Lecture Marketing metrics: Chapter 4 - Trần Nhật Minh

Lecture Marketing metrics - Chapter 4: Non-financial metrics presentation of content: Product and portfolio management, pricing strategy, chanel and retail management, marketing communication metrics.

• Chanel and retail management

• Marketing communication metrics

Product & portfolio

management

◦Customer Lifetime Value (CLV)

◦Prospect Lifetime Value

Trial, repeat, penetration and

volume projection

• Purpose: to understand volume projections

• Trial rate (%): the percentage of a defined

population that purchases or uses a product for the

first time in a given period.

• First-time triers in period t (#): the number of

customers who purchases or use a product or

brand for the first time in a given period

Trial, repeat, penetration and

volume projection

•𝑻𝒓𝒊𝒂𝒍 𝒓𝒂𝒕𝒆 % =𝐹𝑖𝑟𝑠𝑡 𝑡𝑖𝑚𝑒 𝑡𝑟𝑖𝑒𝑟𝑠 𝑖𝑛 𝑝𝑒𝑟𝑖𝑜𝑑 𝑡(#)

𝑇𝑜𝑡𝑎𝑙 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 (#)

•𝑷𝒆𝒏𝒆𝒕𝒓𝒂𝒕𝒊𝒐𝒏 𝒕 # = 𝑃𝑒𝑛𝑒𝑡𝑟𝑎𝑡𝑖𝑜𝑛 𝑖𝑛 𝑡 − 1 # ∗

Usage (AAU)

• Awareness & Knowledge:

◦Awareness: the percentage of potential customers or

consumers who recognize a given brand.

◦Knowledge: the percentage of surveyed customers who

demonstrate specific knowledge or beliefs about a brand

or products.

Awareness, Attitudes, and

Usage (AAU)

• Attitude: A combination of what consumer believe

and how strongly they feel about it.

Awareness, Attitudes, and

Usage (AAU)

• Cautions:

◦Periodic changes

◦Customer and non-customer responses

◦Triangulate customer survey data with sales revenue or

other data related to business performance

◦Separate leading from lagging indicators

Customer satisfaction

• Purpose: provides a leading indicator for consumer

purchase intentions and loyalty.

• Customer satisfaction: The number of customers,

or percentage of total customers, whose reported

experience with a firm, its products, or its services

(ratings) exceeds specified satisfaction goals.

Customer satisfaction

• Cautions:

◦Response bias from disappointed or angry customer

◦Sample selection: satisfaction is calculated based on

surveyed customers

◦Change in customers’ expectations

◦Impact of marketing activities changes satisfaction

Customers, recency, retention

• Purpose: to monitor firm performance in

attracting and retaining customers.

• Customer counts: the number of customers of a

firm for a specified time period.

• Recency: the length of time since a customer’s last

purchase.

• Retention rate: the ratio od the number of

retained customers to the number at risk.

Customers, recency, retention

• Cautions:

◦Defining the customer properly is critical

◦Not all customers are the same

◦Where is the customer

◦Who is the customer

Customer profit

• Purpose: to identify the profitability of individual

customers.

• Customer profitability: the difference between the

revenues earned from and the costs associated

with the customer relationship during a specified

period.

• Customers: individual or group.

Customer Lifetime Value

• Purpose: to assess the value of each customer

• Customer Lifetime Value (CLV): the present value

of the future cash flows attributed to the customer

relationship.

Customer Lifetime Value

• 𝑪𝑳𝑽 $ = 𝑀𝑎𝑟𝑔𝑖𝑛 $ ∗1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒 %𝑅𝑒𝑡𝑒𝑛𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 (%)

−𝑅𝑒𝑡𝑒𝑛𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒(%)

Prospect Lifetime Value

• Purpose: to account for the lifetime value of a

newly acquired customer (CLV) when making

prospecting decisions

Prospect Lifetime Value

• 𝑷𝒓𝒐𝒔𝒑𝒆𝒄𝒕 𝑳𝒊𝒇𝒆𝒕𝒊𝒎𝒆 𝑽𝒂𝒍𝒖𝒆 $ =

𝐴𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 % ∗ 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑚𝑎𝑟𝑔𝑖𝑛 $ +

