What Drives Managerial Use of Marketing vs. Financial Metrics and Does it Impact Performance? An Industry Study hosted by The Paul Merage School of Business University of California, Irvine in cooperation with The Society for Marketing Professional Services (SMPS) Researchers: Ofer Mintz, Doctoral Candidate, The Paul Merage School of Business, University of California Irvine Imran S. Currim, Associate Dean and Chancellor s Professor, The Paul Merage School of Business, University of California Irvine
Hello, The Paul Merage School of Business at the University of California Irvine would like to thank you for participating in our industry survey on What Drives Managerial Use of Marketing vs. and Does it Impact Performance. As promised, in return for your participation, we have provided you with the following individualized benchmark report. In this report, you will be able to see listings of marketing and financial metrics, as well as how an assortment of marketing activities and different types of firm, industry, and managerial characteristics influence managerial metric use. Furthermore, the metrics that are most often used and associated with highest performance for each of these 0 types of marketing activities and graphs depicting the relationship between metric use and marketing activity performance is provided as well. Overall, a total of managers completed our in-depth questionnaire, encompassing, marketing decisions. These managers ranged from a variety of sources including LinkedIn professional groups, marketing executive associations, MBA and undergraduate alumni from two universities, and managers directly approached by email from us. We very much appreciate these organizations support, which without this research may have not been possible. We hope this research proves of value to managers, the research community, and policymakers alike. For any questions please email Ofer Mintz at omintz@uci.edu. Thank you again for your participation. Ofer Mintz, Doctoral Candidate, The Paul Merage School of Business, University of California Irvine Imran S. Currim, Associate Dean and Chancellor s Professor, The Paul Merage School of Business, University of California Irvine THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e i
TABLE OF CONTENTS List of Marketing Metrics General Marketing Metrics Specific to Marketing Activity Marketing Metrics List of General Specific to Marketing Activity Type of Marketing Activity Traditional Advertising Internet Advertising Direct to Consumer Social Media Sales Force Price Promotion 8 Pricing 9 PR / Sponsorship 0 New Product Development Distribution Demographic, Firm, and Industry Characteristics Job Title Work Experience Firm Size Ownership Type Business-to-Business vs. Business-to-Consumer Industry 8 International Country 9 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e ii
General Marketing Metrics Definition: Marketing metrics refer to metrics that cannot be specified in direct financial terms without extensive econometric calculations. General marketing metrics can be used for any type of marketing activity. Market Share (Units or Dollars) Awareness (Product or Brand) Satisfaction (Product or Brand) Likeability (Product or Brand) Preference (Product or Brand) Willingness to Recommend (Product or Brand) Loyalty (Product or Brand) Perceived Product Quality Consideration Set Total Customers Share of Customer Wallet Share of Voice Specific to Marketing Activity Marketing Metrics Definition: Specific to marketing activity marketing metrics are specialized for use with certain types of marketing activities. Some of these metrics will overlap. Traditional Advertising: Impressions Reach Recall Internet Advertising: Impressions Hits/Visits/Page Views Click-through Rate Direct to Consumer: Reach Number of Responses by Campaign New Customer Retention Rate Social Media: Hits/Visits/Page Views Number of Followers / Tags Volume of Coverage by Media Sales Force: Reach Number of Responses by Campaign New Customer Retention Rate Price Promotion: Impressions Reach Trial / Repeat Volume (or Ratio) Pricing: Price Premium Reservation Price Relative Price PR / Sponsorship: Volume of Coverage by Media Reach Recall New Product Development: Belief in New Product Concept Attitude toward Product / Brand Expected Annual Growth Rate Distribution: Out of Stock % / Availability Strength of Channel Relationships Product Category Volume (PCV) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
