Introduction to Marketing Metrics

Marketing metrics measure the success of marketing campaigns and

show how well campaigns are tracking toward key performance
indicators(KPIs).
They are the one of the most important elements of any campaign,
and without them, marketing teams would not have any clear picture
of whether their marketing strategy is a success .
Introduction to Marketing Metrics
Marketing metrics are a quantifiable way to track performance and are
an important marketing measurement tool for gauging a campaign ’s
effectiveness.
The most appropriate marketing metrics vary greatly from one
campaign to the next, but in general they measure the effects of your
campaign on audience actions
The right marketing metrics to measure will be the ones that ultimately
have the most impact on business goals, which may be sales
generated for one campaign but increamental to each other.
Alignment of Business Objectives, Strategies
and Metrics
• It is important that performance metrics are aligned with corporate
objectives and strategies and do not unintentionally undermine each
other, a phenomenon called ‘sub-optimization”.
• To align metrics, businesses need to devise them together in the
context of an entire ecosystem designed to drive certain behaviors
and avoid others.
• To create effective performance metrics, marketers or researchers
must start at the end point-with the goals, objectives or outcomes
they want to achieve – and then work backwards.
Alignment of Business Objectives, Strategies
and Metrics con…
A good performance metric embodies a strategic objective.
It is designed to help the organization monitor whether it is on the
right track to achieve its goals.
The sum of all performance metrics in an organization tells the story of
the organization’s story.
Importance of Marketing Metrics
• Marketing metrics are critically important because they help brands
determine whether campaigns are successful, and provide insights to
adjust future campaigns accordingly.
• They help marketers understand how their campaigns are driving
towards their business goals, and inform decisions for optimizing their
campaigns and marketing channels.
• These insights help a marketing team understand if it has achieved
goals in terms , reaching new customers, awareness, engagement,
sales, lead generation, and more.
Importance of Marketing Metrics
• These digital analytics also serve as an early warning system if
marketing campaigns are not performing as expected , and can help
with effective decision making to adjust the campaigns in real time.
• Finally, marketing metrics are the primary way marketers can show
the impact that marketing and advertising is making for their
company or organization.
• This can inform annual budgets and head count, making these
insights essential beyond ongoing measurement and campaign
planning.
Key Marketing Metrics
1. Impression share: Marketers can use this metric to determine
how much visibility their brand is getting on a particular channel
compared to the larger potential audience it can engage. An
increase in impression can lead to higher sales.
2. Click –through Rate (CTR) CTR is the number of times on ad or link
is clicked on as a percentage of the impressions. Since, ads are
“push campaign, their CTR is generally low.
About 4% or higher CTR generally indicate that company’s
messaging is relevant and compelling.
Key Marketing Measurement Metrics con..
3. Lead generation metrics:
AI powered solutions like Marketing cloud can help marketers track
deals generated from multiple channels in a single, unified dash board
These leads get prioritized automatically based on the likelihood of
their conversion.
Popular lead generation metrics include Visitor-to-Lead and Lead- to-
opportunity that measure the conversion of page visitors into ‘warm
leads’ into and warm leads to ‘hot leads’.
Key Marketing Measurement Metrics con..
4. Marketing Qualified Lead (MQL) to Sales Qualified Lead
(SQL) Ratio:
MQL are those have shown the intent to buy and SQL are
