Key Sales and Marketing Metrics for Every Business

I wrote before about the fallacy of measuring Marketing ROI.

So what should all businesses be measuring?

Well that partly depends on your business. But here are some key metrics that should be relevant for nearly every business that also relate closely to your business finances.

Sales Metrics

• Volume and Value % compared with plan and prior year
• Volume and Value % compared with competition

Marketing Investment Metrics

• Marketing budget % expenditure compared with plan and prior year
• Share of Voice % compared with competitors: could be in actual advertising spend or equivalents if PR coverage. One could also measure Social Media coverage as well here?

Bottom Line

• Profit by business/marketing unit or brand % compared with plan and prior year
• Share of market profit % compared with competitors

Getting marketing metrics for competitors

If you are a big business  then there will be whole teams, agencies and market research companies dedicated to this kind of analysis. But if you are small, perhaps with just a handful of marketing staff, what do you do?

Rather than ignoring competitors altogether there are some quick and easy ways to get the above data:

Competitor Sales Data:

Do a survey of mutual or prospective customers to establish their purchasing of competitor products. You don't have to survey the whole market - a reasonable sample of between 50 and 100 will do if you compare with your own products.

Competitor Share of Voice:

You probably know which outlets will act as advertising or PR mediums for your product. Simply survey these for a period (depending on publication frequency) and note details of your competitors adverts and editorial copy. If you can also monitor social media and channels such as events as well. By spending a bit of little bit of effort you should be able to get a good snapshot of your competitors' marketing activity and how much they are spending. It's probably worth maintaining this ongoing to see what they change. For instance it would be useful to see if they are investing more in marketing a product that directly competes with yours.

Competitor Share of Profit:

A really difficult one to do, but in the UK you can get copies of accounts from Companies House and these will give broad brushstroke data on profitability for any Ltd company.

Fallacy of the ROI Marketing Metric

In the world of marketing metrics ROI (Return on Investment) is the corporate speak holy grail. Job adverts and marketing plans talk about measuring ROI or maximising ROI in an effort to track the effectiveness of marketing. A lot of this is an effort to make marketing more financially accountable and show the worth of all that marketing budget to senior management.

Yet the ROI metric itself is fundamentally flawed and should not be used. 

Here's why:

Marketing ROI is measured by dividing the return (profit before marketing) by the marketing investment (marketing budget invested in a particular brand or campaign). So for instance if the profit gained on a launch of a new paperclip is £1,000,000 and we spent £200,000 on our marketing campaign to launch that paperclip, the ROI is £1,000,000 divided by £200,000 or a factor of 5.

If we could achieve the same return of £1,000,000 and spend only £160,000 then our ROI would be higher at 6.25.

So far so good - you can see how marketing managers, campaigns and methodologies could usefully be compared and measured using such a metric and benchmarking carried out between industries and competitors.

But ROI doesn't actually make your business more profitable - it's a statistic not a measure of actual net return, the actual profit that is so important.

Here's why ROI doesn't work as a metric: 

Say with our first example we could have spent £250,000 on marketing instead of £200,000, and that this then yielded returns of £1,200,000 instead of £1,000,000. Our ROI is now only 4.8 rather than 5, so obviously the campaign is doing worse? Well no actually because the net return has gone up from £800,000 to £950,000, we are now making £150,000 more profit, so this campaign is actually performing better, although the ROI metric would tell us that it isn't.

It is surprising that ROI is bandied about so much as a holy grail of marketing metrics when it is so obviously and fundamentally flawed. I am indebted to Tim Ambler's book Marketing and the Bottom Line for opening my eyes to this fallacy. If you want a more robust way of benchmarking then you need to look at other metrics such as DCF (Discounted Cash Flow).

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