MM Session 3 Monitoring Performance 2012_AL_Aug13
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Transcript of 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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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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Year 1 Year 2 Year 3 Year 4
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
Lifetime ValueShowing the
Benefits of Retention (2)
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Year 1 Year 2 Year 3 Year 4
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
Lifetime ValueShowing the
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?