What Drives Managerial Use of Marketing vs. Financial Metrics and Does it Impact Performance?

Transcription

1 What Drives Managerial Use of Marketing vs. Financial Metrics and Does it Impact Performance? An Industry Study hosted by The Paul Merage School of Business University of California, Irvine Researchers: Ofer Mintz, Doctoral Candidate, The Paul Merage School of Business, University of California Irvine Imran S. Currim, Associate Dean and Chancellor s Professor, The Paul Merage School of Business, University of California Irvine

2 Hello, The Paul Merage School of Business at the University of California Irvine would like to thank you for participating in our industry survey on What Drives Managerial Use of Marketing vs. Financial Metrics and Does it Impact Performance. As promised, in return for your participation, we have provided you with the following individualized benchmark report. In this report, you will be able to see listings of marketing and financial metrics, as well as how an assortment of marketing activities and different types of firm, industry, and managerial characteristics influence managerial metric use. Furthermore, the metrics that are most often used and associated with highest performance for each of these types of marketing activities and graphs depicting the relationship between metric use and marketing activity performance is provided as well. Overall, a total of managers completed our in-depth questionnaire, encompassing,8 marketing decisions. These managers ranged from a variety of sources including LinkedIn professional groups, marketing executive associations, MBA and undergraduate alumni from two universities, and managers directly approached by from us. We very much appreciate these organizations support, which without this research may have not been possible. We hope this research proves of value to managers, the research community, and policymakers alike. For any questions please Ofer Mintz at omintz@uci.edu. Thank you again for your participation. Ofer Mintz, Doctoral Candidate, The Paul Merage School of Business, University of California Irvine Imran S. Currim, Associate Dean and Chancellor s Professor, The Paul Merage School of Business, University of California Irvine THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e i

3 TABLE OF CONTENTS List of Marketing Metrics General Marketing Metrics Specific to Marketing Activity Marketing Metrics List of Financial Metrics General Financial Metrics Specific to Marketing Activity Financial Metrics Type of Marketing Activity Traditional Advertising Internet Advertising Direct to Consumer Social Media Sales Force Price Promotion 8 Pricing 9 PR / Sponsorship New Product Development Distribution Demographic, Firm, and Industry Characteristics Job Title Work Experience Firm Size Ownership Type Business-to-Business vs. Business-to-Consumer Industry 8 International Country 9 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e ii

4 General Marketing Metrics Definition: Marketing metrics refer to metrics that cannot be specified in direct financial terms without extensive econometric calculations. General marketing metrics can be used for any type of marketing activity. Market Share (Units or Dollars) Awareness (Product or Brand) Satisfaction (Product or Brand) Likeability (Product or Brand) Preference (Product or Brand) Willingness to Recommend (Product or Brand) Loyalty (Product or Brand) Perceived Product Quality Consideration Set Total Customers Share of Customer Wallet Share of Voice Specific to Marketing Activity Marketing Metrics Definition: Specific to marketing activity marketing metrics are specialized for use with certain types of marketing activities. Some of these metrics will overlap. Traditional Advertising: Impressions Reach Recall Internet Advertising: Impressions Hits/Visits/Page Views Click-through Rate Direct to Consumer: Reach Number of Responses by Campaign New Customer Retention Rate Social Media: Hits/Visits/Page Views Number of Followers / Tags Volume of Coverage by Media Sales Force: Reach Number of Responses by Campaign New Customer Retention Rate Price Promotion: Impressions Reach Trial / Repeat Volume (or Ratio) Pricing: Price Premium Reservation Price Relative Price PR / Sponsorship: Volume of Coverage by Media Reach Recall New Product Development: Belief in New Product Concept Attitude toward Product / Brand Expected Annual Growth Rate Distribution: Out of Stock % / Availability Strength of Channel Relationships Product Category Volume (PCV) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

5 General Financial Metrics Definition: Financial metrics refer to metrics that specified in direct financial terms. General marketing metrics can be used for any type of marketing activity. Net Profit Marketing Expenditures (% Return on Investment (ROI) specifically on Brand Building Return on Sales (ROS) Activities) Return on Marketing Investment Stock Prices / Stock Returns (ROMI) Tobin s q Net Present Value (NPV) Target Volume (Units or Sales) Economic Value Added (EVA) Customer Segment Profitability Customer Lifetime Value (CLV) Specific to Marketing Activity Financial Metrics Definition: Specific to marketing activity financial metrics are specialized for use with certain types of marketing activities. Some of these metrics will overlap. Traditional Advertising: Cost per Customer Acquired / Cost per Thousand Impressions (CPM) Lead Generation Internal Rate of Return (IRR) Internet Advertising: Cost per Click Conversion Rate Internal Rate of Return (IRR) Direct to Consumer: Cost per Customer Acquired Conversion Rate Lead Generation Social Media: Lead Generation Cost per Exposure Total Costs Sales Force: Sales Potential Forecast Sales Force Productivity Sales Funnel / Sales Pipeline Price Promotion: Promotional Sales / Incremental Lift Redemption Rates (coupons, etc.) Internal Rate of Return (IRR) Pricing: Unit Margin / Margin % Price Elasticity Optimal Price PR / Sponsorship: Lead Generation Cost per Exposure Total Costs New Product Development: Expected Margin % Level of Cannibalization / Cannibalization Rate Internal Rate of Return (IRR) Distribution: Total Inventory / Total Distributors Channel Margins Sales per Store / Stock-keeping units (SKUS) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

