mm session 3 monitoring performance 2012_al_aug13

8/10/2019 MM Session 3 Monitoring Performance 2012_AL_Aug13

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CIM PROFESSIONAL DIPLOMA IN

MARKETING

MANAGING MARKETING

Session 3Monitoring Performance


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Learning Outcomes

By the end of the session, students will be able to:

Determine innovative and effective methods formeasuring and monitoring marketing

performance in operations, activities andresource management (1.3)

Critically analyse monitoring information andrecommend ways in which to improve marketing

performance (1.4)

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Measurement and monitoring

This first section of the session reviews the

basic concepts surrounding measuring

and monitoring marketing performance

with a view to improving performance

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A feedback control system

ProcessInput Output

MeasureCompareCorrective

action

Target/

budget


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5

Variance analysis

Performance

Variables usedto judge

operations

Example

Standards

Marketingobjectives

Marketingplan

Profits 15% ROI

Sales per

unit ofanalysis

5,000 average

sales per unit(e.g. customer)

Consumer

service

Complaints and

warranty service

per 100 units sold

Costs perunit of

analysis

Sales costs 1,000

Distribution costs

1,250

Product costs

2,000

Source: Adapted from Luck and Ferrell (1979)


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1. Strategicrelated to overall performance

of an organisationshareholder value,

ROI, branding, eco efficiency

2. Tacticalshort term measure to improvecustomer satisfaction, loyalty rates and

promotional effects

Performance Measures


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Types of control

Strategic controls

Effectiveness (doing

the right thing)

Efficiency (how wellits done)

Adaptability

Annual planningcontrols

Profit controls

Brand equity controls

Tactical performance

measurement

Annual budgetingprocedures

Auditing mechanisms

Benchmarkingprocedures


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Choosing metrics

Should be clearly linked to corporate, business or

marketing objectives

Focused on measuring the key indicators in a clear way

so they are easily understood

Encompass broad and balanced factors and incorporate

a range of marketing measures

Be capable of tracking performance reliably over time Cost-effective


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Suitability does it give the information you need?

Feasibility can it be activated and usedcan it be communicated?

Acceptability to marketing areas and shareholders,

e.g. Finance DepartmentResources are you able to do it and is it practical?

Actionable is it something that can be influenced by your actions,

e.g. campaign results, or too dependent on external

factors, e.g. economic conditions?

Focused are you measuring the most important and critical areas

Critical Success Factors (CSFs) or

Key Performance Indicators (KSFs)

Choosing metricsquestions to ask


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Strategic Control Systems

Type of analysis Used to control

Financial analysisRatio analysisVariance analysisCash budgetingCapital budgeting and expenditure

Elements of profitabilityCosts or revenueCash flowInvestment

Market/sales analysis- overall consideration of sizeand growth of market segments and corporatemarket shareDemand analysisMarket share or penetrationSales targetsSales budget

Competitive standingSales effectivenessEfficiency in use of resources for selling

Physical resource analysis

Capacity fillYieldProduct inspection

Plant utilisation

Materials utilisationQuality

Human resources analysisWork measurementOutput measurementLabour turnover

ProductivityWorkforce stability


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Financial and non-financial metrics


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Market size, growth, share, number of

competitors

Market share, revenue or gross profit as a %

of salesCustomer acquisitions / rates

Customer lifetime value

Number of new products launched in last 5

years

% revenue from new services / productsCompany / brand awareness amongst target

group

Perceptions / Image of company /brand

Market trends

Return on marketing investment

Innovation

Branding / Corporate Identity

Examples of how we can measureWhat do we want to measure?

Examples of Marketing Activities

Measurements


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Measuring the Marketing Mix

Product

Market share

Sales

Sales by segment

No of new productsWarranty claims

Repeat purchases

Place

Channel costs

Channel volume

Channel growth

Delivery time

Stock levels

Price

Profit margin

Discount levels

Price by segment

Price comparisons

Promotion

Cost per contactMedia coverage

Sales per call

Awareness levels

Enquiries generated

ControlEffectiveness control

Efficiency control

Strategic control

Profitability


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Evaluation Tools & Methods

Potential tools which can be used formeasurement include; Consumer audit

Sales information

Retail audits

Feedback from reps

Voucher/coupon returns

Campaign-specific measures, e.g. website visits or calls

Response Rates

Conversion Rates


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Example - Potential Online Measurements

Activity

Brand-building

Whether ad seen

Number of times seen

Attitudinal changes

Awareness levels

Feelings towards company

Email

Number openedClick-throughs

Undelivered

Unsubscribes

Acquisition costs

Direct Marketing

Enquiries

Web site visits

Purchases

Average order values

Acquisition costs

Internet

Visitors

Pages visited

Pages exited from

Entry pages

Successful keywords

Visitor sources

Purchases

Abandoned sales


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Browsers2,000

Add to Cart1,000

Purchasers - 400

One-offs - 300

Regular Buyers - 90

Loyals - 10

50%

40%

75%

22.5%

2.5%

The Funnel of Activity - Conversion

Levels Example


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Consider the following scenarios for the Funnel of

Activity on the previous slide;

How many more sales would a 10% increase in browsers

achieve? (Answer;40, of whom 30 will only ever buy once).

How many more sales would increasing check-out completionsfrom 40% to 60% achieve? (Answer;200).

Which is easier and more cost effective to achievemore

browsers or revisiting the checkout process to complete more

sales?

