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January 2005
Five Fundamentals for Useful Marketing Metrics
By Suzanne Taylor
Great marketers figure out how to make their customers’ lives better, with the goal of attracting many
profitable, happy customers. In order to measure how well marketing efforts help build a large and loyal
customer base, it’s essential to identify and use the metrics that matter most.
A recent poll conducted by the Silicon Valley American Marketing Association (SVAMA) among 3,500 of its
members and their friends found that while 88 percent of respondents reported measuring their marketing
activities, only 52 percent measure at least half of their programs. This finding means that marketers spend
millions of dollars without accountability for results.
Marketers need to take a disciplined approach to using accurate, timely, and meaningful marketing metrics.
To help you develop more insightful and useful metrics, focus on these five fundamentals:
Essential Metrics Criteria
Simply put, useful and meaningful metrics help you track how well you’re meeting your marketing objectives.
Using a set of core metrics not only helps determine goals, but it’s also the yardstick by which you measure your
success and progress.
It’s important not to have too many metrics. Instead, focus on those that best meet the following
criteria—and make sure that key stakeholders agree that the selected metrics meet these criteria:
- Drives and reflects business results
- Is something that you can influence
- Can be measured accurately, consistently, and cost-effectively
Customer-Acquisition Metrics
All marketers want to acquire new customers. To measure the effectiveness of your acquisition efforts, use
the following key metrics: P
- Awareness levels
- Purchase-decision drivers
- Rate of customer acquisition
- Market share
- ROI for marketing programs
- Cost of customer acquisition
After spending over $700 million on Amazon television ads, Jeff Bezos realized that probably over
half of that money was wasted. Instead, he says, “Developing over one million affiliate sites is one of
Amazon’s best investments, and it is totally measurable. We have scaled back on TV and wish we had come
to that conclusion earlier, because television is simply not as measurable.”
Product “Wow” Metrics
A great product or service is the most important element for building an exceptional customer
experience. Without a great product, customer acquisition efforts are a waste of time and money, and
customer-retention efforts are futile. Examples of product “wow” metrics include the following:
- Ease of learning
- Ease of use
- Satisfaction vs. expectations
- First-time user experience
- Usability
- Longitudinal usage
There’s nothing more powerful than a customer’s first impression when using a new product. Making this
first experience one that satisfies or even delights the customer reinforces their purchase decision and
ensures they’ll continue using the product. Another key element for continued usage is product usability.
Whether it’s a software program, a new pair of jeans, or a household cleaner, the product must be designed
for easy and enjoyable usage. And, of course, the product absolutely must deliver on the benefits promised
in the marketing materials, so that customer satisfaction at least equals—and hopefully
exceeds—expectations.
Customer-Retention Metrics
Improving customer retention remains one of the most effective ways to improve profits. Marketers not
only want customers to continue using products on an ongoing basis, they also want customers to buy their
other products and services. Current customers are also vitally important in spreading positive word of
mouth, which attracts new customers. By turning loyal customers into advocates, you can significantly
reduce customer-acquisition costs and dramatically increase the value of current customers. Some important
customer retention metrics include:
- Retention rate
- Abandonment rate
- RFM (recency, frequency, monetary value)
- LTV (lifetime value)
- Brand equity
- Net promoter score
The net promoter score measures the difference between customers who spread positive and negative word of
mouth about your product. An accurate measure of customer loyalty, the net promoter score has recently gained
momentum as a critical retention metric. As Loyalty Rules author and Bain & Co. fellow, Frederick
Reichheld, states, “The net of promoters minus detractors doesn’t show up in profit and loss statements,
but detractors destroy your future.”
Strategic Accountability
It’s imperative to tie marketing metrics to marketing strategies. By measuring marketing effectiveness through
quantifiable, insightful, and useful benchmarks, you’ll have the information you need to focus efforts and resources
on what best builds your business. You’ll also improve your ROI, since you’ll be able to invest in the strategies
and programs that bring in the highest return for the money.
Marketing metrics also allow you to own accountability for your marketing efforts. What better way is there
to prove the value of your work than showing how your strategies, ideas, and programs directly increased business?
Even if your metrics aren’t as strong as you’d like, they can help you understand where you want to go and how to
get there. Solid marketing metrics give you credibility and responsibility for the bottom line by revealing true
performance and should be an essential ingredient in your marketer’s toolbox.
Suzanne Taylor is a marketing strategy consultant focused on building businesses through customer-driven
innovation. With 15 years of consumer, small business, and high-tech marketing experience, Suzanne has worked and
consulted for companies including Intuit, Yahoo!, Adobe, Palm Computing, Microsoft, Clorox, and several startups.
Suzanne co-wrote a book called Inside Intuit: How the Makers of Quicken Beat Microsoft and Revolutionized an
Entire Industry published by Harvard Business School Press in 2003, which Symantec selected for a company-wide
management book club discussion in 2004. She also taught an Internet marketing class at Stanford University and holds
B.A. and M.B.A. degrees from Stanford. For more information, send an email to
staylor@serrano.com or go to
www.suzannetaylor.com.
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