The Launch Doctor - Email Newsletter

The Launch Pad
November 2004

Marketing Metrics

This time of year can be very stressful for marketing managers. I’m not just talking about the holidays; I’m talking about preparing the marketing plan and budget for the coming year. Not only do you have to figure out the products, launches, and programs that will be implemented in order support the new and existing products, but you also have to estimate the cost of all of those programs. In addition, all of it has to be presented in a convincing way so that you get your desired share of the company’s budget pie. Quite often, a detailed justification may be necessary for each line item in the plan. One way to provide that justification is to prepare and apply some marketing metrics to estimate the “return” – the value that is being returned to the company in a qualitative or quantitative sense.

Planning level: Where are you in the hierarchy?
The first step in planning and budgeting should begin at the top, to determine where your plan will fit in the overall corporate strategy and budget. Some of you may be preparing a plan for the whole company, or a more detailed plan for a single product, or at some level in between. Where you fit in the hierarchy will affect how thoroughly you will need to justify your plan, and the metrics you can use. Here are some possible levels of planning:
-Corporate marketing: branding and image campaigns, marketing of the company as a whole
-New launches: marketing plans for the major new launches planned during the forthcoming year
-New product lines or families: marketing plans for a set of products related to each other
-New single product: a detailed marketing plan for one product
-Continuing marketing programs for existing product families
-Continuing marketing programs for existing single products

The corporate marketing plan will likely require more supporting detail and will include the higher-cost marketing programs, such as advertising and public relations. At the same time, these programs aren’t as easy to measure in terms of return, and more qualitative measures must be used. New products will usually require a longer list of programs because awareness has to be created along with information about the product; therefore, they will be more costly. It will be difficult to estimate potential return in the case of new products, and sometimes, historical data for similar products may have to be used. The return on continuing marketing programs is closely tied to sales history and market share, so those will be important measures.

Quantitative and Qualitative Metrics
There are many business factors related to assessing return. You might use qualitative measures, evaluating strategic objectives such as planned growth, new market expansion, etcetera, and whether marketing helps achieve them. These are often judgment calls, based on gut instinct or intuition. Have people heard of our company or products? Do they like doing business with us? What do industry analysts say about us? Has our media coverage been favorable? Do we have any customers in our new geographic regions?

Quantitative factors are easier to apply because data can be gathered and analyzed. Has our market share increased? How many new customers do we have? Have our sales increased? Are we getting more sales leads? Is our customer service improving? These are all measures that can be expressed with numbers.

Preparing Metrics for the Decision Makers
The managers or executives who will review and approve your plan may apply specific financial ratios when they analyze it in order to decide whether your plan will be consistent with the company’s projected financial goals and operating budget. They may use ratios that use sales, revenues, profit, assets, operating costs or any combination of factors consistent with the company’s policies and procedures. If you know what those ratios are and understand how they are calculated, you can go several steps further and do the calculation for the decision makers. If not, you should at least develop and apply the appropriate metrics for each of your line items so that they will be ready to do their analysis.

With brand new products that are first introduced into the marketplace, sales might not occur right away, yet the appropriate programs must be implemented in order to have a successful launch. It’s not possible to simply eliminate those programs because you need some to build initial awareness of your company and product. Therefore, when applying metrics to a new product or new market, you may need to estimate potential return based on historical data for programs and products similar to the one you’re analyzing. What were the costs and the return for those programs for the old product? What did we learn from it? Should we use it as a basis for future planning?

Sometimes, decision makers will identify which marketing line items to approve from a purely financial standpoint. If the financial ratio is less than desirable, there are two ways to make it more appealing: increase revenue or lower the costs. The ultimate measure of return on marketing expenditures is whether those efforts translate into revenue, and how much. But it’s also worth looking at the cost side and how to lower them; you may be able to prove productivity gains for the sales if particular marketing programs are undertaken, or perhaps marketing materials could be produced on-demand or only in electronic form, lowering the cost. As you’re preparing your plan and your justification, it’s useful to look at it from the decision-maker’s point of view; how can you make that item more favorable and increase the chances for approval?

Estimating Return to the Company by Type of Program
Here is a checklist of possible metrics for estimating the return from different types of marketing programs:

Corporate marketing:
-Brand and image campaign: corporate website hits, sales lead tracking data, media coverage (number or articles that included key messages), focus group feedback on brand recognition

Programs used in launches, product families, and single products:
-Brochures, datasheets, and other printed materials: sales leads generated, new customers acquired
-Electronic versions of brochures, datasheets and other marketing materials: website hits for those pages, online inquiries to sales team, online sales
-Advertising: sales leads generated from past ads, focus group feedback
-Public relations such as press and analyst tours: number of favorable articles in media, ranking in analyst reports
-Events such as trade shows: sales leads generated, booth traffic based on count of material distributed or count of booth visitors, sales inquiries after event, sales completed, new customers acquired

The Cost Picture
Along with the metrics for each line item, you also need to submit the estimated cost. If you believe that the potential return for a line item will be low, then you may want to examine ways to reduce costs in order to make increase the chances for approval.

Certain types of marketing collateral may make your sales force more efficient. For example, if you can show that a CD-based sales tool will replace several pieces of printed material and make it easier for the sales team to respond to customers, the company gains some productivity that may also result in additional sales.

Re-purposing of marketing content across multiple marketing materials will also reduce costs; you can write the content once and use it in several venues. Also, if the same set of marketing materials are produced for every launch or for every product, are there templates that can be used for marketing materials that will save time and therefore money?

You may be able to save money by outsourcing certain tasks related to marketing materials rather than hire or maintain a full-time position. This will be especially true if these materials are only produced once or twice a year.

Putting it all Together
Within your overall marketing plan you will have a section that describes each of the programs or line items and the estimated budget you will need to implement them. For each line item, you should identify the metric that will apply (such as sales leads generated), and then estimate the return (will generate 20 new leads in the health care vertical market, based on last year’s data for a similar product). On the cost side, if you have built in some cost-saving due to productivity or other factors, you should specifically state that also. If you present the metric, your estimated return and the budget request, you will have stated your best case, and the decision maker will have the necessary information for approving your plan - all in one place.

The practice of applying metrics has benefits beyond the planning and budgeting cycle. These metrics and resulting analysis are also useful for marketing managers as the overall plan is implemented in the new fiscal year. Programs and products can be prioritized, resources can be allocated, and progress against quarterly goals can be assessed as the year unfolds.

The Quick and Quirky Example will return next month. Really. I promise.

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May all of your marketing plans be approved ahead of time so that you can just party through the holidays…

Catherine Kitcho
The Launch Doctor