How much more successful would the company be if it

increased regular buyers to 50% and Loyals to 15% via

relationship management?

Conversion Levels Example


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Acquisition Cost and Lifetime Value

The cost of acquiring customers and the

relationship to estimated lifetime value is

a useful measure of marketing success.

This next section evaluates the processes

involved

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Assume your product costs 100 and you make 20 profit per sale.

If a campaign generates 50 sales and cost you 1,000 your Acquisition Cost

is 20

If the customer buys once per quarter you will make 80 per year from

that customer. If they stay with you for 5 years you would make 400 profit

Is i t a su ccessfu l campaign?

Would you now consider i t a succ essfu l campaign?

Key LessonIdentify the maximum allowable Acquisition Cost for your product based on the

LifeTime Value. This is a more useful measure than overall cost or number of

sales/responses. Use it to measure campaign success.

Acquisition Costs


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Uses of Acquisition Cost and

LifeTime Value

Compare the success of different direct response

activities.

Measure profitability of segments or products.

Identify if a particular piece of activity is worth continuingwith.

Decide the allocation of the marketing budget to different

media, i.e. maximise activity with lowest Acquisition

Cost.

Accurately measure your Return on Investment for your

marketing spend.


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Year 1 Year 2 Year 3 Year 4

No of custs. 500 375 281 211

Sales Value 40,000 30,000 22,480 16,880

Equiv value 40,000 25,500 19,108 14,348

Total Sales 40,000 65,500 84,608 98,956

Equiv LTV 80 131 169 198

If a customer purchases 4 times per year, with a profit of 20 per sale, the singleyears LTV is 80. Imagine 500 customers, 75% of whom stay with you each year.

Lifetime ValueShowing the

Benefits of Retention


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No of custs. 500 300 180 108

Sales Value 40,000 18,000 7,200 2,160

Equiv value 40,000 16,200 5,950 1,623

Total Sales 40,000 56,200 62,150 63,773

Equiv LTV 80 112 124 127

This time, the retention rate is only 60%, with customers purchasing only 3times in year 2, twice in year 3 and once in year 4. Notice the decrease in LTV


Benefits of Retention (2)


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No of custs. 500 400 320 256

Sales Value 40,000 40,000 32,000 25,600

Equiv value 40,000 36,000 26,446 19,234

Total Sales 40,000 76,000 102,446 121,680

Equiv LTV 80 152 205 243

Now the retention rate has been increased to 80%, with customers averagepurchase value increasing, making a sale worth 25 profit


Benefits of Retention (3)


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Plans to improve performance

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Cost reduction - use of new technologies for

internal and external cost savings and service

improvement

e.g. Call handling technology for Call Centres

does this work in terms of customer

satisfaction though?


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Benchmarking and

the Balanced Scorecard

The final section of this session evaluates

the role that benchmarking can play in

monitoring and assessing marketing

performance. It also reviews the ways in

which the balanced score card approach

can used as a performance monitoringframework.

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Benchmarking

A systematic and ongoing process of

measuring and comparing an

organisations business processes andachievements against acknowledged

process leaders or key competitors to

facilitate improved performance

Drummond & Ensor


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Benchmarking Process

Identify key performance measures for each

business function

Measure own performance as well as that ofcompetitors

Identify areas of competitive advantage by

comparing performance levels

Design and implement plans to improve own

performance on key issues


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Disadvantages of Benchmarking

Implies there is only one best way of doing

something

Could be yesterdays solution

A catching up exercise, i.e. comparing theorganisation to what has already beendone,

as opposed to identifying what couldbe done

Assumes the information youre getting is

accurate


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Importance to customer Elements Actual Performance

Low Medium High Poor Satisfactory Good

Order cycle time

Delivery reliability

Frequency of delivery

Documentation quality

Order completeness

Technical support

Company Benchmarkcompetitor

Benchmarking Example - Service

Comparison

Service support


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Benchmarking Technique -

Comparing with Best of Breed

Integration

Price

Growth Quality

SalesR&D

investment

ROI Capacity

utilisation

Management

Technology

Manufacturing

Marketing

Interpretation:

Outside the

circle = better

than average

Inside the circle

= below average


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Comparison Example

Integration

Price

Growth Quality

SalesR&D

investment

ROI Capacity

utilisation

Interpretation:

Outside the

circle = better

than average

Inside the circle

= below averageXX

XX

X

X

XX


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Balanced Scorecard

This concept gives organisations a framework aroundwhich to base their measurement systems.

It suggests that each measureor Key PerformanceIndicator (KPI) - fits into one of four broad categories.

Targets are given for each KPI which is then measuredon an ongoing basis.

The main advantage is that it provides a roundedapproach to developing measures

The downside is that managers sometimes have tosqueeze measures into a category where it doesnt reallyfit.

It can also give too much rigidity and bureaucracy, ratherthan the ability to measure whats important.


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Balanced Scorecard

Financialperspective

Goal Measure

Goal Measure

Internalperspective

Goal Measure

Innovation &learning perspective

How do we lookto stakeholders?

How do customerssee us?

How can we continue to

improve and create value?

What must weexcel at?

Customerperspective

Goal Measure

Adapted from

Harvard Business Review


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Critically evaluate the measures of performance used

by an organisation with which you are familiar. What

additional information would be useful? What existing

measurement systems are not as effective as they

could be, i.e. what information would you like to have

but dont?

mm session 3 monitoring performance 2012_al_aug13

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