Which Marketing Metrics Do You Really Need to Know?

A recent book, Marketing Metrics: 50+ Metrics Every Executive Should Master (Wharton, 2006) by Farris, Bendle, Pfeifer, and Reibstein, claims that there are over 50 metrics every executive should master. Faced with such a daunting number, most marketers are likely to want to know which of the 50 are critical—and which are merely nice to know.

Before trying to identify the more important metrics, it is necessary to define the term. "Metrics" is usually defined as a measuring system that quantifies a trend, dynamic, or characteristic. However, this definition is not universal. Laura Paterson of VisionEdge Inc. defines "metrics" as the standards for measurement, providing target values that a company must achieve to reach a certain level of success. "Measurements" are the raw outcome of a quantification process, such as a company's numbers, ratios, and percentages, she says, while "benchmarks" are the standards against which all others values are judged.

Much of what is written about metrics and marketing performance measurements relate to large companies involved in fast-moving consumer goods (FMCG). For many marketers, it is difficult to relate these kinds of metrics and their relevance to small and medium-sized businesses, especially if they are involved in services, partnerships, or consultancies.

Similarly, relating such metrics to businesses involved in industrial markets or in long-term contracts is even more difficult, but it is not impossible. In fact, measuring marketing performance in both significant and useful ways is both essential and possible for every type of business.

Marketers will be interested in measuring performance in their own areas of responsibility, product management, advertising, or sales. However, measuring performance of the whole marketing function requires the chief marketing officer (CMO) to identify those metrics that are fundamental to the business.

The first questions that the CMO should ask are these:

• Are we making revenue?
• Are we making profits and how much?
• From where do the profits and the costs arise?
• Is the marketing growing or shrinking and at what rate?
• Are sales and profits growing in line with the market or differently?

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Nicholas Watkis is a management consultant specializing in marketing management and measuring marketing performance. For more information, check out www.businessperformancemaximized.com or www.contractmarketingservice.com.