6 The Number of Managers Performance (Max=) TRADITIONAL ADVERTISING Metric Use (n=9) Average:.9 Median:. Mode Use:.. Financial Metrics (Marketing/Financial) 9 Relationship between Metrics and Performance Top Five Metrics Used (% used):. Awareness (%). Reach (9%). Marketing Expenditures (8%). Return on Investment (ROI) (%). Lead Generation (%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Awareness (88%). Marketing Expenditures (%). Reach (%) 8 Thing that stood out:. Wide variance between different marketing groups who responded. 88% of high performers used Awareness THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

7 The Number of Managers Performance (Max=) INTERNET ADVERTISING Metric Use (n=9) Average:.8 Median:. Mode Use:. Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). 9 Top Five Metrics Used (% used):. Click-through Rate (%). Hits/Visits/Page Views (%). Cost per Click (%). Conversion Rate (8%). Impressions (9%) 8 Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Click-through Rate (%). Hits/Visits/Page Views (%). Conversion Rate (%) Things that stood out:. Same ratio of marketing vs. financial metrics as traditional advertising. Increasing metric use has a very steep linear relationship with performance THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

8 Performance (Max=) The Number of Managers DIRECT TO CONSUMER Metric Use (n=8) Average:. Median:. Mode Use:. Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). Top Five Metrics Used (% used):. Number of Responses (%). Lead Generation (%). Conversion Rate (%). Awareness (%). Return on Investment (ROI) (%) 8 Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Number of Responses (%). Lead Generation (%). Awareness (%) Things that stood out:. Only % did not use any metrics. Only % of higher performers did not use any marketing metrics THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

9 Performance (Max=) The Number of Managers SOCIAL MEDIA Metric Use (n=98) Average:.8 Median:. Mode Use:. 9 Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). 8 Top Five Metrics Used (% used):. Number of Followers / Tags (%). Hits/Visits/Page Views (%). Lead Generation (8%). Awareness (%). NO FINANCIAL METRICS USED (%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Hits/Visits/Page Views (%). Number of Followers / Tags (%). Lead Generation (%) Things that stood out:. The mode use is ; % of managers do not use any financial metrics. Increasing metric use is results in less risky social media performance THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

10 Performance (Max=) The Number of Managers SALES FORCE Metric Use (n=9) Average:. Median:. Mode Use:. 9 Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). 8 Top Five Metrics Used (% used):. Target Volume (%). Sales Force Productivity (%). Sales Funnel / Sales Pipeline (%). Sales Potential Forecast (%). Total Customers (%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Sales Force Productivity (%). Sales Potential Forecast (%). Target Volume (%) Things that stood out: metrics are used % or more for highest performers THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

11 The Number of Managers Performance (Max=) PRICE PROMOTION Metric Use (n=) Average:.8 Median:. Mode Use:. Relationship between Metrics and Performance Financial Metrics (Marketing/Financial) Top Five Metrics Used (% used):. Target Volume (%). Promotional Sales / Incremental Lift (8%). Total Customers (9%). Market Share (%). Net Profit (%). Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Target Volume (8%). Promotional Sales / Incremental Lift (%). Net Profit (%) Things that stood out: 8% of highest performers and % of managers overall used target volume THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 8

12 The Number of Managers Performance (Max=) PRICING Metric Use (n=) Average:. Median:. Mode Use:. Relationship between Metrics and Performance Financial Metrics (Marketing/Financial) Top Five Metrics Used (% used):. Net Profit (%). Target Volume (9%). Unit Margin / Margin % (%). Market Share (%). Price Elasticity (%). Relative Price (%). Price Premium (%). Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Net Profit (%). Target Volume (%). Price Elasticity (9%) Things that stood out:. top metrics used had equal split, but top metrics associated with highest performance are financial. Very few poor performers THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 9

13 Performance (Max=) The Number of Managers PR / SPONSORSHIP Metric Use (n=) Average:.9 Median:. Mode Use:. Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). Top Five Metrics Used (% used):. Awareness (%). Reach (%). Lead Generation (%). Volume of Coverage by Media (%). Total Costs (%) 8 Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Awareness (8%). Reach (%). Lead Generation (8%). Return on Investment (ROI) (8%) Things that stood out:. % of managers used no metrics. U.S. managers had a much higher ratio (.) vs. overall managers (.) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

14 Performance (Max=) The Number of Managers NEW PRODUCT DEVELOPMENT Metric Use (n=) Average:. Median:. Mode Use:. 8 Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). Top Five Metrics Used (% used):. Target Volume (%). Return on Investment (ROI) (8%). Market Share (%). Expected Margin % (%). Net Profit (8%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Target Volume (%). Return on Investment (ROI) (%). Expected Margin % (9%) Things that stood out:. Increasing metric use has a very steep linear relationship with performance. Top of metrics used are financial, then next metrics are marketing THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