prospects that the sales teams consider ready for direct
contact.
Marketer's assets and ads may get several sign us or clicks but
al these leads would not have purchase intent.
Key Marketing Measurement Metrics con..
5. Cost per lead (CPL) CPL is the amount marketers spend on gaining a
new lead from campaign or channel. This metric can help marketers
measure the ROI of their campaigns and allocate budgets where they
see better results
Marketers must ensure the amount they spend on measures like paid
ads and monitoring social media is as low as possible while maintaining
high acquisition rates.
Key Marketing Measurement Metrics con..
6. Lead –to-customer conversion rate:
While gathering leads is important for marketing and sales teams,
measuring the number of leads that actually convert into paying
customers is also important.
This can help marketers determine whether their sales team needs a
greater number of leads, leads of higher quality, or the right content to
help them to close the deals faster.
Key Marketing Measurement Metrics con..
7. Cost per Acquisition(CPA) CPA is the amount marketers spend to get
a new customer. If the CPA is less than the revenue the customer brings
in over a period of time, then the company’s marketing efforts are on
the right track.
Marketers can calculate the overall CPA of all their marketing efforts or
for individual channels to inform budget allocations.
Key Marketing Measurement Metrics con..
8) Customer Life time Value (CLV) CLV is the amount a customer is
expected to spend on company during the time they are with
marketers.
It can include license renewals , product plan updates ( upsell), and
buying of other products(cross-sell) depending on offerings and pricing
model
Marketers can predict CLV’s based on similar customer profiles and
journeys seen in the past.
Key Marketing Measurement Metrics con..
9. Return on Investment
(ROI) Marketing RO can be calculated by diving CLV by CPA. If
marketer’s CPA is high but CLV is low, they need to tweak their
campaign strategy to increase the revenue generated from it.
10. Action Completion: Marketers should check if their audiences are
taking the actions they are leading them towards. It could be actions
like entering contact details, subscribing to newsletters, or clicking on a
CTR.
Action completion for different channels will be measured basis
different actions. So, if the action is subscribing to a news letter,
marketers would measure how many people are subscribing.
Key Marketing Measurement Metrics con..
11) Multiple Touch Point Attribution
Not many people complete a purchase the first time they go browse
online.
Usually, buyers prefer checking their options and coming back to make
the final purchase. Marketers, to better understand the impact of their
marketing efforts at different touch points in their customer journey,
they can use tools like W –shaped attribution model. This model
attribute 30 % credit to first clicks, 30% to clicks to convert leads, 30%
to clicks that create opportunities, and 10% to other interactions.
Key Marketing Measurement Metrics con..
12) Company –focused metrics: Lastly and importantly , knowing how
marketers contribute to the company’s business growth and profits is
crucial.
Company-foused marketing metrics help measure and assess how
much of the company’s new or repeat customers, business
opportunities,measure, and profits –can be attributed to the marketing
initiatives.
E.g of such company metrics include marketing originated customer
percentage, customer acquisition cost recovery time, return on
marketing investment, etc
Major Marketing Metrics
1. Share of hearts , minds and markets
2. Margins and profits
3. Product and portfolio management
4. Customer profitability
5. Sales force and channel management
6. Promotion
7. Pricing strategy
8. Advertising media and web metrics
9. Marketing & Finance
Market Share
Market share represents the total opportunities for a product or
service of a specified organization existing in a particular segment ,
during a particular time-period

