The Role of Metrics in Marketing in the Contemporary World - Literature review Example

The Role of Metrics in Marketing in the Contemporary World Introduction The role of metrics has become crucial in facilitating efficient, effective and targeted marketing in the contemporary world. As a result, it has become increasingly important for managers, marketers and students to learn how to apply metrics in judging marketing results. Metrics has proved to be the key to success in marketing (Weissbrich, 2009, p. 8). Moreover, it encourages vigour and objectivity throughout the world of business, science and government. Metrics is a system that quantifies a character, a trend or dynamic. It is used in explanation of a phenomenon, analysing the causes, sharing findings and projecting the results of future events. Metrics also assists in the comparison of observations across time periods and regions. Consequently, it provides frameworks for efficient and effective marketing approaches. In today’s world, there has been significant pressure on marketing executives to be accountable for their companies’ returns on investments (Roll, 2006, p. 26). As well, there has been an increase in awareness and stronger motivation among marketing executives to quantify returns derived from market campaigns. Through effective and efficient application of metrics, marketers are able to realise new opportunities, measure them and invest in them. For example, a marketing executive may want 10% of a company’s current customers to reorder within 2 weeks, 20% to reorder within 2 months, and 50% to reorder within 1 year. He or she will need to create short-run metrics which will help the company to reach its long-term goals within the set timeframe (Hastings & Saperstein, 2008, p. 231). Discussion Hutt and Speh (2009, p. 449) highlight four key categories of metrics for consideration: customer metrics, strategic metrics, operational metrics and output metrics. Strategic metrics measure the success of a company’s strategic approach to customer relationship management. A Strategic metrics is used to determine whether the laid objectives of a company focus sufficiently on the needs of the customer, the role of customer relationship management in positioning the organisation in the market place and the extent to which marketing information is used when developing business strategy. Customer metrics measure the value delivered to the customer by the organisation as well as the value that a customer delivers to the organisation. This helps in measurement of customer satisfaction, customer retention, customer acquisition costs and in determining the lifetime value of a customer (Baker & Hart, 2007, p. 408). Operational metrics on the other hand measure staff training, career progression, recognition, compensation and appraisal among others (Hutt & Speh 2009, p. 449). This also involves processes such as product and service development targets and customer service levels. Finally, output metrics measure the impact of customer relationship management strategy on the performance of the organisation in terms of customer satisfaction, increase in productivity, reduction in operational costs and increase in level of profits. However, Baker and Hart (2007, p 408) explain that apart from identification and selection of such standards of measurements, it is appropriate to understand the relationship between the metrics so that the customer relationship management processes can be refined individually and collectively to achieve maximum effect. According to Scott (2010 p. 239), application of metrics requires specific measurement skills. Such skills include identification and tracking of marketing campaign performance of a wide array of marketing communication channels. The most commonly used communication channels are radio, TV, direct mail, telemarketing, web marketing, e-mail, search marketing, social marketing and podcasts among others. The use of web metrics has also increased in recent years (Hutt & Speh, 2009, p. 399). This has been through placement of online adverts on a company’s website designed to drive visitors to view information or an online video of a company’s product. A business marketing manager employing such an action is then able to measure traffic to the site and evaluate all components of the site that are of interest to visitors. Such data helps to better understand what the visitors searched for and the information that elicited greatest interest. In turn, a marketer is able to optimize their sites with information that effectively resonates with their audiences and provide links that are most important to the visitors. That is a good example of application of metrics that has helped very many businesses to win many customers. Chiu and Tavella (2008, p. 8) identify eight key steps of marketing efforts which in combination with metrics help in optimisation of returns on investment. The first step is identification of the key objectives of an organisation as laid by the major stakeholders. These objectives need to be quantified and set as goals to be achieved. For example, a business goal could be to increase sales revenue by a given percentage over a given time period. This is a quantified objective and can be realised. Hastings and Saperstein (2008, p. 231) explain that it is difficult to derive an investment strategy for an objective that is not quantified since it is hard to measure. The second step involves selection of appropriate metrics to measure market success. In this stage, there may be need to examine multiple metrics simultaneously to pick up insights that are sought. These can be used in validation of the metrics and to increase the level of accuracy (Chiu & Tavella, 2008, p. 7). For example, a single metric on revenue growth alone may not provide full information or may not shed enough as compared with when it is combined with metrics on market share. If the objective of a business is to increase revenue by a given margin, this will be the appropriate metric to track. For an advertisement programme, the appropriate return metrics to track are brand equity and brand awareness (Schultz, 2003, p. 