Acquisition & retention cost

• Purpose: to determine the firm’s cos of acquisition

Pricing strategy

Key metrics

• Price premium

• Reservation price

• Percent good value

• Price elasticity of demand

Price Premium

•𝑷𝒓𝒊𝒄𝒆 𝒑𝒓𝒆𝒎𝒊𝒖𝒎 % =𝑏𝑟𝑎𝑛𝑑 𝐴 𝑝𝑟𝑖𝑐𝑒 $ −𝑏𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘 𝑝𝑟𝑖𝑐𝑒 $𝑏𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘 𝑝𝑟𝑖𝑐𝑒 ($)

Price Premium

• Benchmark price:

◦Price of a specific competitor(s)

◦Average price paid: the unit-sales weighted average price in

◦Retail, distributor, manufacturer pricing

◦Gross, net of discounts, rebates, coupons

Other pricing metrics

• Reservation price and Percent good value:

◦Reservation price: the maximum price which a customer

will buy a product.

◦Percent good value: the proportion of customers who

perceive a product to represent a good value (to carry a

selling price at or below their reservation price)

Other pricing metrics

• Price elasticity of demand

◦“Own” price elasticity (E1): the change in units sold due

to the reaction of a firm’s customers to its changes in

price

◦“Competitor reaction” elasticity (E2): the reaction of

competitors to a firm’s price changes

◦“Cross” price elasticity (E3): the reaction of a firm’s

customers to price changes by its competitors

◦Residual price elasticity=E1 + (E2 * E3)

Chanel and retail

management

Key metrics

• Distribution

◦Numeric distribution

◦All Commodity Volume (ACV)

◦Product Category Volume (PCV)

• SKU Profitability

◦Markdown

◦Gross Margin Return on Inventory Investment (GMROII)

◦Direct Product Profitability (DPP)

Numeric, ACV, PCV

distribution

• Purpose: to measure a firm’s ability to convey a

product to its customers.

Numeric distribution

•𝑵𝒖𝒎𝒆𝒓𝒊𝒄 𝒅𝒊𝒔𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 % =

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑙𝑒𝑡𝑠 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝑝𝑟𝑜𝑑𝑢𝑐𝑡() 𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑢𝑡𝑙𝑒𝑡𝑠

𝑖𝑛 𝑡ℎ𝑒 𝑚𝑎𝑟𝑘𝑒𝑡()

All Commodity Volume (ACV)

• Purpose: to provide a measure of customer traffic

in the stores that stock a brand.

•𝑨𝑪𝑽 𝒅𝒊𝒔𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 % =

𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑡𝑜𝑟𝑒𝑠 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝑏𝑟𝑎𝑛𝑑($) 𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑎𝑙𝑙 𝑠𝑡𝑜𝑟𝑒𝑠($)

•𝑨𝑪𝑽 𝒅𝒊𝒔𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 $ =

𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑡𝑜𝑟𝑒𝑠 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝑏𝑟𝑎𝑛𝑑($)

Product Category Volume

(PCV)

•Purpose: to provide a strong indication of the market

share within a category to which a given brand has

access

•𝑷𝑪𝑽 𝒅𝒊𝒔𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 % =

𝑇𝑜𝑡𝑎𝑙 𝑐𝑎𝑡𝑒𝑔𝑜𝑟𝑦 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑡𝑜𝑟𝑒𝑠 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝑏𝑟𝑎𝑛𝑑($) 𝑇𝑜𝑡𝑎𝑙 𝑐𝑎𝑡𝑒𝑔𝑜𝑟𝑦 𝑠𝑎𝑙𝑒𝑠

𝑜𝑓 𝑎𝑙𝑙 𝑠𝑡𝑜𝑟𝑒𝑠($)

•𝑷𝑪𝑽 𝒅𝒊𝒔𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 $ =

𝑇𝑜𝑡𝑎𝑙 𝑐𝑎𝑡𝑒𝑔𝑜𝑟𝑦 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑡𝑜𝑟𝑒𝑠 𝑐𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝑏𝑟𝑎𝑛𝑑 $

Category performance ratio

• Purpose: to provide insight into a brand’s

distribution network is more or less effective in

selling the category of which that brand is part.

• 𝑪𝒂𝒕𝒆𝒈𝒐𝒓𝒚 𝒑𝒆𝒓𝒇𝒐𝒓𝒎𝒂𝒏𝒄𝒆 𝒓𝒂𝒕𝒊𝒐 % =𝑃𝐶𝑉(%)𝐴𝐶𝑉(%)

SKU profitability

• Purpose: to assess the effectiveness and

profitability of individual product and category

sales.