Market share = Business revenue for a fiscal period X 100

Total industry revenue for same fiscal period
Determinants of market Share
1. Access to distribution channels
2. Intensity of competition
3. Pricing and Financing of sales activities
4. Organizational resources
5. Market entry decisions
6. Risk Taking ability
7. Existing Relationship
8. Brand Name and reputation
Estimation of market share
1. Survey of consumers and distributors
2. Retail Audits
3. Competitor analysis
4. Gaining information from local patterns
5. Limited marketing efforts to test market
Benefits of Tracking Market share
1.Economies of scales
2. Increased sales
3. Increased customer base
4. Reputation
5. Dominating the industry
6. Increased Bargaining power
Relative Market share
• Relative market share indexes a firm's or a brand’s market share against
that of its leading competitor.

• Relative Market Share (%)

=Brand’s Market Share/ Largest competitor’s market share X 100
It is a metric that shows a company’s position in the market compared to its
main competitor
If the percentage is low, it usually means there is significant difference in
market share between the company and the industry leader.
If the percentage is high, it means the company is one of the leading
organization in the field
Benefits of tracking Relatives Market Share
1. Identifies the company’s main competitor
2. Assess product lines
3. Improves understanding of an industry
4. Helps investors find opportunities
Steps to calculate relative market share
1. Determine what you want to measure
2. Calculate the company’s market share
3. Calculate of competitors ’s market share
4. Determine the relative market share
5. Track the relative market share
Market concentration
• Market concentration is used when smaller firms account for large
percentage of the total market. It measures the extent of domination
of sales by one or more firms in a particular market. The market
concentration ratio is measured by the concentration ratio.
• The concentration ratio is calculated as the sum of the market share
percentage held by the largest specified number of firms in an
industry. The concentration ratio ranges from 0% to 100%, and an
industry's concentration ratio indicates the degree of competition in
the industry.
Market concentration
• The most common measure to calculate the market concentration is
Herfindahl-Hirschman Index (HHI)
The Herfindahl-Hirschman Index (HHI) is a common measure of market
concentration and is used to determine market competitiveness, often pre-
and post-merger and acquisition (M&A) transactions.

The index measures the size of companies relative to the size of the industry
they are in and the amount of competitiveness. The HHI is calculated by
squaring the market share of each firm competing in a market and then
summing the resulting numbers. It can range from close to 0 to 10,000, with
lower values indicating a less concentrated market.
Market concentration
• Formula and Calculation of the Herfindahl-Hirschman Index (HHI)
• The HHI is a commonly accepted measure of market concentration. It
is calculated by squaring the market share of each firm competing in a
market and then summing the resulting numbers. It can range from
close to 0 to 10,000.
Market concentration
• A market with an HHI of less than 1,500 is considered a competitive
marketplace, an HHI of 1,500 to 2,500 is moderately concentrated,
and an HHI of 2,500 or greater is highly concentrated.
Market penetration
• Market penetration is a measure of how much a product or service is being
used by customers compared to the total estimated market for that
product or service. Market penetration can also be used in developing
strategies employed to increase the market share of a particular product or
service.
• Market penetration also relates to the number of potential customers that
have purchased a specific company’s product instead of a competitor’s
product.
• Market development is the strategy or action steps needed to increase
market share or penetration.
• Common market penetration strategies include lowering prices, acquiring
competitors, targeting new markets, or introducing new products.
Market Penetration Rate
• A key component of market penetration is quantifying a company's
market penetration. This is done by calculating a firm's market
penetration rate.
• A market penetration rate is simply a ratio that compares a company's
performance against the total market.
Market Penetration Strategies
• Change Product Pricing
• Create New Product
• Target New Geographies
• Seek Partnerships
• Innovate Existing Product
• Create Promotional Opportunities
• Invest (More) in Sales Representatives
Brand penetration
• Brand Penetration is a measure of the popularity of the brand. Brand
penetration is defined as the number of people who buy a particular
brand over a specific period of time divided by the size of the
concerned market’s population. Brand penetration is a measure of
adoption of a brand or the number of sales of a brand as compared to
the total theoretical market for that brand.
Importance of Brand Penetration
• Brand penetration is a business growth strategy in which several
initiatives are being taken to increase the market share for its brand in
a particular market segment.
• It is an effort to dig deeper into an existing market place.
• Thus, brand penetration is both measurement and projection of how
successful a brand has been or will be against the competition & a
critical component in brand management
 Brand Penetration Formula

Brand Penetration (%) = Customers Who Have Purchased the Brand /Total
Population
Brand Penetration Methods
Brand Penetration Methods
• Brand penetration techniques include lowering prices,
advertisements, bundling products to gain traction, discounts,
increasing the mailing list, enhancing brand recall etc. Brand
Penetration is one of the four marketing strategies from the Ansoff
Matrix for brand and market growth.
• The other three strategies are- market development, product
development, and product/market diversification.
Advantages of Brand Penetration
1. “Brand Penetration” as a growth strategy is very effective in providing
faster growth to the brand equity. When a brand offers reduced and better
prices than the competitors, their customers tend to switch to this brand.
Lower prices are linked to higher growth and the more reasonable the prices
are, the higher is the impact
2. Economies of Scale: With reduced prices and aggressive advertisement,
products of that brand tend to sell more. With more sale, the brand
compensates for the reduced prices of its products and even earn more
profit than before.

