Marketing Metrics PDF

Unit Margin and Price Elasticity ✱ Marketing Metrics are indicators needed to measure business performance from a marketing perspective. ✱ Key Performance Indicators (KPIs) are the more widely used critical metrics. ✱ Unit Margins & Markup measure the difference between...

Unit Margin and Price Elasticity ✱ Marketing Metrics are indicators needed to measure business performance from a marketing perspective. ✱ Key Performance Indicators (KPIs) are the more widely used critical metrics. ✱ Unit Margins & Markup measure the difference between the selling price and cost. ✚ Unit margin (in percentage) = (Selling price per unit – Cost per unit) X 100 / Selling price per unit ✚ Markup (in percentage) = (Selling price per unit – Cost per unit) X 100 / Cost per unit ✱ Price Elasticity (of demand) is the responsiveness or sensitivity of the demand to changes in prices. ✚ Elasticity = ((Final demand – Initial demand)/Initial demand) / ((Final price – Initial price)/Initial price) ✚ Typically, it is negative because a price increase will likely reduce demand. It is a function of how easy it is to find substitutes. Chapter 20: Marketing Metrics 20.1  Breakeven ✱ Breakeven Point is the level of sales at which total revenue equals total cost, and hence the term, breaking even. It can be calculated as: ✚ Breakeven Volume $ Revenue Total Costs ✚ Breakeven Revenue ✚ Breakeven Market Share All three can be useful to assess the strategy Variable Costs  = pn - (vn + F) Fixed Costs Breakeven volume = Total fixed costs / Contribution margin per unit Breakeven revenue = Breakeven volume X Selling price per unit B.E. # Breakeven market share (in units) = Breakeven volume / Size of the market in units Breakeven market share (in dollars) = Breakeven revenue / Size of the market in dollars Chapter 20: Marketing Metrics 20.2  Customer Lifetime Value ✱ CLV measures how much profit a firm expects to make from a single customer throughout the duration of the relationship with the customer CLV = Net present value of all future earnings – Customer acquisition cost. It can be calculated using the formula: where, CLV is customer lifetime value, CR = customer revenues, C = customer costs, R = retention rate, d = discount rate, and AC = acquisition rate, for all n periods ranging from 1 to N ✱ Estimating CLV is an essential step in determining the feasibility of any marketing, promotion, and pricing strategy. Calculating CLV is also an excellent way to determine the value of building relationships with specific customers. Chapter 20: Marketing Metrics 20.3  Measuring Customer Sentiment ✱ Many of the marketing metrics are non-financial and often at times measures of perception, but they still need to be and can be measured. ✱ Examples include metrics, such as attitudes towards brand, brand image, and brand preference. Measures for these metrics need to ensure that differences in them are reflected in the scales used to assess them. ✱ For example, the following four questions on a 7-point scale measure brand loyalty, as per Jacoby and Chestnut. (Any one question may not yield a valid and reliable measure.) ✚ I will buy this brand the next time I buy this product ✚ I intend to keep purchasing this brand ✚ I am committed to this brand ✚ I would be willing to pay a higher price for this brand over other brands Chapter 20: Marketing Metrics 20.4