Types of Metrics
Activity-Based Metrics, essentially involves counting. For example, marketing in Activity-Based Metrics for trade shows to generate leads, will count the number of booth attendees, maybe even the number of ‘leads’ resulting from the show. Activity-Based Metrics doesn’t really satisfy the organisations need to understand marketing’s contribution.
Operations Performance Metrics
In Operations Performance Metrics, the marketing function is being managed like a business. It establishes metrics to improve organisational efficiencies and ROI. The connection between a marketing program and a business output is more tightly linked. In Operational Performance Metrics, the cost/lead for any marketing program would be measured and reported.
The limitation is that Operational Performance Metrics really only provide the organisation with a way to rationalise financial investments in marketing and not necessarily with a way to relate marketing back to improving strategy and performance. Operational Performance Metrics frameworks do not show how to secure more revenue-producing customers, keeping these customers, and growing the profitable revenue derived from the customer franchise.
A good marketing metrics framework must demonstrate how marketing enables the organisation to realise these outcomes.
Good metrics must provide clear data on efforts that impact outcomes. For example, a business outcome of “obtain 15% market share in the hospitality industry within three years,” will depend on the marketing strategy. The strategy might be to focus on a particular segment such as city hotels or on a specific channel such as convention centres. The outcome and strategy serve as the determinant for what performance indicators and corresponding metrics will matter most. A metric associated with the Outcome- Based stage would focus on the additional share of market as a result of new deals.
Leading-Indicator Metrics facilitate business decisions regarding strategic direction. For example, if a primary business objective is to increase the number of products used by a customer, then tracking share of wallet and the degree to which it is improving lifetime value serves as leading indicators. This measures whether the organisation is achieving its objective and taking business from the competition.
Leading-Indicator Metrics enables the capture of directional data. Once there is enough historical information, statistical models will enable the prediction of the likely impact of specific initiatives on business performance.