Marketing Metrics: The Definitive Guide to Measuring Marketing Performance

The cost of goods sold obviously gets assigned to the customers based on the goods each customer purchased. Assigning the more indirect costs may require the use of some form of activity-based costing (ABC) system.

The largest problem in performance review is a tendency to rely on only one or two metrics. This can be dangerous because an individual’s performance on any one measure may be anomalous.

In a multi-bonus system, the following formula can represent the compensation structure for a salesperson: Compensation ($) = Salary ($) + Bonus 1 ($) + Bonus 2 ($) In this system, bonus 1 might be attained at a level approximately halfway to the individual’s sales goal for the year. The second bonus might be awarded when that goal is met.

managers can develop a program that mixes both short- and long-term incentives. They can link some rewards to a simple, short-term metric, such as calls per week, and others to a more complex, long-term target, such as market share achieved in a year.

Warm Lead: A lead that is expected to be responsive. These potential customers may have registered through a Web site or requested product information,

Whereas customer profit is a metric that summarizes the past financial performance of a customer relationship, customer lifetime value looks forward in an attempt to value existing customer relationships.

When an incentive program is implemented, it may reward the “wrong” salespeople. To avoid this, before activating any newly proposed program, sales managers are advised to apply that program to the prior year’s results as a test. A “good” plan will usually reward the salespeople whom the manager knows to be the best.

Take care not to use this CLV formula for relationships in which customer inactivity does not signal the end of the relationship. In catalog sales, for example, a small percentage of the firm’s customers purchase from any given catalog. Don’t confuse the percentage of customers active in a given period (relevant for the cataloger) with the retentio

most things change over time. Customers who were profitable last year may not be profitable this year.