Measuring Marketing: 110+ Key Metrics Every Marketer Needs

"Well organized and succinct, Measuring Marketing is both a comprehensive, prescriptive look at the variety of ways to evaluate the impact of marketing, as well as an excellent reference guide. A practical analytical tool in today's complex, multidimensional business world to help decision makers understand marketing's impact on a business or product line, Measuring Marketing is applicable from start-up to established player. Particularly helpful are the examples of measurement for each metric and the discussion of how each impacts decision making." —Brent N. Smith, Managing Partner LevelOne Capital Limited "John has successfully demonstrated marketing has very finite and tangible attributes that are quantifiable and will benefit any organization focused on both value and volume. If we are honest, most global organizations fall short in quantifying the value of marketing. Measuring Marketing clearly defines what is important to measure and why. Both will favorably influence a company's decisions in investing in marketing that will eventually flow to its investors with the realization that the use of capital is being maximized. John has masterfully proven marketing has many more quantifiable components than most recognize. It is a magnificent tool for any organization's marketing department to apply concurrently in discussions with their Finance departments." —Kevin Goulding, President and CEO, AIG China "Every CEO has the responsibility of ensuring their company's brand is positively promoted and protected, and effective marketing plays a big part. However, the CEO is frequently asking 'is the money we are spending making a difference?' The question of 'should the company invest more, or less, on marketing' is impossible to answer unless there are specific and tangible marketing metrics that can be measured. Knowing what and how to measure marketing in a data-driven way has been difficult, but John Davis has built on his many years of marketing experience, in both the business and academic worlds, to craft a proven methodology. Now, in this updated edition, John takes his research further to offer new insights and answers to 'how can we be sure our marketing investment is driving the results we want?'" —Steven Leonard, President, EMC Asia Pacific/ Japan, EMC Corporation " Measuring Marketing is a comprehensive outline of marketing concepts—from basic fundamentals to advanced, state-of-the-art topics—written in a clear, thought-provoking manner. The examples provided and impacts on decision-making sections draw valuable insights into how the concepts can be leveraged to drive share owner value. It's a must-read reference book for both the marketing professional and the P&L owner." —William Brown, President and CEO, Harris Corporation "I have been in marketing for 20+ years and have had to come by this information piecemeal. Measuring Marketing is bound to become as indispensable to marketers as the AP Stylebook is to writers. It is a superb catalogue of KPIs for any business, large or small. John's easy-to-approach explanations of each measurement and its impact on decision-making are ideal for both financially and non-financially oriented managers. Measuring Marketing should be handed out alongside diplomas for all marketing graduates." —David Maddocks, founder, The David Maddocks Company; former Chief Marketing Officer, Converse "John Davis's innovative approach to measuring marketing effectiveness is redefining the traditional business process of managing, measuring, and allocating marketing investment. The complexity of the new marketing channels created in the last decade and increased need to differentiate your brand have exposed the need for more product and brand performance metrics. Comparing John's insights to traditional marketing practices is like comparing the MRI to the X-ray." —Thomas McCabe, Managing Director and Global Business Head, DBS Bank "John Davis's book Measuring Marketing offers a very systematic and quantitative platform in designing and assessing key marketing initiatives. Use of simple KPIs will allow marketers to make mid-course corrections if needed and achieve desired results. I would highly recommend this book to all marketers." —Ravi Agarwal, Practice Faculty on Leadership in Asia, MBA/EMBA programs, Nanyang Business School

