Marketing Metrics Flashcards
Why are sustainability metrics important?
It provides a broader view of company performance, beyond financial performance. Corporate responsibility is broadened. It is a reflection about the role of the business in relation to society (as a means to foster security, health, education, democracy) and to the environment (in terms of safeguarding the ecosystem from natural resources depletion).
What are some examples of sustainability goals?
- Increase in women in leadership positions. (People)
- Lowering Co2 emissions. (Planet)
- Move to sustainable energy. (Planet)
What is CSR?
The notion of corporate social responsibility (CSR) points to the desirability/necessity that firms broaden their responsibility beyond (crude) financial growth.
CSR states that corporations should generate simultaneously economic, social and environmental value.
There is a variety of interests at stake for any business.
What are the main foundations of the stakeholders view? How is this different than the stockholder view?
1 - Moral (when shareholders focus on profits only, there is still a bigger impact to society: when ees are fired or go unpaid, financial bailouts are funded publicly)
2 - Instrumental (empirical/ pragmatic)
Evidence suggests that managing stakeholders strategically increases the likelihood of success.
Stakeholder view provides a broader view of company performance, beyond financial performance. Corporate responsibility is broadened. It is a reflection about the role of the business in relation to society and to the environment. There isn’t a method equivalent to financial accounting to show social environmental value/impact of a business.
Stockholder view does not question how the business is organized and its role in society, but rather how its money is spent. Financial reports focus on showing financial value generated for shareholders.
What is the difference between a price leader and a cost leader?
Price leader: selling at a higher price
To be a price leader, for customer’s to pay more, you need to have a quality product and good satisfaction. A high churn rate could show issue with a product itself.
Cost leader: selling at a lower price.
You can tell if a company is a cost leader, as they would have a higher number of units sold and less revenue.
What are the two questions considered when thinking about stakeholders?
1 - Who (or what) are the stakeholders of the firm? Calls for normative theory of identification to explain why managers should consider certain classes of subjects as stakeholders.
2 - To whom (or what) do managers pay attention? This calls for a descriptive theory of stakeholder salience, to explain conditions under which managers do consider certain groups of subjects as stakeholders - salience.
What is the normative approach to stakeholder identification?
Freemans definition of stakeholder “Any group or individual who can affect or is affected by the achievement of organization’s objectives”
Definition highlights a two way relationship. Needs to identify primary stakeholders and then uncovering the interests of each stakeholder through a stakeholder analysis.
What is the process for stakeholder analysis?
A stakeholder analysis allows managers to identify and characterize the parties who will be affected by or who affect important decisions.
Thinking of power implications, look at equity (stockholders, partners those with voting power), economic (interest but no ownership, employees, customers, suppliers) and influencers (interest in firms actions, consumer advocates, trade organizations, media).
Thinking of prioritization: the power to influence the firm, the legitimacy of the relationship to the firm and the urgency of the stakeholder’s claim on the firm.
Salience = relevance or importance.
How do you prioritise stakeholders?
You prioritize stakeholders based on power, legitimacy and urgency.
What are the 3 pillars of sustainability reporting?
ESG: Environment, Social and Governance (economic)
CSR statements should generate ESG information simultaneously.
What is the push/pull of reporting ESG issues?
Reporting ESG issues is PULLED by stakeholders (positive financial impact for business, specific interests of investors i.e. climate change, and sustainable investing i.e. green bonds)
Reporting ESG issues is PUSHED by requirements of the reporting, i.e. UN sustainable development goals or EU regulations.
In ESG reporting, what is the difference between framework and standards?
Frameworks provide principle based guidance on how info is structured, prepared and what broad topics are covered.
Standards provide specific, detailed and replicable requirements. Standards make frameworks actionable and are WITHIN frameworks.
What is the Global Reporting Initiative?
The Global Reporting Initiative is the most widely adopted sustainability reporting guidelines, and takes steps towards standardisation of accounting for social value.
Preparing a report with the GRI standards indicates that the doc provides a full and balanced picture of a business’ relevant sustainability topics and their impacts, as well as how these impacts are managed.
What are the two approaches to using GRI?
GRI, The Global Reporting Initiative is used in 2 ways:
Core, which is the minimum info needed to understand the nature of the organization. The flexibility is what makes GRI more accepted as a voluntary program.
Comprehensive, which requires disclosures on organzational aspects including ALL topic specific disclosures.
Omissions must include the reason they are left out - like n/a, confidentiality constraints, legal prohibitions, information unavailable (and what steps are being taken to obtain the info and timeframe).
How do you rate sustainability? What are two important rating systems?
Rating sustainability helps internalize and improve business commitment to sustainable development in a way that it can be demonstrated to all stakeholders. Ratings are an efficient tool for investors.
Covalsence Ethical Quote: CEQ is a market index tracking reputation for worlds largest companies on ESG corporate dimensions of firms ethical performance. Analyzes companies based on level of reposting, communication, endorsements and controversies.