General Definition: Financial metrics refer to metrics that specified in direct financial terms. General marketing metrics can be used for any type of marketing activity. Net Profit Marketing Expenditures (% Return on Investment (ROI) specifically on Brand Building Return on Sales (ROS) Activities) Return on Marketing Investment Stock Prices / Stock Returns (ROMI) Tobin s q Net Present Value (NPV) Target Volume (Units or Sales) Economic Value Added (EVA) Customer Segment Profitability Customer Lifetime Value (CLV) Specific to Marketing Activity Definition: Specific to marketing activity financial metrics are specialized for use with certain types of marketing activities. Some of these metrics will overlap. Traditional Advertising: Cost per Customer Acquired / Cost per Thousand Impressions (CPM) Lead Generation Internal Rate of Return (IRR) Internet Advertising: Cost per Click Conversion Rate Internal Rate of Return (IRR) Direct to Consumer: Cost per Customer Acquired Conversion Rate Lead Generation Social Media: Lead Generation Cost per Exposure Total Costs Sales Force: Sales Potential Forecast Sales Force Productivity Sales Funnel / Sales Pipeline Price Promotion: Promotional Sales / Incremental Lift Redemption Rates (coupons, etc.) Internal Rate of Return (IRR) Pricing: Unit Margin / Margin % Price Elasticity Optimal Price PR / Sponsorship: Lead Generation Cost per Exposure Total Costs New Product Development: Expected Margin % Level of Cannibalization / Cannibalization Rate Internal Rate of Return (IRR) Distribution: Total Inventory / Total Distributors Channel Margins Sales per Store / Stock-keeping units (SKUS) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers TRADITIONAL ADVERTISING Metric Use (n=0).00 SMPS.8 Median:.00 Mode Use:.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0.0 The Number of Metrics Used by Managers 0 0 0 Relationship between Metrics and Performance Top Five Metrics Used (% used):. Awareness (0%). Marketing Expenditures (%). Reach (%). Return on Investment (ROI) (%). Lead Generation (%) 0 0 0 Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Awareness (9%). Marketing Expenditures (%). Reach (%) Thing that stood out:. Wide variance between different marketing groups who responded. More of a linear relationship with performance when more metrics used 0 0 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers INTERNET ADVERTISING Metric Use (n=). SMPS. Median:.00 Mode Use: 8.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0.0 Top Five Metrics Used (% used):. Click-through Rate (%). Hits/Visits/Page Views (%). Cost per Click (%). Conversion Rate (%). Impressions (%) The Number of Metrics Used by Managers 90 80 0 0 0 0 0 Relationship between Metrics and Performance Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Click-through Rate (%). Hits/Visits/Page Views (9%). Conversion Rate (%) Things that stood out:. Same ratio of marketing vs. financial metrics as traditional advertising. Increasing metric use has a very steep linear relationship with performance 0 0 0 0- -9 0- -9 0+ 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers DIRECT TO CONSUMER Metric Use (n=9).0 SMPS. Median:.00 Mode Use:.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0. Top Five Metrics Used (% used):. Number of Responses (%). Lead Generation (%). Conversion Rate (%). Awareness (%). Return on Investment (ROI) (%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Number of Responses (8%). Lead Generation (%). Awareness (%) The Number of Metrics Used by Managers 0 00 80 0 0 0 0 Relationship between Metrics and Performance Things that stood out:. Only % did not use any metrics. Only % of higher performers did not use any marketing metrics 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers SOCIAL MEDIA Metric Use (n=8).8 SMPS. Median:.00 Mode Use:.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0. Top Five Metrics Used (% used):. Number of Followers / Tags (8%). Hits/Visits/Page Views (%). Lead Generation (8%). Awareness (%). NO FINANCIAL METRICS USED (0%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Hits/Visits/Page Views (0%). Number of Followers / Tags (%). Lead Generation Things that stood out:. Marketing/financial ratio is highest. Increasing metric use is results in less risky social media performance The Number of Metrics Used by Managers 80 0 0 0 0 0 0 0 0 Relationship between Metrics and Performance 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers SALES FORCE Metric Use (n=).8 SMPS.8 Median:.00 Mode Use: 9.