Acknowledgments xiii Introduction xv SECTION I CORPORATE FINANCIAL METRICS 1 CHAPTER 1 Revenue 3 CHAPTER 2 Gross Profit 5 CHAPTER 3 Value–to–Volume Ratio 7 CHAPTER 4 Net Profit 9 CHAPTER 5 Earnings–Based Value 13 CHAPTER 6 Return on Sales 17 CHAPTER 7 Return on Assets 19 CHAPTER 8 Return on Equity 21 SECTION II MARKETING PLANNING METRICS 25 CHAPTER 9 Market Share 27 CHAPTER 10 Relative Market Share 29 CHAPTER 11 Market Growth 31 CHAPTER 12 Market Demand 33 CHAPTER 13 Market Penetration 35 CHAPTER 14 Program/Non–Program Ratio 41 CHAPTER 15 Program/Payroll Ratio 43 CHAPTER 16 Causal Forecast 45 CHAPTER 17 Time–Series Analysis 49 SECTION III BRAND METRICS 55 CHAPTER 18 Brand Equity 57 CHAPTER 19 Brand Scorecards 61 CHAPTER 20 Brand Premium 65 CHAPTER 21 Brand Contribution and Review Analysis 71 SECTION IV CUSTOMER METRICS 75 CHAPTER 22 Net Sales Contribution 79 CHAPTER 23 Time–Driven Activity–Based Costing 81 CHAPTER 24 Segment Profitability 83 CHAPTER 25 Customer Profitability 87 CHAPTER 26 Share of Customer 89 CHAPTER 27 Return on CustomerSM 91 CHAPTER 28 New Customer Gains 93 CHAPTER 29 Customer Acquisition Costs 95 CHAPTER 30 Cost per Lead 99 CHAPTER 31 Retention Rate 103 CHAPTER 32 Churn Rate 107 CHAPTER 33 Customer Losses 109 CHAPTER 34 Consumer Franchise 111 CHAPTER 35 Customer Equity and Customer Lifetime Value (CLTV) 115 CHAPTER 36 Customer Brand Value 119 SECTION V PRODUCT/OFFERING METRICS 121 CHAPTER 37 Usage 123 CHAPTER 38 New Product Purchase Rate 125 CHAPTER 39 Marketing Cost per Unit 129 SECTION VI PRICE METRICS 131 CHAPTER 40 Price 133 CHAPTER 41 Markup Price 137 CHAPTER 42 Target Return Price 141 CHAPTER 43 Sales Price Variance 143 CHAPTER 44 Markdown Goods Percentage 147 CHAPTER 45 Profit Impact 149 SECTION VII ADVERTISING/PROMOTION METRICS 153 CHAPTER 46 Share of Voice 155 CHAPTER 47 Recall 157 CHAPTER 48 Recognition 161 CHAPTER 49 Reach 163 CHAPTER 50 Frequency 165 CHAPTER 51 Gross Rating Points (GRP) 167 CHAPTER 52 Cost per Gross Rating Point (CPP) 171 CHAPTER 53 Response Rate 173 CHAPTER 54 Conversion Rate 175 CHAPTER 55 Advertising–to–Sales Ratio 177 CHAPTER 56 Promotion Profit 181 SECTION VIII DIRECT MARKETING METRICS 185 CHAPTER 57 Direct Marketing Revenue Goals 187 CHAPTER 58 Direct Marketing Profit Goals 191 CHAPTER 59 Direct Marketing Gross Profit 193 CHAPTER 60 Direct Marketing Net Profit 195 CHAPTER 61 Direct Marketing ROI 197 SECTION IX ONLINE/DIGITAL/SOCIAL METRICS 199 CHAPTER 62 Gross Page Impressions (or Gross Page Requests) 201 CHAPTER 63 Word of Mouth (WOM) 203 CHAPTER 64 Total Clicks 205 CHAPTER 65 Click–Through Rate (CTR) 207 CHAPTER 66 Cost per Click 209 CHAPTER 67 Cost per Action 211 CHAPTER 68 Pay per Lead 213 CHAPTER 69 Activity Ratio for Social Media 215 CHAPTER 70 Deductive Social Media ROI 217 CHAPTER 71 Resolution Time 219 CHAPTER 72 Social Media Profitability 221 SECTION X PLACE/DISTRIBUTION METRICS 223 CHAPTER 73 Cost per Sales Dollar 225 CHAPTER 74 Transactions per Customer 227 CHAPTER 75 Transactions per Hour 229 CHAPTER 76 Average Transaction Size 231 CHAPTER 77 Average Items per Transaction 233 CHAPTER 78 Hourly Customer Traffic 237 CHAPTER 79 Returns to Net Sales 239 CHAPTER 80 Inventory Turnover 241 CHAPTER 81 Percent Inventory Carrying Costs 243 CHAPTER 82 Gross Margin Return on Inventory Investment 245 CHAPTER 83 Sales per Square Foot 247 CHAPTER 84 Sales/Profits per Employee 249 CHAPTER 85 Retail Close Ratio 251 CHAPTER 86 Retailer’s Margin Percentage 253 CHAPTER 87 Percent Utilization of Discounts 255 CHAPTER 88 Shrinkage to Net Sales 257 SECTION XI SALES METRICS 259 CHAPTER 89 Net Sales Contribution 263 CHAPTER 90 Absolute Index (AI) 265 CHAPTER 91 Relative Index 267 CHAPTER 92 Percent of Sales 269 CHAPTER 93 Independent Sales Representative Analysis 273 CHAPTER 94 Turnover Rate 275 CHAPTER 95 Recruiting 279 CHAPTER 96 Breakdown Approach 281 CHAPTER 97 Workload Approach 285 CHAPTER 98 Sales Performance Quotas 289 CHAPTER 99 Average Sales per Call 295 CHAPTER 100 Close Process and Close Ratio 297 CHAPTER 101 Cost per Call 301 CHAPTER 102 Break–Even Sales Volume 303 CHAPTER 103 Sales Productivity 305 CHAPTER 104 Four Factor Model 307 CHAPTER 105 Sales Variance Analysis 309 CHAPTER 106 Sales Volume Variance 313 CHAPTER 107 Straight Salary 315 CHAPTER 108 Straight Commission Plans 319 CHAPTER 109 Profit–Based Commission 321 CHAPTER 110 Salary Plus Commission or Bonus 323 CHAPTER 111 Salary Plus Commission and Bonus 327 CHAPTER 112 Commission Plus Bonus 329 CHAPTER 113 Team Selling Compensation 331 About the Author 335 Index 337

John A. Davis is the author of several acclaimed marketing books: the first edition of this book; the first and second editions of The Olympic Games Effect ; Competitive Success ; Magic Numbers for Sales Management ; and Magic Numbers for Consumer Marketing . He is a member of the marketing faculty at the Lundquist College of Business, University of Oregon, where he received the BAC Outstanding Teaching Award in 2012, and Chairman of Brand New View, an executive education and professional services firm. Previously, he was Dean of the Global MBA Program and Professor of Marketing at SP Jain, with campuses in Singapore, Dubai, and Sydney. In 2010, he was the recipient of the "Best Professor in Marketing" honor, awarded by CMO Asia and Asia's Best Business School Awards. Before SP Jain, he was department chair and professor of marketing at Emerson College, and professor of marketing practice at Singapore Management University, where he received the "Most Inspiring Teacher" award and Dean's Teaching Honors. John regularly consults with leading global companies and is a sought-after conference speaker. He has also founded two award-winning companies and has led marketing teams at Nike, Informix, and Transamerica. He received his MBA from Columbia University and his BA from Stanford University.