Numbers are vital to running any organization but who owns the numbers? Measurement And Judgment Pfeffer and Sutton’s (2000) book chapter starts a bit too negatively for my liking. The title sets the wrong tone. “When Measurement Obstructs Good Judgement”. To be fair their point isn’t that measurement is bad. They really mean that bad…
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Good And Bad Profits
Fred Reichheld is best known for his (over) exuberant advocacy of the Net Promoter Score. Introducing Net Promoter he suggests a difference between good and bad profits; an interesting, though theoretically imprecise, idea. Are All Dollars In The Same? Short of outright fraud, isn’t one dollar of earnings as good as another? Certainly, accountants can’t…
Marketing State Of Mind
Marketers often brag about understanding external customers. They often do this while ignoring internal customers. To be a great marketer understanding the end consumer isn’t enough. Having a “marketing state of mind” means trying to solve the problems of your internal customers. Why is that? Internal Customers Of Marketers Imagine a simplified firm: the accountants…
Measuring Competition 2: The Bendle Panda Index
The Herfindahl Index covered in the prior post is an excellent way of measuring competition. Sadly it involves squaring market shares. This seems too much math so in the spirit of simple metrics I’m suggesting a new measure of competitiveness; the BPI or The Bendle Panda Index. It makes Net Promoter look complex and Gigerenzer…
Measuring Competiton 1 The Herfindahl Index
The competitiveness of any industry matters. One way to measure competitiveness is the Herfindahl Index, also known as the Herfindahl-Hirschman Index. Competition Changes Market Outcomes Consumers usually get a bad deal in “concentrated” markets. This is because markets with fewer significant players usually mean less competition. This matters to managers too. If you are considering entering…
Net Promoter
One of the most interesting discussions about marketing metrics in recent years concerns the Net Promoter System/Score, (NPS). Net Promoter Net Promoter is very simple. It compares % of customers who give high scores on “would you recommend to a friend?” with % of customers who give low scores. The Net Promoter is just the…
CLV And Limited Capacity
Customer Lifetime Value (CLV) is a great thing to calculate. It encourages marketers to take the numbers seriously. It helps finance people see the numerical basis of marketing. Calculating CLV encourages you to treat customers well; they are valuable and you have the numbers to prove it. Finally marketing’s influence probably increases when people think…
Beating Rivals Should Not Be Your Goal
Is the goal of business to do the best you can or to beat others? A surprising number of people seem to think business is about beating others. The technical term is competitor orientation — when your ultimate objective is to beat your competitors. The point is that pretty much whatever your view of business,…
Marketers Prefer Contribution
A couple of years ago teaching introductory marketing I told my students they must have calculations in the final exam. They listened and gave me numbers. My students were mostly aim for investment banking. They thought finance had the “best” numbers and so used these. They gave me some marvellous numbers, e.g., EBITDA and NOPAT….
Does Acquisition Cost Reduce CLV? No
Marketing suffers from serious definitional problems which undermine the communication function of metrics. For example, Does Acquisition Cost Reduce CLV? I therefore recommend a step forward; lets all exclude acquisition costs from customer lifetime value (CLV) calculations. CLV Is The Net Present Value Of A Customer Relationship Customer lifetime value is the net present value…