15 Performance (Max=) The Number of Managers DISTRIBUTION Metric Use (n=) Average: 8. Median:. Mode Use: Relationship between Metrics and Performance Financial Metrics (Marketing/Financial). Top Five Metrics Used (% used):. Target Volume (9%). Strength of Channel Relationships (%). Channel Margins (%). Total Customers (%). Total Inventory / Total Distributors (%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Strength of Channel Relationships (89%). Channel Margins (9%). Target Volume (%) Things that stood out:. 89% of high performers used strength of channel relationships. Top metrics used were utilized by over % of managers. Highest amount of metrics used THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

16 Percent of Managers JOB TITLE Metric Use Senior Marketing Executives. Average: Senior Non-Marketing Executives.9 Average: Marketing Managers Average:.9 Non-Marketing Managers Average:. Senior Marketing Executives. Financial Metrics Senior Non-Marketing Executives. Financial Metrics Marketing Managers Average Ratio. of Marketing vs. Financial Metrics Non-Marketing Managers Average. Ratio of Marketing vs. Financial Metrics % % % % % % % % by Managers % % SR MKTG SR NON-MKTG MKTG MGR NON-MKTG MGR THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

17 Percent of Managers Performance (Max=) WORK EXPERIENCE Metric Use More than Average Experience Average: Less than Average Experience Average: More than Average Experience Financial Metrics Less than Average Experience Financial Metrics : % % % % % Relationship between Metrics and Performance % % % % % < EXPERIENCE >EXPERIENCE < EXPERIENCE > EXPERIENCE Linear (< EXPERIENCE) Linear (> EXPERIENCE) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

18 Percent of Managers Performance (Max=) FIRM SIZE Metric Use Small Firm Average:. Large Firm Average:. Small Firm Average Ratio of Marketing. vs. Financial Metrics Large Firm Average Ratio of Marketing. vs. Financial Metrics : % % % % % % % % The Number of Metrics Used by Managers Relationship between Metrics and Performance % % SMALL FIRMS LARGE FIRMS SMALL FIRMS LARGE FIRMS Linear (SMALL FIRMS) Linear (LARGE FIRMS) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

19 Percent of Managers OWNERSHIP TYPE Metric Use Public Firm Average:. Private Firm Average:. Public Firm Average Ratio of Marketing. vs. Financial Metrics Private Firm Average Ratio of. Marketing vs. Financial Metrics % % % % by Managers % % % % % % PUBLIC FIRMS PRIVATE FIRMS THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

20 Percent of Managers Performance (Max=) BB vs. BC Metric Use BB Firm Average:. BC Firm Average:. Mixed Firm Average:. BB Firm Average Ratio of Marketing. vs. Financial Metrics BC Firm Average Ratio of Marketing. vs. Financial Metrics Mixed Firm Average Ratio of Marketing. vs. Financial Metrics % % % % % % % % Relationship between Metrics and Performance % % BB FIRMS BC FIRMS MIXED FIRMS BB FIRMS BC FIRMS MIXED FIRMS Linear (BB FIRMS) Linear (BC FIRMS) Linear (MIXED FIRMS) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e

21 INDUSTRY Metric Use Architecture Average:. Banking / Finance / Accounting /.9 Insurance Average: Communications / Media Average:. Consumer Packaged Goods Average:. Consumer Services Average: 8. Education Average:. Energy Average:. Engineering Average:.8 Government Average:. Health Care / Pharm. Average:. Manufacturing and Process Industries. (Non-computer) Average: Mining / Construction Average:. Professional Services / Law / Consulting. Average: Retail / Wholesale Average:. Technology (Software / Biotech). Average: Transportation Average:.8 Other (non-listed) Industries Average:. Average number of metrics used for each marketing activity by industry INDUSTRY TR AD INT AD DC SM SF PP PRI PR NPD DIST Architecture N/A N/A.. N/A N/A Banking / Finance / Accounting / Insurance Communications / Media Consumer Packaged Goods Consumer Services Education N/A Energy N/A.. N/A Engineering Government N/A N/A... N/A N/A N/A. N/A Health Care / Pharmaceutical Manufacturing and Process Industries (Noncomputer) Mining / Construction N/A. 8.8 Other Professional Services / Law / Consulting Retail / Wholesale Technology (Software / Biotech) Transportation N/A N/A.. N/A THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 8

22 INTERNATIONAL COUNTRY / REGION Metric Use USA Average:. Canada Average:.89 Europe Average:. Latin America 9. Average: Pacific Rim & East. Asia Average: South Asia, Mid East. & Africa Average: USA Average Ratio. Canada Average Ratio. Europe Average Ratio. Latin America. Pacific Rim & East. Asia South Asia, Mid East. & Africa Average number of metrics used for each marketing activity by industry COUNTRY / REGION TR AD INT AD DC SM SF PP PRI PR NPD DIST USA Canada Europe Latin America Pacific Rim & East Asia South Asia, Mid East, & Africa THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 9