◦Markdown

◦Gross margin Return on Inventory Investment (GMROII)

◦Direct Product Profitability (DPP)

Markdown

• Purpose: indicate errors in product assortment,

pricing, or promotion; difficult to interpret if used

as standalone metric.

•𝑴𝒂𝒓𝒌𝒅𝒐𝒘𝒏 $ = 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑆𝐾𝑈 $ −

𝐴𝑐𝑡𝑢𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑝𝑟𝑖𝑐𝑒 $

•𝑴𝒂𝒓𝒌𝒅𝒐𝒘𝒏 % =𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑆𝐾𝑈($)𝑀𝑎𝑟𝑘𝑑𝑜𝑤𝑛($)

Gross Margin Return on

Inventory Investment (GMROII)

• Purpose: quantifies the profitability of products in

relation to the inventory investment required to

make the available.

• 𝑮𝑴𝑹𝑶𝑰𝑰 % =

𝐺𝑟𝑜𝑠𝑠 𝑚𝑎𝑟𝑔𝑖𝑛 𝑜𝑛𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑠𝑎𝑙𝑒𝑠 𝑖𝑛 𝑝𝑒𝑟𝑖𝑜𝑑($)𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑣𝑎𝑙𝑢𝑒 𝑎𝑡 𝑐𝑜𝑠𝑡($)

Direct Product Profitability

(DPP)

•Purpose: quantifies the profitability of products in

relation to the inventory investment required to make

•Advertising media metrics

◦Opportunities to see (OTS)

◦Gross Rating Points (GRPs)

◦Share of Voice

Baseline sales, incremental sales, promotional lift

• Purpose: To select a baseline of sales against

which the incremental sales and profit generated

by marketing activity can be assessed.

• Impressions: the number of times a specific

advertisement is delivered to a potential customer.

•𝑰𝒎𝒑𝒓𝒆𝒔𝒔𝒊𝒐𝒏𝒔 # = 𝑅𝑒𝑎𝑐ℎ # ∗ 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 #

•𝑹𝒆𝒂𝒄𝒉 # =𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦(#)𝐼𝑚𝑝𝑒𝑟𝑠𝑠𝑖𝑜𝑛(#)

Gross Rating Points (GRPs)

• Reach [Rating points – (%)]: calculated as

individuals reached by that vehicle, divided by the

total number of individuals in a defined

population.

• Gross Rating Points (GRPs): the sum of all rating

points delivered by the media vehicle carrying an

Target Rating Points (TRPs)

• Target Rating Points (TRPs): the gross rating

points delivered by a media vehicle to a specific

• Purpose: to compare the costs of advertising

campaigns within and across different media.

• CPM: The cost of a media campaign, relative to its

success in generating impressions or opportunities

Share of voice

• Purpose: to evaluate the comparative level of

advertising committed to a specific product or

brand.

• Share of voice: the percentage of advertising in a

given market that a specific product or brand

• Impressions, Pageviews, Hits:

◦Purpose: to assess website traffic and activity.

◦Pageviews: the number of times a specific page has been

displayed to users (equal to OTS)

◦Hits: A count of the number of files served to visitors on

the web.

Web metrics: rich media

• Rich media display time:

◦Purpose: to determine how long an advertisement is

viewed

◦𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒓𝒊𝒄𝒉 𝒎𝒆𝒅𝒊𝒂 𝒅𝒊𝒔𝒑𝒍𝒂𝒚 𝒕𝒊𝒎𝒆 # =

𝑇𝑜𝑡𝑎𝑙 𝑟𝑖𝑐ℎ 𝑚𝑒𝑑𝑖𝑎 𝑑𝑖𝑠𝑝𝑙𝑎𝑦 𝑡𝑖𝑚𝑒(#)

𝑇𝑜𝑡𝑎𝑙 𝑟𝑖𝑐ℎ 𝑚𝑒𝑑𝑖𝑎 𝑖𝑚𝑝𝑟𝑒𝑠𝑠𝑖𝑜𝑛𝑠(#)

Web metrics: rich media

• Rich media Interaction rate:

◦Purpose: to measure and monitor active involvement

Web metrics: Costs

• Purpose: to capture customer’s initial response to

websites.

◦Cost per impression

◦Cost per click

◦Cost per order

Web metrics: Costs