3. Combat Competitors: Market Penetration urges loyal customers of other

brands to experience this brand's products once. If the quality and price
offered are the most reasonable, this strategy provides an opportunity for
the brand to capture those loyal customers and become the market leader.
 Disadvantages of Brand Penetration
1. Marketplace at some point of time becomes saturated which means that almost all of
the existing customers or new customers have used, have been using or satisfied by the
brand. At this point, investing heavily in marketing for this strategy may not do just for
the investments made. Thus, the cost-benefit ratio has to be kept well in mind before
implementing this strategy.

2. Aggressive marketing may help to convert a certain percentage of customers for the
brand but the brand has to be ready for the competitor’s responsive attacks for
capturing the market share.

3. Brand Penetration often leads to lowering of the industry prices. One brand lowers
the price of its products to penetrate deeper in the market and soon other competitors
do the same thing to stay in the competition which in turn lower the industry price for
that product and brands end up making marginally low profits or even losses at times.
Penetration share
• A brand's penetration share, in contrast to penetration rate, is
determined by comparing that brand's customer population to the
number of customers for its category in the relevant market as a
whole. Here again, to be considered a customer, one must have
purchased the brand or category at least once during the period
• Penetration Share (%) = Brand Penetration (%)/Market
Penetration (%)
• Penetration Share (%) = Customers Who Have Purchased
the Brand (#)/Customers Who Have Purchased a Product in
the Category (#)
Share of requirements
• Share of requirements, also known as share of wallet, is calculated
solely among buyers of a specific brand. Within this group, it
represents the percentage of purchases within the relevant category
accounted for by the brand in question.

• Share of requirements is, in essence, the market share for a brand

within a market narrowly defined as the people who have already
purchased that brand.
Purpose

• The share of requirements metric aids marketers in understanding the

source of market share in terms of breadth and depth of consumer
franchise, as well as the extent of relative category usage (heavy
users/ larger customers versus light users/smaller customers).

• Many marketers view share of requirements as a key measure of

loyalty. This metric can guide a firm’s decisions on whether to allocate
resources toward efforts to expand a category, to take customers
from competitors, or to increase share of requirements among its
established customers.
Formula
• Unit Share of Requirements (%) = [Brand purchases (#) ÷ Total
category purchases by brand buyers (#)] x 100
• Revenue Share of Requirements (%) = [Brand purchases (Rs) ÷
Total category purchases by brand buyers (Rs)] x100
Importance of Share of Requirements

• Share of Requirements is useful in analyzing the overall market share of a

brand. It is part of the whole equation to calculate market share. The
equation goes as

• Market Share = Penetration Share + Share of requirements + Heavy usage

index

• Marketers can easily target some niche segments using the metrics stated
ahead. Share of units alone doesn’t make much sense unless used in
tandem with penetration share and heavy usage index. Marketers see
share of requirements as an indicator of customer loyalty. It guides the
decisions regarding resource allocation, poaching customers from others.
Heavy Usage Index
The heavy usage index, or weight index, is a measure of the relative
intensity of consumption. It indicates how heavily the customers for a
given brand use the product category to which that brand belongs,
compared with the average customer for that category. The heavy
usage index yields insight into the source of volume and the nature of a
brand’s customer base.
Purpose
The purpose of the heavy usage index is to define and measure
whether a firm’s consumers are “heavy users.”
This metric answers the question, “How heavily do our customers use
the category of our product?”
When a brand’s heavy usage index is greater than 1.0, this signifies that
its customers use the category to which it belongs more heavily than
the average customer for that category.
Construction of HHI
• Heavy usage index: The ratio that compares the average consumption of
products in a category by customers of a given brand with the average
consumption of products in that category by all customers for the category.

