The are any number of marketing metrics. (We said 50+ in the first edition of our book. That worked for us. After all, we couldn’t be bothered to count them. There are much more than 50). An obvious question is, therefore, which metrics should we bother to calculate? What is the value of any metric?
The Value Of Any Metric
This is a tough question. One popular approach which we describe in our new, 3rd, edition of Marketing Metrics involves assessing the value of perfect information. This is a hypothetical benchmark. You estimate what you would achieve if you were perfectly informed. For example, if you knew everything about what your customers want then what level of sales could you achieve? Then go to the next stage and work out how much profit would this create?
The Value Of Perfect Information
Once you have this estimate of the profits with perfect information you can compare this amount to what you are currently gaining. What does this tell you? It tells you the maximum amount you should be willing to pay to gain perfect information. Of course, no metric is ever perfect. The difference between perfect information and now isn’t what you, in reality, will be willing to spend on developing metrics. Still, it is “… an upper bound on the value of any information that the firm can collect. In the real world the value of any imperfect information the firm can collect must be less than this upper bound.” (Bendle, Farris, Pfeifer and Reibstein, 2015, page 394).
Obviously, managers may have problems accurately estimating what they could gain with perfect information. As such we provide a quick guide to situations when information will have more value (page 395).
The Value Of Any Metric Depends Upon Usage And Situation
A key point is that the value of information, and thus any metric that provides information, depends upon the precise situation at hand. Don’t just seek information, i.e., calculate metrics, for the sake of it. How much effort and expense you should put into metrics depends upon the value of the information that can be gained.
For more on marketing metrics see here. For a sample chapter of the book see here.
Read: Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, Third Edition, (2015) Neil T. Bendle, Paul W. Farris, Phillip E. Pfeifer, and David J. Reibstein, Pearson.