231). The next step involves assessment of market opportunities. This encompasses determination of the available market opportunities, the segments of those markets, their size and the rate of growth of each. Kiren (2010, p. 75) argues that such information can be gathered through exploration of news available to the public and the data already existing in the company. The next option is to gather information through leveraging of marketing sources from a third party, which can greatly in forecasting market segments by segments. For market segments where market information is not readily available, the information can be gathered through customised research. The fourth step involves conducting a competitive analysis (Chiu & Tavella, 2008, p. 8). This requires a combination of survey data and life transaction data in analysing and tracking of competition information. Brand weaknesses and strength analysis should be incorporated into the process, which can assist in gaining competitive edge in the market. As Aekar 2005 (cited by Schults, 2003, p. 226) observes, one of the reasons why the Japanese automobile firms were able to successfully penetrate the US market during 1970s was their effectiveness in doing market analysis. They came in groups, measured, photographed sketches and tape-recorded everything they could and asked the Americans precise questions. This then leads to the fifth step, which involves derivation of optimal marketing spending and media mix. After derivation of fundamental information on market opportunities and collection of competitors’ landscape, an optimal market spending is determined within the scope of a given objective. This may involve maximisation or minimisation approaches to a particular metric. For example, a company can aim to maximise profits or to minimise costs. Some companies still may choose to maximize revenue but doing so may imperil the organisation’s long-term value. Step six involves leveraging data mining for optimisation and seeking early feedback from key stakeholders of an organisation. At this point, data mining adds value by delineating a road map to optimal use of opportunities realised during research. It is important to select a target list for the marketing list, which will need the use of a response model to help predict the likelihood of a prospect’s response. Such a model requires statistical data mining techniques such as logistic regression and trees (Chiu & Tavella, 2008, p. 8). This follows the final presentation of a marketing campaign. In a successful marketing campaign, specific objectives are achieved and the same strategies and tactics can be relied upon in future campaigns. If organizational objectives are not realised from the results it means that market campaigns have failed. In such a case, the strategies and tactics used can be improved through avoidance of linked weaknesses and identification of areas of improvement during future campaigns (Kumar, 2004, p. 235). Finally, the learnt experience is incorporated into the next round of marketing campaign. This helps in gaining a competitive advantage in the market and eventually realising optimal returns on investment. In addition, this information will be vital in predicting the future needs of the market (Chiu & Tavella, 2008, p. 8). Conclusion In conclusion, metrics holds the key to success of marketing campaigns in any business organisation. The need for specific metrics skills has been clearly brought out as applied in the contemporary world. Metrics have a wide application in tracking and measurement of performance of various marketing communication channels. Similarly, metrics skills are used in planning, management, performance tracking and marketing campaigns. Four categories of metrics have been noted in this discussion. These are customer metrics, strategic metrics, operational metrics and output metrics. Effective marketing efforts involve eight key steps which are: 1) identification of objectives of the key shareholders; 2) selection of appropriate metrics to measure market success; 3) assessing market opportunity; 4) conducting competitive analysis; 5) determination of optimal marketing spending and media mix; 6) leveraging data mining for optimisation; 7) comparing of metric goals and results; and 8) incorporating learning into the next round of marketing planning. All of these steps help in derivation of efficiency and effectiveness in marketing campaigns and achievement of set targets in the end. References Baker, M. J. & Hart, S. 2007, The Marketing Book, Butterworth-Heinemann, London. Chiu, S. & Tavella, D. 2008, Data Mining and Market Intelligence for Optimal Marketing Returns, Butterworth-Heinemann, Burlington, USA. Hastings, H. & Saperstein, J. 2008, Improve your Marketing to Grow your Business: Insights and Innovation that Drive Business and Brand Growth, Wharton School Publishing, Pennsylvania. Hutt, M. D. & Speh, T. W. 2009, Business Marketing Management: B2B, Cengage Learning, Mason. Kirenz, J. 2010, Linking Consumer Mindset Metrics to Consumer Behaviour and Capital Market Valuation, BoD – Books on Demand, University of Zurich, Zurich, Available from http://books.google.com/books?id=9MWxu3diafsC&pg=PA137&dq=Linking+Consumer+Mindset+Metrics+to+Consumer+Behaviour+and+Capital+Market+Valuation&hl=en#v=onepage&q&f=false Kumar, N. 2004, Marketing as Strategy: Understanding the CEO's Agenda for Driving Growth and Innovation, Harvard Business Press, Massachusetts, USA. Roll, M. 2006, Asian Brand Strategy: How Asia Builds Strong Brands, Palgrave Macmillan, New York. Scott, D. M. 2010, The New Rules of Marketing and PR: How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly, John Wiley and Sons, New Jersey. Schultz, G. 2003, The Customer Care and Contact Centre Handbook, ASQ Quality Press, Milwaukee, WI, Available from http://books.google.com/books?id=mcM4H3guNiUC&printsec=frontcover&dq=Garry+Schultz,&hl=en#v=onepage&q&f=false Weissbrich, D. 2009, The Marketing-Sales-Finance Triangle: An Empirical Investigation of Finance-Related Interactions & Managerial Challenges among Marketing, Sales, and Finance Actors, Gabler Verlag, Heidelberg. Read More