• The heavy usage index can be calculated on the basis of unit or Rs inputs:

• Heavy usage index (Rs)= Average total purchases in category by brand/

Average total purchases
in category by all customers for that category

or

• Heavy usage index (%) = Market share (%)/ [Penetration share (%) x Share
of requirements (%)]
Brand Development Index
• Brand Development Index or (BDI) quantifies how well a brand performs
within a specific group of customers, compared with its average
performance among all customers.

• The American Marketing Association defines BDI as a measure of the

extent to which the sales of products for a brand in a market category have
captured the total potential in a geographical area, based on the
population of that area and the average consumption per user nationally.
• The BDI is usually calculated for separate metropolitan areas, and is used to
determine high-potential (underdeveloped) areas for new product entries
or for primary demand promotions.
Brand Development Index
• Purpose
• The purpose of the BDI metric is to quantify the relative performance
of a brand within specified customer groups. The Development Index
helps marketers identify strong and weak segments (usually
demographic or geographic) for individual brands.

• The BDI is especially useful in conjunction with the Category

Development Index (CDI). It can be used in deciding the allocations in
the media to which a specific brand is advertised. It can also be used
to determine how much advertising, or promotion effort is, or should
be put in that specific market.
Construction of
Brand Development Index
• Brand Development Index (BDI): An index of how well a brand
performs within a given market group, relative to its performance in
the market as a whole.

• BDI (I) = [Brand sales to group (#)/Households in group (#)]

[Total brand sales (#) / Total households (#)]
(Although defined here with respect to households, these indexes
could also be calculated for customers, accounts, businesses, or other
entities).
Importance of Brand Development Index
• BDI or brand development index is used to quantify the relative
performance of a particular brand in a defined customer group.
• It is usually done based on demographics or psychographics.
• Brand development index helps a company identify strong and weak
segments for particular brands.
• BDI can be used to gauge the presence of brand in a particular market. It
goes well with the aggressive and defensive marketing strategies of a
brand.
• For example: A brand employing aggressive marketing strategy will invest
more in advertisements in areas having low BDI for its products.
• Similarly a brand employing defensive marketing strategy will try to further
strengthen its hold in areas having high BDI by investing more in those
areas. All these strategies help in improving the market share of a brand.
 Category Development Index (CDI)
• A Category Development Index (CDI) measures the sales performance of a category of
goods or services within a specific group, compared with its average performance among
all consumers.

• CDI measures the sales strength of a particular product category within a specific market
(e.g., soft drinks among ten- to fifty-year-olds).

• Purpose
• The purpose of the CDI metric is to quantify the relative performance of a category
within specified customer groups. The Category Development Index helps marketers
identify strong and weak segments (usually demographic or geographic) for categories of
goods and services.

• The CDI is useful in all marketing strategies when used with the Brand Development
Index (BDI). The CDI can give vital data for marketers to allocate advertising to specific
areas maximizing product category knowledge and profit.
Construction of Category Development Index

• Category Development Index (CDI): An index of how well a category

performs within a given market segment, relative to its performance in the
market as a whole.

• CDI (I) = [Category sales to group (#) ÷ Households in group (#)]

[Total category sales (#) ÷ Total households (#)]
( Although defined here with respect to households, these indexes could also
be calculated for customers, accounts, businesses, or other entities.)

• For example, Boston enjoys high per-capita consumption of ice cream.

Bavaria and Ireland show higher per-capita consumption of beer than Iran.
Relationship between BDI and CDI
Relationship between BDI and CDI
• The companies have to measure both CDI and BDI to come to a
conclusion about a market.
There are 4 possibilities
. 1. High BDI and High CDI- In this case the category as well as brand both
are said to be doing well. For example, if we consider Soaps category under
that Lux or Dove both will have a high BDI. This indicates that the company
should build more on the brand and should be in extension mode.

2. High CDI Low BDI - In this case the category is doing well but the brand is
not able to capture the desired market share. For example, in soaps
category in a particular market if Margo is not doing well then it will have low
BDI. Company should try to attract more customers and try to gain market
share.
Relationship between BDI and CDI

3. Low CDI High BDI- When a category is not performing well but even then
some brands are doing well. For example, the talcum powders segment is
degrading still ponds is doing well with around 50-60% market share.
Company should try to revive the brand or gradually divest the business.