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0. Top Five Metrics Used (% used):. Target Volume (8%). Sales Funnel / Sales Pipeline (8%). Sales Potential Forecast (%). Sales Force Productivity (%). Total Customers (%) The Number of Metrics Used by Managers 80 0 0 0 0 0 0 Relationship between Metrics and Performance Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Sales Potential Forecast (9%). Sales Funnel / Sales Pipeline (%). Sales Force Productivity (%) Things that stood out:. Marketing/financial metric ratio is lowest. metrics are used 0% or more for highest performers 0 0 0- -9 0- -9 0+ 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers PRICE PROMOTION Metric Use (n=0). SMPS.00 Median:.00 Mode Use:.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0. Top Five Metrics Used (% used):. Target Volume (%). Promotional Sales / Incremental Lift (0%). Total Customers (0%). Net Profit (%). Market Share (%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Target Volume (8%). Promotional Sales / Incremental Lift (%). Net Profit (%) Things that stood out: 8% of highest performers and % of managers overall used target volume The Number of Metrics Used by Managers 0 0 0 0 0 0 0- -9 0- -9 0+ Relationship between Metrics and Performance 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 8
The Number of Managers PRICING Metric Use (n=).98 SMPS.8 Median:.00 Mode Use:.00 Average Ratio of Marketing vs. 0.9 SMPS Ratio of Marketing vs. 0. Top Five Metrics Used (% used):. Net Profit (%). Target Volume (8%). Unit Margin / Margin % (0%). Market Share (8%). Relative Price & Price Elasticity (%) The Number of Metrics Used by Managers 0 0 0 0 0 0 Relationship between Metrics and Performance Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Net Profit (9%). Unit Margin / Margin % (%). Target Volume (%) Things that stood out:. 0 top metrics used had equal split, but top metrics associated with highest performance are financial. Very few poor performers 0 0 0- -9 0- -9 0+ 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 9
The Number of Managers PR / SPONSORSHIP Metric Use (n=89).9 SMPS. Median:.00 Mode Use: 0.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0. The Number of Metrics Used by Managers 00 90 80 0 0 Relationship between Metrics and Performance Top Five Metrics Used (% used):. Awareness (%). Reach (%). Lead Generation (%). Volume of Coverage by Media (%). Total Costs (0%) Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Awareness (8%). Reach (%). Lead Generation (% 0 0 0 0 0 0 Things that stood out:. % of managers used no metrics. Notice that b/c higher marketing/financial ratio, this activity has wider variance with performance 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 0
The Number of Managers NEW PRODUCT DEVELOPMENT Metric Use (n=80) 8. SMPS. Median: 8.00 Mode Use:.00 Average Ratio of Marketing vs. 0. SMPS Ratio of Marketing vs. 0. The Number of Metrics Used by Managers 80 0 0 0 Relationship between Metrics and Performance Top Five Metrics Used (% used):. Target Volume (%). Return on Investment (ROI) (8%). Market Share (%). Expected Margin % (%). Net Profit (8%) 0 0 0 Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Target Volume (%). Return on Investment (ROI) (%). Expected Margin % (%) Things that stood out:. Most amount of metrics used for this activity. Top of metrics used are financial, then next metrics are marketing 0 0 0- -9 0- -9 0+ 0 0 0 THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
The Number of Managers DISTRIBUTION Metric Use (n=).9 SMPS.0 Median:.00 Mode Use:.00 Average Ratio of Marketing vs. 0.8 SMPS Ratio of Marketing vs. 0. Top Five Metrics Used (% used):. Target Volume (%). Strength of Channel Relationships (%). Channel Margins (%). Total Customers (%). Net Profit & Total Inventory / Total Distributors (% each) The Number of Metrics Used by Managers 0 0 0 Relationship between Metrics and Performance Top Three Metrics Associated with High Performance (i.e., used most in top quartile):. Target Volume (8%). Strength of Channel Relationships (8%). Channel Margins (8%) 0 0 0 0 Things that stood out: Only % did not use any metrics THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
Percent of Managers JOB TITLE Metric Use Senior Marketing Executives. Senior Non-Marketing Executives.8 Marketing Managers.9 Non-Marketing Managers. SMPS Senior Marketing Executives. SMPS Senior Non-Marketing.89 Executives SMPS Marketing Managers.0 SMPS Non-Marketing Managers. % 0% % 0% % 0% by Managers % 0% % 0% 0- -9 0- -9 0+ SR MKTG SR NON-MKTG MKTG MGR NON-MKTG MGR THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
