price – the remaining value is the “brand.”
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But this isn’t correct because there are so many unknowns that end up y p multiplying together that the derived “brand equity” is almost a derived “brand equity” is almost a random number
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The better approach is to use surveys to ask how much a person t kh h will be willing to pay for the branded g p y vs. non‐branded product
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The percentage difference The percentage difference multiplied by product sales is the approximate value of the brand. i t l f th b d
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A Simple Example ¾ ¾ ¾
Branded Product = 1000 Non‐Branded = 500 P d tS l Product Sales = 400,000 400 000
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Find the Percentage Difference (1000/500) 200% (1000/500) = 200%
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Multiply by Product Sales 200% x 400,000 = 800,000 Brand Value = 800,000 Brand Value 800,000
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Another way is with the internet and A th i ith th i t t d SMS messaging g g
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Placing a URL or SMS number on a billboard can quantify the impact of q y p the marketing telling you how many people acted as a result of the people acted as a result of the awareness advertising.
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Evaluation Marketing ¾
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Evaluation marketing is designed to drive customer purchase intent by enabling h i t tb bli customer to compare different products or services Examples are – product white papers print ads with white papers, print ads with breakdowns of the benefits and features, product b h brochures and websites d b it with product descriptions
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Evaluation Marketing ¾
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Evaluation marketing demonstrates the value proposition of the proposition of the product/service, the benefits and cost trade‐offs The challenge is the time The challenge is the time delay between the evaluation and purchase that could be weeks that could be weeks, months or longer depending on the product Another challenge is linking Another challenge is linking the evaluative marketing with an actual purchase
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Evaluation Marketing ¾
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Standard metrics for evaluative marketing i l d include product information d ti f ti downloads for a website or impressions of marketing print ads However, these metrics do not measure the impact of not measure the impact of evaluative marketing well So how do we quantify the effectiveness? ff ti ? We find metrics that point to future sales
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Dell competes based on price Dell competes based on price because it has a low‐cost direct channel to the customer and ou s a d g supp y c a outstanding supply‐chain management that drives low‐cost manufacturing. manufacturing http://emagine‐group.com
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In Dell advertising, the price of the product is prominently featured in d ti i tl f t d i Dell’s evaluative marketing with a g list of the facts.
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This is a great method if the customer criteria is solely price – yp it lets them quickly evaluate product features and weigh the price against features and weigh the price against performance trade‐offs.
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Apple takes a different approach in i its evaluative marketing, l i k i emphasizing the cool designs and p g g product innovations
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Apple iPhone ads highlight the pp g g innovative benefits of the technology such as the App Store technology, such as the App Store
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When we look at Apple laptops, When we look at Apple laptops Apple charges a price premium over Dell and de‐emphasizes price in the ll d d h i i i h evaluative marketing – g yyou don’t see the price on the Apple website until you configure your computer you configure your computer http://emagine‐group.com
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So how do we define a So how do we define a metric with these things in mind?
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Anyone who has purchased a car has probably gone to a dealer and picked up brochures for the new picked up brochures for the new cars that fit their purchasing criteria & th d & then done side‐by‐side id b id comparison of these glossy documents http://emagine‐group.com
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These brochures are examples of evaluative marketing in the auto l ti k ti i th t business, but what is the value of the glossy brochure?
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That is hard to quantify, but we can That is hard to quantify but we can define a metric that is a measure of f future purchasing intent that h i i h embodies the collective impact of p the evaluative marketing activities – the test drive the test drive. http://emagine‐group.com
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Metric 2 – The Test Drive Customer Pretest of a Product/Service Prior to Purchase /
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It turns out that someone who test‐ It turns out that someone who test‐ drives a car is very likely to purchase the car. The purchase probability is not 100% because of a test drive, o 00% because o a es d e, instead there is a probability of purchase. purchase http://emagine‐group.com
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By measuring the number of test drives and the number of customers who subsequently purchase, we calculate the average probability of calculate the average probability of purchase.
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Number of purchases Number of purchases /number of test drives = average probability of purchase b bilit f h
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Test drives are a leading metric that Test drives are a leading metric that point to future sales. So evaluative marketing should be designed to increase the number of test drives c ease e u be o es d es by increasing the amount of foot traffic. traffic http://emagine‐group.com
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So we design experiments and measure traffic and test drives ffi d di resulting from specific marketing g p g activities.
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Intel Chip Sales
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Intel has a greater than 80% market share in processors for Windows‐ p based PCs and servers. This almost monopoly power drives Intel’s sales monopoly power drives Intel’s sales model.
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It has a very large direct sales force that engages OEM partners with the h ih h g goal of selling additional Intel chips g p on the motherboard.
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Intel s sale cycle takes roughly 18 Intel’s sale cycle takes roughly 18 months, from initial discussions to the manufacture of OEM boards h f f b d with new Intel processors. This p poses a problem for because of the long sales cycle long sales cycle. http://emagine‐group.com
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How does Intel do their test drive?
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Within a few months of the initial discussions with Intel, the OEM , must create a team to study the feasibility of incorporating the Intel feasibility of incorporating the Intel product into the motherboard.
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This is the This is the “design design win win” for Intel and for Intel and the test drive that points to future revenues.
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Why?
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When the OEM puts together a When the OEM puts together a team to investigate manufacturing f ibili i feasibility, it requires people and i l d money, which is not possible y, p without an implied commitment to purchase. purchase http://emagine‐group.com
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By collecting data from its operational CRM, Intel can measure p , the conversion rate from design wins to sales to predict the wins to sales to predict the probability of future sales revenues.
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So, for Intel, the focus is on , , improving evaluative marketing material to drive more design wins material to drive more design wins
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What do we learn?
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The test drive is an essential metric at the evaluation marketing stage of the purchasing cycle the purchasing cycle
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You should first decide what the “test drive” for your product is, then y p , design the evaluative marketing campaigns to incentivize the test campaigns to incentivize the test drive.
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