4. Low CDI High CDI- When a brand as well as category both are not
performing then in that case the brand should quickly move out of the
business.
For example, Spinz or Yardley has very less share of market in a non-
performing category.
DECOMPOSING MARKET SHARE – DIFFERENT
APPROACHES TOWARDS MARKET SHARE
• The concept of market share can be decomposed into three sections.
• Firstly, we can look at market share as the overall share of the market as
compared with competitors. This can be an absolute percentage, but can
likewise be expressed as a relative number. For instance, in the BCG-matrix,
we consider relative market share.

• Secondly, market share can be understood as share of wallet. This means

the share of the target consumers’ total expenditure.

• Thirdly, market share may refer to share of voice, which is the measure of a
company’s advertising expenditure compared with competitors.
 The Need for Decomposing Market Share
• For most marketers the key measure tends to be overall market share compared
with competitors. This is why, when thinking of market share, the first definition
will come to your mind. But by decomposing market share, we can see that there
is more to it than only this definition.
• The point of measuring market share is to see how effective competitive strategies
are: if share is increasing, the strategy is working, whereas if share is falling the
competitors are using more successful approaches. Of course, a growth in sales
does not necessarily mean that market share is also increasing – if the market is
growing, sales will increase even if share of market does not, and in a rapidly
growing market a firm can be increasing sales while losing market share, as
competitors’ sales grow even faster. That is why growing sales can lead managers
into a false sense of security, imagining that all is well when in fact competitors are
forging ahead.
• Because of such traps, it makes sense to consider more than just the overall share
of the market occupied by the company. Decomposing market share can thus help
to get a more complete image of the company’s performance in relation to
competition.
Share of Wallet
• Share of wallet refers to the amount of a consumer’s total disposable
income that is spent on the firm’s products. This is a useful measure
as it shows the degree to which the individual values the company’s
brands, and is likely to be a good surrogate measure for involvement.

• A person who spends a large proportion of their disposable income

on a company’s products is obviously fairly committed to the brand.
Share of wallet is a relatively recent concept. The less frequent use
may be explained by the fact that it is difficult to research effectively,
since the parameters are hard to set and the data difficult to collect.
Share of Voice
• Share of voice is an indicator of the degree to which a firm’s marketing
communication will be effective.
• It measures the relative expenditure on advertising of each company,
providing an overall estimate of the extent to which each firm is likely to
get its message through to potential customers.
• For example, if a company aims to capture a 30% share of the market, it
needs to plan on gaining at least a 30% share of voice.
Gap Analysis
• A gap analysis is the process that companies use to compare their
current performance with their desired, expected performance. This
analysis is used to determine whether a company is meeting
expectations and using its resources effectively.

• A gap analysis is the means by which a company can recognize its

current state—by measuring time, money, and labor—and compare it
with its target state. By defining and analyzing these gaps, the
management team can create an action plan to move the
organization forward and fill in the performance gaps
 How to Conduct a Gap Analysis
Step 1: Identify Your Current State
• A gap analysis starts by focusing on where your organization is currently
operating at. This includes researching the products it offers, customers it serves,
geographical locations it reaches, and benefits it offers to its employees. This
information can be quantitative (i.e., financial records as part of required filings)
or qualitative (i.e., surveys or feedback from key stakeholders).

• Often, a company will perform a gap analysis because it is already aware of an

issue. For example, customer feedback surveys have generated poor results, and
a company wants to investigate why and implement remedies. Before it can
dream of what it wants to become, it must understand why these errors are
happening, when issues are arising, and who the change management leaders
must be.
 How to Conduct a Gap Analysis ….
Step 2: Identify Your Future State

• The crux of gap analysis resides in this step, where a company must identify what it wants
to become. This stage must be done with great care, as the identity that a company wants
to have will dictate the strategic steps that it must make to obtain those goals.