Percent of Managers WORK EXPERIENCE Metric Use More than Average Experience Less than Average Experience SMPS More than Average Experience SMPS Less than Average Experience More than Average Experience Average Ratio of Marketing vs. : Less than Average Experience Average Ratio of Marketing vs. :: SMPS More than Average Experience Average Ratio of Marketing vs. : SMPS Less than Average Experience Average Ratio of Marketing vs. :.9... 0. 0. 0. 0. % 0% % 0% % 0% % 0% % 0% The Number of Metrics Used by Managers Relationship between Metrics and Performance 0 0 0 0 <EXPERIENCE >EXPERIENCE <EXPERIENCE >EXPERIENCE Linear (<EXPERIENCE) Linear (>EXPERIENCE) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
Percent of Managers FIRM SIZE Metric Use Small Firm.9 Large Firm.09 SMPS Small Firm. SMPS Large Firm. Small Firm Average Ratio of 0. Marketing vs. : Large Firm Average Ratio of 0. Marketing vs. :: SMPS Small Firm Average Ratio of 0. Marketing vs. : SMPS Large Firm Average Ratio of 0. Marketing vs. : % 0% % 0% % 0% % The Number of Metrics Used by Managers Relationship between Metrics and Performance 0% % 0% 0 0 0 SMALL FIRMS LARGE FIRMS SMALL FIRMS LARGE FIRMS Linear (SMALL FIRMS) Linear (LARGE FIRMS) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
Percent of Managers OWNERSHIP TYPE Metric Use Public Firm.8 Private Firm. SMPS Public Firm.8 SMPS Private Firm.8 Public Firm Average Ratio of 0. Marketing vs. : Private Firm Average Ratio of 0. Marketing vs. :: SMPS Public Firm Average Ratio of 0.0 Marketing vs. : SMPS Private Firm Average Ratio of 0. Marketing vs. : % 0% % 0% % 0% % by Managers 0% % 0% 0- -9 0- -9 0+ PUBLIC FIRMS PRIVATE FIRMS THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
Percent of Managers BB vs. BC Metric Use BB Firm. BC Firm 8.9 Mixed Firm. SMPS BB Firm.8 SMPS BC Firm.00 SMPS Mixed Firm.8 BB Firm Average Ratio of Marketing 0. vs. : BC Firm Average Ratio of Marketing 0. vs. : Mixed Firm Average Ratio of 0. Marketing vs. : SMPS BB Firm Average Ratio of 0. Marketing vs. : SMPS BC Firm Average Ratio of 0.8 Marketing vs. : SMPS Mixed Firm Average Ratio: 0.9 % 0% % 0% % 0% % 0% % 0% The Number of Metrics Used by Managers BB FIRMS BC FIRMS MIXED FIRMS Relationship between Metrics and Performance 0 0 0 0 BB FIRMS BC FIRMS MIXED FIRMS Linear (BB FIRMS) Linear (BC FIRMS) Linear (MIXED FIRMS) THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e
INDUSTRY Metric Use Architecture. Banking / Finance / Accounting /. Insurance Communications / Media.90 Consumer Packaged Goods. Consumer Services 8. Education.8 Energy 8.00 Engineering.8 Government.0 Health Care / Pharm..0 Manufacturing and Process 8. Industries (Non-computer) Mining / Construction. Professional Services / Law /. Consulting Retail / Wholesale 9. Technology (Software / Biotech).0 Transportation 8.0 Other (non-listed) Industries.9 Average number of metrics used for each marketing activity by industry INDUSTRY TR AD INT AD DC SM SF PP PRI PR NPD DIST Architecture..0... N/A N/A. N/A 9.0 Banking / Finance / Accounting / Insurance.8.8..0...8.8.0. Communications / Media 8.0.8 8....0..9..0 Consumer Packaged Goods 8.. 9..0..8.. 9.. Consumer Services 8. 9. 9.0 9. 0.0..0.. N/A Education 9.. 9.0.0 8..0.8..0.0 Energy..0..0.0.0 8. 9.0 9.8 8.0 Engineering.9.....0...0 N/A Government.0.0.0.0. N/A.0.0..0 Health Care / Pharmaceutical 8.0.8. 8.8 8.8... 8.. Manufacturing and Process Industries (Noncomputer) 8.9. 8..0 0. 9. 0.. 0.9.0 Mining / Construction....8 9.. 8.. 8.0. Other.0 8.8.. 8.. 8.. 9.. Professional Services / Law / Consulting.....9. 8..0..0 Retail / Wholesale 0. 0.. 9. 0.8 9.0 8...0. Technology (Software / Biotech).....9.9.9..8 9. Transportation.0.0..0. N/A.0 8.0.0. THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 8
INTERNATIONAL COUNTRY / REGION Metric Use USA.8 Canada. Europe 9. Latin America.8 South Asia, Mid East, & Africa.0 USA Average Ratio of Marketing vs. 0. : Canada Average Ratio of Marketing vs. 0.0 : Europe Average Ratio of Marketing vs. 0. : Latin America Average Ratio of Marketing vs. 0.9 : Pacific Rim & East Asia Average Ratio of Marketing vs. Financial 0.8 Metrics : South Asia, Mid East, & Africa Average Ratio of Marketing vs. 0. : Average number of metrics used for each marketing activity by country/region COUNTRY / REGION TR AD INT AD DC SM SF PP PRI PR NPD DIST USA.8..8..9..9.8 9.0. Canada 8. 8.0.8. 8.0.8..9.9. Europe. 9. 8.. 9. 8. 8. 0.0 8. 9. Latin America 9.0.0 8.. 8.. 8.0... Pacific Rim & East Asia..8... 0.. 8.9.0 9. South Asia, Mid East, & Africa.. 8..9 8.9.8.8.. 8. THE PAUL MERAGE SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA IRVINE P a g e 9
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