Measuring the Long Term Marketing Health of Your Organization  by Ken Bernhardt Regents' Professor Robinson College of Business, Georgia State University Atlanta Business Chronicle - May 20, 2004 One of the most important functions of a senior marketing executive is the measurement and tracking of the organization's long term marketing health. Perceptive observers of the business scene have weighed in on the importance of good measurement as illustrated by the following quotes: We need measures that are akin to leading indicators...Slowly, we are moving from counting to measuring [Peter Drucker] Our systems invariably measure the wrong stuff [Tom Peters] Many executives are insulated from reality and consequently don't know what the ____ is going on [James Champy] Focusing on what's easily measured leads to looking good without being good [Peter Senge] When it comes to measuring marketing, many managers can be divided into one of two camps: the expense-driven managers vs. the investment-driven managers. Expense driven managers ask questions such as what are my projected sales for next year, are my spending ratios (e.g., sales force, advertising, etc.) on a par with my competitors, am I gaining or losing market share, and how can I reduce my marketing expenses? This leads to such traditional marketing measures as sales, market share, average order size, advertising recall, percent product trial and repeat, cost per inquiry, and customer satisfaction.  Investment-driven managers, on the other hand, ask questions such as what are our long term marketing goals, what returns are we earning from our marketing investments, which new customers should we seek and which ones should we avoid, what can be done to reduce customer acquisition costs, and what is the quality of our market share - -do we have customers who are loyal and will stay with us? Dr. Bob Lusch, dean of the business school at Texas Christian University in Fort Worth, Texas, may be the only business school professor in the country who has had a faculty position in both the marketing and accounting departments at the business schools where he has taught. In this column I will report some of the ideas for new measures of marketing effectiveness he has shared with me, and I will add some of my own as well. How about measuring the percent of time the CEO of the organization spends on strategic marketing issues?  If you believe, as my old track coach used to say, "the speed of the leader is the speed of the pack," think what this time allocation communicates to the rest of the organization.  My hypothesis would be that as the proportion of time spent on strategic marketing goes up, the company's performance will be higher. Another interesting measure to track over time is the percent of marketing staff that is passionate about the business. Another interesting measure for tracking the health of publicly owned companies would be the company's price earning multiple (company stock price divided by its earnings per share) relative to its top competitors. If this number is rising, the financial analysts are betting that the company's future earnings are likely to grow faster than that of the competitors. The reason these days is likely to be a function of the company's marketing performance (e.g., brand development, new product development, customer satisfaction). Many companies measure sales conversion ratios (percent of sales calls that result in business for the firm). How about measuring the percent of unsuccessful calls instead? If this number is too low, it probably means that the sales force is concentrating on the same old customers and not doing enough prospecting for new ones. Over time, this will slow down the company's success.  A similar measure is the number (or percent) of customers who have had an unsatisfactory experience with the firm. If the company is not identifying customer problems, there is no way they can fix them. Thus, receiving few or no complaints is not a good thing.  One reason Hampton Inns initiated their highly successful service guarantee was to increase their ability to identify all their problems. When Roberto Goizueta, famed CEO of  the Coca Cola Company focused on the company's "share of stomach" instead of it's market share, many growth opportunities came to light. Are you merely measuring your market share vs. direct competitors, or are you measuring your customers' share of wallet (share of all their expenditures in your category plus related categories where you could compete)? A related measure is the percent of your key products that you sell at a discount. Ideally, if your products and services are truly meeting customer needs, this number is low. Note that the automobiles most in demand don't have to offer special discount offers and rebates - - in fact, the "hot" cars often sell at a premium over sticker price.  Other measures of your marketing health might include the percent of sales over the past 3 years from new distribution channels or sales in the past year from services and products that didn't exist 3 or 5 years ago. The point of this column is not to argue against the traditional measures of marketing effectiveness or for any of the specific measures proposed here. The point is to get you to think more creatively about what you should be measuring. As Peter Drucker has said, "We need measures that are akin to leading indicators - Slowly, we are moving from counting to measuring."  So, happy measuring to you.