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Measure for Success

Month

September 2015

Key metric – Customer profit

Is the profit a firm makes from a customer or customer group over a specific time period.

Calculating customer profitability is an important step in understanding which customer relationships are better than others.  Often, companies will find that some customer relationships are unprofitable.  The firm may be better off without these customers.

At the other end, the firm will identify its most profitable customers  and position itself to take steps to retain these most profitable relationships.

Key metric – Willingness to recommend

Willingness to recommend is a metric related to customer satisfaction.

When a customer is satisfied with a product they might recommend it to friends, relatives and colleagues. This willingness to recommend metric can be a powerful marketing advantage and is normally expressed as a percentage of surveyed customers who indicate that they would recommend a brand to friends.

Key metric – Customer satisfaction

Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectations. Customer satisfaction is defined as the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services exceeded specified satisfaction goals.

Customer satisfaction is seen as a key performance indicator within many businesses and is often part of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy.

Key metric – Market penetration

Two key measures of a product’s popularity are market penetration rate and penetration share.

Market penetration rate is the number of people who buy a specific brand or a category of goods at least once in a given period, divided by the size of the relevant market population. A brand’s penetration share, in contrast to penetration rate, is determined by comparing that brand’s customer population to the number of customers for its category in the relevant market as a whole. Here again, to be considered a customer, one must have purchased the brand or category at least once during the period.

Often, managers must decide whether to seek sales growth by acquiring existing category users from their competitors or by expanding the total population of category users, attracting new customers to the market. Penetration metrics help indicate which of these strategies would be most appropriate and help managers to monitor their success. These equations can also be calculated for usage instead of purchase.

Key metric – Market growth rate

The increase in size or sales observed within a given target group over a specific time frame. When the management of a business is reviewing the success of a product, it needs to deduct the overall market growth rate from the observed product sales growth.

Key metric – Cannibalisation rate

In marketing terms, cannibalisation refers to a reduction in sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer.

While this may seem inherently negative, in the context of a carefully planned strategy, it can be effective, by ultimately growing the market, or better meeting consumer demands. Cannibalisation is a key consideration in product portfolio analysis.

Key metric – Market share

Market share is the percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.

Marketers need to be able to translate and incorporate sales targets into market share because this will demonstrate whether forecasts are to be attained by growing with the market or by capturing share from competitors. The latter will almost always be more difficult to achieve.

Market share is closely monitored for signs of change in the competitive landscape, and it frequently drives strategic or tactical action.

Five ways marketing can be more like sales

A recent study of senior marketers by Marketo and the Economist Intelligence Unit (EIU) showed that 60% of marketers believe their company views their department as a cost centre. Little wonder, then, that they don’t share the same respect as the sales team, who bring money in and help pay their salaries.

Continue reading “Five ways marketing can be more like sales”

Quote of the day

Marketing doesn’t make sense without a clear link to revenue and sales.

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