Global RepTrack has annual reports on reputation of corporations and places, based on three pillars: REPUTATION, BRAND, ESG.
This scoring system measures how stakeholders view companies ESG performance and have become a priority for the public and powerful indicator of consumer behavior. Low ESG score, 20% willingness to buy. High ESG score, 60% willingness to buy.
What are the two limits of the DuPont model in modeling firm performance?
The DuPont model allows firms to analyze Return on Assets (ROA)/ an inward focus.
There are two limitations:
1. You don’t have a value for intangibles like brands, patents – and are therefore not represented accurately in a balance sheet. This value also changes with time.
- DuPont model focuses on the production part of the company, not sales (revenue) and marketing. It focuses on becoming more efficient by reducing costs, but a marketer would instead look at how good they are at generating sales.
What is the starting point to measuring firm performance for management?
The starting point is always the marketing mix: Price, Promotion, Product, Place. You need to understand the relationships in order to make decisions, and understand to which extent there is a positive or negative effect. (If you raise advertising costs, you may increase sales).
What is ID and EM in terms of marketing dashboards?
ID and EM are two alternative ways of modeling performance. Usually marketing metrics include both, to help support effective marketing decisions.
ID (adopt identities) is what is used in the DuPont model. ID may be used to estimate metrics that are difficult to measure directly (assumptions are required).
It may be necessary to adopt empirical relationships (EM) when modeling. EM results from an estimation process based on data. EM may rely on constructs that must be measured indirectly, through indicators.
What are the decisions associated with the elements of the marketing mix?
What is the purpose of market size analysis? Market potential?
The purpose of market size analysis is to identify business opportunities, envision appropriate business strategies and to calibrate business investments (like R&D and/or product development.
The market potential depends on definition of consumer groups and the marketing environment. Can be expressed in sales volume (#) or sales revenue ($).
Market potential helps make decisions about:
Intro of new products
Allocation of marketing investments
Location of new stores
Creation of new distribution channels
What is the purpose of a market share analysis? How do you calculate it?
What is relative market share?
The purpose of a market share analysis is to see how well a firm is doing against its competitors.
Unit market share % = unit sales/ total market unit sales
Revenue market share % = sales revenue/total market revenue
Relative market share helps assess how well a firm is doing in its relative position in the market - against the leading competitor.
Relative market share = firm’s market share/leading competitor’s mkt share
What is BDI?
BDI is the Brand development index, and this quantifies how well a brand is performing within a specific group of customers, compared with its average performance among all consumers.
CDI = category development index. Category is any product with different characteristics that meets the same need.
CDI tells us how strong the category is and allows us to assess our relative strength with BDI, as an example if it CDI is 1.5 and our BDI is 1.5, we know the category is strong in this place, not necessarily a strength we have. If our BDI is 1.5 but the CDI is .9, we can see we are performing better than the category.
High BDI/High CDI = high market share, good market potential.
Low BDI/High CDI = low market share, good market potential
Low CDI/High BDI = High market share, monitor for sales decline
Low CDI/Low BDI = low market share, poor market potential
What is the Herfindahl Index used for?
The Herfindahl index is used to calculate market concentration. It shows the degree to which a relatively small number of firms accounts for a large proportion of the market.
What is the purpose of market penetration?
The purpose of market penetration is to measure brand or category popularity.
What is demand’s price elasticity?
Demand’s price elasticity is the responsiveness of demand to a small change in price. It is the % change in Volume associated with 1 pp change in Price.
the higher the price, the quantity will go down; we need to see to which degree. It is an “elastic” demand if it is more gradual. If it is a steep decline, it is considered “inelastic” demand.
Elasticity = 0 in the graph, is it inelastic and a vertical line. You can change price and people will not change quantities. It is difficult to find products like this. 0 is an indicator of absolute inelasticity.
Elasticity = 1 in the graph, that increase 1% change in quantities = 1% decrease change in price (in percentage points). Over 1, you have an elastic situation.
With this information, you can decide how much weight to put on price, vs other items like place. The more you are targeting the mass market, the more price is elastic. In luxury, you have a lot of inelasticity.
What are some evaluation of sales force performances/ results?
1 - Revealed preferences, or data on behaviors like effectiveness. The higher the value the more effective the person is that you are evaluating.
a - Units per Transaction (higher UPT the more items purchased during each sales visit)
b - Average Sales per Transaction (measures the salesperson’s productivity and ability to capture customer’s interest, i.e. performance)
c - Sales per Employee’s Hour
2 - Stated preferences (data regarding opinions)
What is pipeline anaylsis?
Pipeline analysis is used to track the progress of sales efforts, to forecast short-term sales and to evaluate sales force workload.
If you calculate the share of market on per units and per revenue terms, what can this tell you?
Companies with a higher revenue to their units, means they are practicing a price strategy.
If their units are higher, they are practicing a cost strategy.
