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Assessing marketing performance: don't settle for a silver metric

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Abstract:

This paper starts with the premise that marketing should be accountable, and considers by which measure or measures it should be held to account. "Marketing" for the purposes of this paper is defined as satisfying customers and thereby maximising net inward cash flow. This suggests that marketing performance can and should be evaluated financially, ideally with a single number, or "silver metric". The authors review the arguments for and against silver metrics in general and, in particular, three popular candidates: ROI, Discounted Cash Flow (DCF) and Return on Customer. So far as performance evaluation is concerned, six objections to the use of ROI, five to the use of DCF and four to Return on Customer are identified. Furthermore, the authors highlight the critical and potentially misleading role of forecasts as benchmarks for performance assessment. At the same time, the value of DCF techniques, such as customer equity and customer lifetime value, is recognis ed for planning purposes. A more satisfactory means for assessing marketing performance is net profit plus any enhancement of the marketing asset albeit that requires multiple metrics, taken together as a proxy for future cash flows.

Keywords: BRAND EQUITY; DCF; MARKETING; MEASUREMENT; METRICS; PERFORMANCE; ROI

Document Type: Research Article

DOI: http://dx.doi.org/10.1362/026725708X345498

Publication date: September 1, 2008

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