Jon Laughlin | id: 215328467 | username: jonlaughlin | email@example.com
Accountability of any given department within a firm comes without question. The necessity of all actions need to be justified and in most cases accurately quantified. Marketing departments are no different from the rest, they do not abide by different rules and are not governed by their own special regulations. Therefore, management expect the actions of the marketing department to be assessed, and to be assessed their output and results must be measured. This is where things get tricky for a marketer. With the usual vast array of variables, the accuracy of any single marketing activity on any single metric if fraught with difficulties.
Traditionally senior management have been focused on financial metrics including return on investment, discounted cash flow, and return on customer (Ambler & Roberts, 2008). While the appeal of these theoretically simplistic types of metrics are appreciated, particularly with management, they all have their limitations and flaws.
The trend towards non-financial metrics is becoming more popular in certain industries and within certain firms. These metrics tend more toward market share, market penetration, brand awareness and customer satisfaction amongst other things (Mintz & Currim, 2013). What is unmistakable is that there is a plethora of metrics available with just as many suggestions about the appropriate use in the appropriate situation, 10 Online Marketing Metrics You Need To Be Measuring, The 6 Marketing Metrics & KPIs Your CEO Actually Cares About, 6 Metrics You Need to Track, Key marketing metrics every business should measure, these example show the uncertainty and complexity of the subject.
The plain truth is that a multitude of metrics are likely to be required dependent on what suits a specific company. Using a single metric alone will rarely paint the whole picture of a company’s performance.
Let take the smartphone industry for example and compare a couple of key metrics, profit margin and market share. In the quickly evolving tech world brand awareness and loyalty are paramount. With new entrants into the market the key players need to keep market share and retain their customers.
Apple has recently seen a decline in it’s market share from 18% in late 2015 to 15% for the first quarter of 2016 (Statista, 2016). This currently places it second behind Samsung for new phones sold globally. The release of the recent iPhone SE was an attempt to regain some of this market share back from Samsung however it has yet to have an impact (Rossignol, 2016).
image: (Statista, 2016)
Customer equity and customer lifetime value are key metrics to manage and grow customer numbers. Customers are considered a company’s primary asset so a decrease in market share will usually correlate to a reduction of customers and therefor a reduction in brand value (Schulze, Skiera, & Wiesel, 2012). Using these metrics in isolation it would appear that Samsung is the worlds most dominant and profitable smartphone manufacturer, but does a single metric really tell the whole story?
Let examine a second important metric, profit. During 2015 Apple’s iPhone accounted for a phenomenal 91% of global smart phone profits compared to the now second placed Samsung at 14% (the total of 103% is due to other companies making a loss). This discrepancy between market share and profits is due to the average cost of a Samsung phone being $180 US compared to an iPhone at $691 (Jones, 2016).
This example of differing metrics demonstrates the complexity of this process and necessity of employing multiple metrics. Using only one of the above metrics in isolation paints a vastly different story then if we choose to include others measurements.
Company strategy will aid in the decisions about which metric to focus on which will in turn will guide marketing choices. From our scenario it can be seen that although market share is often very important Apple has made a choice to focus more on profits margins (amongst other things) (Yarow, 2013). Samsung tend to have a different brand image being perhaps less sophisticated but more financially accessible, therefore market share metrics play a greater role in its decisions.
Similar scenarios play out in all industries and amongst all companies. There is no right or wrong metric, and no single golden metric. There is however a need for companies to use the appropriate metrics to guide decision making to achieve a desired company strategy and goal.
Ambler, T., & Roberts, J. H. (2008). Assessing marketing performance: don’t settle for a silver metric. Journal of Marketing Management. , 24 (7-8), 733-750.
Jones, C. (2016, Feb 13). Apple’s iPhone Profits Will Weed Out Other Players. Retrieved May 22, 2016, from Forbes: http://www.forbes.com/sites/chuckjones/2016/02/13/apples-iphone-profits-will-weed-out-other-players/#63f03d4f13e5
Mintz, O., & Currim, I. S. (2013). What Drives Managerial Use of Marketing and Financial Metrics and Does Metric Use Affect Performance of Marketing-Mix Activities? Journal of Marketing , 77, 17-40.
Rossignol, J. (2016, April 27). iPhone Drops to 15% Market Share as Smartphone Market Goes Flat. Retrieved May 22, 2016, from Macrumors: http://www.macrumors.com/2016/04/27/iphone-15-percent-market-share/
Schulze, C., Skiera, B., & Wiesel, T. (2012). Linking Customer and Financial Metrics to Shareholder Value: The Leverage Effect in Customer- Based Valuation. Journal of Marketing , 76, 17-32.
Statista. (2016, May 1). Apple iPhone’s share of new smartphone sales worldwide by quarter from 2007 to 2016. Retrieved May 22, 2016, from Statista: http://www.statista.com/statistics/216459/global-market-share-of-apple-iphone/
Yarow, J. (2013, Sept 2013). Apple Made One Thing Clear: It Doesn’t Care At All About Winning Smartphone Market Share. Retrieved May 23, 2016, from Business Insider: Tech: http://www.businessinsider.com.au/apple-clearly-doesnt-care-at-all-about-winning-smartphone-market-share-2013-9?r=US&IR=T