Tag: Marketing Research

Edeling and Himme (2018) report that market can positively predict an organisation’s performance. With this in mind, measuring this metric is a key component to any business.

The first step to an accurate measurement of market share is defining the market. This should be made quite specific as to only reflect the immediate competition and not the larger market. This is so the measurement reflects their performance among relevant competition.

Another consideration is to look at revenue or the number of units sold. This should be chosen depending on the market and goals of the company.

Once these considerations have been made, Edeling and Himme (2018) explain two measures of market share:

• Revenue market share: sales revenue as a percentage of market sales revenue
• Unit market share: unit sales as a percentage of market unit sales

References

Edeling, Alexander and Alexander Himme (2018) “When does market share matter? New empirical generalizations from a metra-analysis of the market share-performance relationship” Journal of Marketing, 82(May), 1-24.

If the acquisition of new customers is an expensive effort and the value these customers offer to your business, the focus should be targeted at customer retention. Keeping what you have.

This is a delicate balance for marketers and business as a whole with a delicate balance between spending too much and too little resulting in extreme negatives.

On one side, a business can spend too much on customer retention and result in no profit being made as the customer is not providing enough value to justify the spending on their retention.

The other end of the scale is neglecting customers to the point that they leave for a competitor’s product or a substitute.

Calculating the cost of retention can be done by dividing the retention spendings by the number of customers retained (Bendle et al. 2016). This number must be less than the value of the customer to prove profitable. The metric is not flawless and as Bendle et al. (2016) points out, there are 3 potential issues:

1. It is unknown how many customers would be retained if there was no retention spending (i.e., calculating the baseline can be difficult)
2. The metric may be difficult to calculate as it is not easy to isolate retention spending from other marketing spending.
3. Using the metric in practice may be difficult, as the organisation might not want to know how much, on average, it will cost to retain any customer. Rather the organisation might be interested in knowing how much, on average, it will cost to retain specific types of customer (e.g., top tier).

Even with these issues considered, attempting to measure retention costs can, at the least, provide an additional data input to a better informed decision.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey

When assessing what is seen as a qualifying factor, it must first be defined. McDonald et al. (2014) defines it as the factors customers expect to be delivered by all organisations in the market. It is looked at as the bare minimum to survive in a market.

Qualifying factors are required to deliver value for the customers. Marketers should look to determine what the threshold is for customers as to not exceed this by significant amounts. The reason being that exceeding this qualifying factor threshold may not hold much, if any return on investment for an organisation.

The purpose here can be seen as reducing dissatisfaction instead of increasing satisfaction as that is more of a measure for critical success factors.

This is a dynamic measurement and a method that can constantly measure the expected and achieved performance levels in an organisation is required to address and gaps in the expected results.

To enhance the accuracy of these measurements/factors, a clearly identified target market is also required and a pre-determined threshold for the gap of expected and achieved performance levels must also be established. This allows definitive actions to take place and a specific time and removes any delay in the decision process.

References

McDonald, Malcolm, Peter Mouncey & Stan Maklan (2014) Marketing Value Metrics: A new metrics model to measure marketing effectiveness. Kogan Page: London.

Bendle (et al. 2016) looks at loyalty as being more of a broad concept then a specific metric marketers seek to measure.

There are some key metrics that must be considered when attempting to measure loyalty. These include share of requirements, willingness to pay a premium, willingness to search, repurchases and purchase frequency (Bendle et al. 2016.

Loyalty is important as an indicator for future business and the higher the level of loyalty is a reflection that the company will be likely to receive future revenue from this customer. Bendle (et al. 2016) raises the dynamic nature of loyalty and given the highly competitive nature of most markets now, if a company fails to meet the changing needs of their customers, the new entrants are constantly evolving to threaten customer loyalty.

Willingness to search is considered the ‘acid test’ for loyalty but to accurately collect the data to build this metric can be difficult. It is defined as the percentage of customers who would wait to buy a brand that is (temporarily) unavailable rather than buy an alternative brand. This could involve the customer going through a different medium to purchase their preferred brand or purchasing the minimum amount of their lesser preferred brand until they can again access their preference.

Loyalty is a key aspect for marketers to consider when measuring the success of their brand, a high level of loyalty in customers can be a great indicator for a sustained competitive advantage and future success. Marketers must always ensure they are meeting their customer’s needs as the threat of a substitute or new entrant are constantly evolving in the competitive environment that exists in most markets today.

References:

Bendle, NT, PW Farris, PE Pfeifer & DJ Reibstein (2016) Marketing Metrics: The Manager’s Guide to Measuring Marketing Performance, 3rd edition. Pearson: New Jersey