• In gap analysis, a company must make specific, measurable goals to yield the greatest
long-term success. For example, in the situation above, it would do the company little
good to set the goal of “becoming better at customer service.” Instead, the company must
identify more trackable metrics, such as “achieve customer satisfaction of 90% within 12
months.”

• Another way of identifying the desired outcome is to analyze what competitors or other
market participants are doing. It may be easier to identify when another company is
doing something well and attempt to emulate that.
How to Conduct a Gap Analysis ….
• Step 3: Identify the Gaps
With the current state and future state defined, it’s time to bridge the
two and understand where the most critical differences lie. In our
running example, it’s in this stage that a company realizes it may be
woefully understaffed, has not provided enough staff training, or does
not have the technical capability to keep up with customer inquiries.
How to Conduct a Gap Analysis ….
• Step 4: Evaluate Solutions
• Now that a company has defined its deficiencies, it’s time to come up with
plans on how it will reach its target state. Sometimes, there may only be
one solution; other times, the gap analysis may call for several
simultaneous changes that must work in tandem.

• To gauge whether a solution will work, it must often be quantifiable with

ways to measure change. Our example of improving customer service may
have an easy metric, such as customer satisfaction percentage. Other gap
analysis findings such as deficiencies in brand recognition may require
more creative, thoughtful solutions that can still be evaluated.
How to Conduct a Gap Analysis ….
• Step 6: Monitor Changes
• For this reason, the company must also conclude its gap analysis by
monitoring any changes. Sometimes, the company took exactly the
right steps. Other times, the gap might have been wider than the
company thought or the company failed to adequately assess its
current position. In any case, gap analysis can be a circular process
where after changes have been made, the company can reevaluate its
current position and where it compares against regarding other
future states.
Types of Gap Analysis
• Market Gap Analysis
Also called product gap analysis, market gap analysis entails making
considerations about the market and how customer needs may be
going unmet. If a company is able to identify areas where product
supply is not meeting consumer demand, then the company can take
measures to personally fill that market gap. This type of analysis may
be performed by external consultants who have more expertise in
these areas of business in which the company may not currently be
operating.
 Types of Gap Analysis

• Strategic Gap Analysis

• Also called performance gap analysis, strategic gap analysis is a more formal
internal review of how a company is performing. The analysis often entails
comparing how a company has done against long-term benchmarks such as a five-
year plan or a strategic plan.

• A strategic gap analysis may also be performed to compare how a company is

faring against its competitors. This type of analysis may unearth ways that other
companies are utilizing personnel or capital in more strategic, resourceful ways.
This type of information may be hard to come by, especially if departed employees
have signed nondisclosure agreements and the company does not publicly
disclose much information about processes.
 Types of Gap Analysis
• Financial/Profit Gap Analysis

• A company may choose to directly analyze where its company may be

falling short compared to competitors by looking specifically at financial
metrics. This may include pricing comparisons, margin percentages,
overhead costs, revenue per labor, or fixed vs. variable components. The
ultimate goal of a profit gap analysis is to determine areas in which a
competitor is being more financially efficient. This information can then be
used in further, broader gap analysis types.
Types of Gap Analysis con..
• Skill Gap Analysis
• Instead of looking at the financial aspects of a company, a business may choose to
look at the human element instead. A skill gap analysis helps determine if there is
a shortfall in knowledge and expertise with current personnel. A skill gap analysis
must clearly define the goals of the company, then map how current laborers
may fit into that design. A skill gap analysis may lead to the recommendation of
simply training existing staff to incur new skills or seeking outside expertise to
bring in new personnel.

• This type of analysis is especially important for innovative companies that must
rely on having direct skill sets to continue to be competitors (or leaders) in their
industry. In addition, skill gap analysis is critical for small companies that must
rely on a smaller staff to operate. In this case, individuals must often have
diverse, flexible talents that can be useful in many different aspects of the
business.
Types of Gap Analysis con..
• Compliance Gap Analysis

• Often leveraging internal audit functions, a compliance gap analysis evaluates

how a company is faring against a set of external regulations that dictate how
something should be getting done. For example, a company may internally
evaluate its accounting and reporting functions in advance of seeking an external
auditor to provide an opinion on its financial statements.

