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Metrics that matter

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  • | 11:00 a.m. October 30, 2015
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Market research is an essential part of managing your product brands as well as your corporate brand. Consistent benchmark tracking is required for understanding the growth and value of your brands — it is impossible to manage your brands without it. So, what are the most important metrics to measure? The answer: those that matter most to the performance of your business.

With market research being such an important component of management, it is amazing how few companies use consistent measures to manage their brands. Even fewer seem to use financial metrics that tie brand measurement to value creation. Identifying metrics that matter to your business is the key to marketing accountability.

Unfortunately, market research is often viewed as being a tactical tool rather than a strategic one. Certainly, qualitative research is important for analyzing immediate marketing issues: evaluating the creative approach for a marketing campaign, gaining insights on products in development or obtaining consumer feedback on new packaging are all logical reasons for utilizing market research tools on a tactical basis.

Strategic market research is more associated with the application of consistent benchmark tracking systems on a quantitative basis. The goal is to tie the result into financial metrics that allow you to run the company more efficiently and to create greater enterprise value. Ultimately, these metrics should give you budgeting tools to help evaluate and project expected outcomes for investments in marketing activities such as advertising, packaging, media relations, social media, investor relations, sustainability investments ... the list is as long as the needs of the company.

When using quantitative research as a strategic tool that ties into financial metrics, it is vitally important to ask the right questions to the right audiences. We have found that the best quantitative research is simple but relates to the basic building blocks of value creation. Here are a few of the core questions we have found useful relating to the corporate brand:

How do you view the company's reputation?
How good is the company's management?
Is the company a good investment?
Do you view the company as innovative?
How good are the products or services of the company?
Would you recommend this company to a friend?

These questions should be asked about your company as well as about key competitors so you can track changes over time, as well as to identify losses or gains against the competition. While you will get useful information immediately in quantitative research, the real value is the repetitive nature and long-term trends of benchmark tracking.

Incorporating financial metrics, which may include revenue, cash flow, earnings and even total enterprise value (stock price) will help facilitate cause-and-effect observations. This is followed by controlled experimentation, which means testing different marketing scenarios and evaluating the results. Ultimately, the entire marketing budget should be evaluated using consistent marketing metrics — this is accountability!

Identifying groups that are most important to the existence of your company is a key component of the quantitative research process. Critical audiences should include customers, of course, but they can also include audiences such as investors, employees, suppliers, media representatives, government regulators and even the communities in which your business exists. Some audiences are more important than others — prioritizing them is essential so research dollars aren't wasted.

Allocating resources to business and brand strategies is consistent with managing for shareholder value creation. Brands represent the lion's share of total intangible asset value, which has grown from 15% of total enterprise value in 1975 to more than 80% in 2009, according to research by Robert Laux, the director of accounting and reporting with Microsoft. This massive growth in value of brands is why it is so important for every company to consider its brands as value-creating assets.

Always remember that brands are an intangible asset that can be:

Accurately and consistently measured and valued;
Compared to competitive companies and industries;
Budgeted and managed like other assets;
Evaluated for growth or loss of value over time;
Evaluated on a return on investment (ROI) basis;
Predictive of future cash flow;
Utilized as a companywide dashboard.

Brands are a business asset, which can and should be managed over time in the same manner as any other business asset. Establishing measures and metrics linking marketing strategies to financial performance will help set the stage for budget preparation that takes the mystery out of resource allocation. When this alignment of strategic goals / objectives, value-based measurements and resource allocation is in place, the company will be on a path to increase what is known as brand equity value. Brand equity is directly related to the premium price customers are willing to pay for your products or the stock in your company.

James R. Gregory is chairman of Tenet Partners, a brand innovation and marketing consultant. He has written four books on creating value with brands. Contact him directly
at (203) 979-7914 or [email protected]


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