Marketing metrics serve as accountable measures for an organisation’s strategic plans and marketing productivity. They are also powerful diagnostic tools for performance improvement (Krishnan, 2006).
Selection of metrics
It is recognised that managers may favour some metrics over others (Mintz and Currim, 2013). Some self-claimed “marketing experts” advise managers to focus on the set of metrics interpreting short term profit such as Return on Marketing Investment (ROMI), Customer Acquisition Cost (CAC), Ratio of Customer Lifetime Value to CAC, Time to Payback CAC, etc., on the assumption that CEOs prioritise the measures of cost vs. revenue.
Ambler et al. (Ambler and Roberts, 2008) have suggested to use a combination of financial and non-financial (i.e. marketing) metrics to evaluate the intermediate and long-term performance of marketing-mix activities. The marketing metrics are based on customers’ mind set, including customer awareness, preference, satisfaction and loyalty. The employment of metrics is associated with the organisation’s financial and marketing performance (Mintz and Currim, 2013). Failure to integrate marketing and financial metrics may lead the marketing activities off track. Nurofen’s campaign of ‘targeted relief from pain’ illustrated such an example.
The rise of the campaign
Since 2004, Reckitt Benckiser, a pharmaceutical giant, had been promoting the Nurofen painkiller series, claiming to target for specific pains such as headache, back pain, migraines and period pain.
Nurofen packaged the same active ingredient ibuprofen in different labels and charges a premium price almost double that of general painkiller products.
Giving the freedom to customers to choose the same thing, Nurofen effortlessly won customer loyalty and instant profit. Nurofen was awarded Choice Shonkys in 2010. In 2013, Nurofen led 22% market share in Australian painkiller industry among a total $629 million industry revenues, far higher than other brands using the same ingredient (Castle, 10th September 2014). At this stage Reckitt Benckiser’s financial metrics showed green ROMI and juicy profit contribution.
The fall of the campaign
However, pharmaceutical expert revealed that ibuprofen does not have selectivity for specific pains (Castle, 2014) and Nurofen misled customers by its targeted pain relief claims. In 2015, Australian Competition and Consumer Commission (ACCC) took Nurofen to Federal Court. The Court found that “Reckitt Benckiser made misleading representations on the packaging of each Nurofen Specific Pain product” and fined Reckitt Benckiser $1.7 million. Additionally, ACCC appealed to the Court for an extra $6 million penalty.
The loss to Reckitt Benckiser may not only be the monetary penalties, but more seriously the damage to its brand equity. Brand equity is defined as “the differential effect of brand knowledge on consumer response to the marketing of the brand” and contains trustworthiness from customers and stakeholders (Keller, 1993). Reckitt Benckiser’s misleading marketing to vulnerable people suffering pain for its own profit made financial and emotional damage to the customers, directly destroying the customers’ trust and loyalty and eventually damaging its own brand equity.
Effect of metrics selection
Ambler (2008) has suggested that brand equity, as intangible asset, is associated with shareholder value and future financial return (Liu et al., 2012); thus should be included in multiple metric approach for long-term performance evaluation. Companies can build brand equity by making their products more reliable, more recognisable and in superior quality. Instead of building brand equity, marketers driven by short term profits could employ single silver metric and eventually feel the pain as Reckitt Benckiser.
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CASTLE, J. 10th September 2014. Pain-relief medication [Online]. https://www.choice.com.au/health-and-body/medicines-and-supplements/prescription-medicines/articles/pain-relief-drugs-panadol-and-nurofen: Choice. [Accessed May 22nd 2016].
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KRISHNAN, B. C. 2006. Marketing and the bottom line: The marketing metrics to pump up cash flow, 2d edition. Journal of Marketing Research 43, 509-512.
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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.