• Compliance gap analysis tends to be preventative and defensive as opposed to

more strategic forms of gap analysis. For example, instead of performing a gap
analysis to attempt to gain a greater percentage of market share, compliance gap
analysis often has the intention of meeting regulations, avoiding fines, meeting
reporting requirements, and ensuring that external deadlines can be met
successfully.
Types of Gap Analysis
• Product Development Gap Analysis
• As a company builds new products, gap analysis can also be performed to analyze
which functions of the products will meet market demand and where the product
will fall short. This type of gap analysis is often associated with the development
of software products or items that take a long time to develop (in which the
market demand may have shifted).

• During product development gap analysis, a company may also evaluate which
aspects of the product or service have been successfully implemented, delayed,
intentionally eliminated, or still in progress. With a blend of multiple types of gap
analysis above, the company can then perpetually evaluate how its product plan
is changing and whether it has the internal resources to meet the internal gaps
needed for product development completion.
Gap Analysis Tools
• SWOT Analysis
• Fishbone Diagram
• McKinsey 7S
• Nadler-Tushman Model
• PEST Analysis
What is marketing effectiveness?
• Marketing effectiveness is a measurement determining how
successful a marketing strategy is in reaching an overarching goal,
increasing revenue and decreasing the cost of customer acquisition. A
company's marketing department uses different metrics than a sales
department does to determine success. While the sales team focuses
more on the number of items sold, the marketing team focuses on
the return on investment (ROI) or profitability.
Marketing effectiveness …
• When measuring effectiveness, companies examine how successfully
a marketing plan or campaign optimizes spending to create both
short-term and long-term results. Some marketing statistics that
professionals examine may include:
1) Leads: The prospective customers who commit to purchasing a
company's items or services are considered leads. Once a lead follows
through on a commitment, they become a customer or client.
Marketing effectiveness…
2) Customer reactions: Interactions and engagements from customers
regarding a company are customer reactions. These reactions can help
shape future marketing strategies and approaches.
3) Incremental sales: The measure of marketing efforts that results in
sales leads for an organization is a measure of incremental sales. This
can help a company determine how helpful the marketing efforts are in
generating new sales.
Marketing effectiveness…
4) Customer retention rate: The number of customers a company
maintains over time is known as the customer retention rate. It’s
important to retain customers to secure multiple sales.
5) Return on investment: A return on investment measures how much
a company benefits from investing in marketing efforts. If a campaign
generates a boost in sales, then the return on investment may be hig
Why is measuring marketing effectiveness
important?
• Because the options for advertising are always changing, from television
commercials to social media advertisements, measuring marketing
effectiveness helps a company determine which option is best. Companies
can determine how to use their marketing budget effectively by finding
campaigns and methods that increase their leads according to
measurements such as pipeline growth and conversion rates.

• They also can discover areas to cut back on spending and reallocate
funding to other areas by looking at these types of assessments. It also can
help when conducting a SWOT analysis, which examines an organization's
strengths, weaknesses, opportunities and threats.
How to measure marketing effectiveness?
1. Determine how to measure success
To measure the success of a company’s marketing efforts, it has to first
determine what their overall goal is. If a company has several goals,
prioritize them so they know which to focus on first. For example, a
soda company may decide that it wants to focus on targeting a younger
demographic. Its goal, or way of measuring success, is to increase its
number of younger consumers.

Figuring out goals helps the company to know how to measure success
when evaluating the marketing effectiveness. Create a marketing plan
for company’s strategy before starting to measure its effectiveness.
How to measure marketing effectiveness?
2) Select channels to track
Next, organize derived traffic into channels or subgroups. Common
channels include direct, email, referral, organic, social and paid.
Decide which audience the company want to track based on the goal it
is marketing towards.
For instance, companies targeting a younger population may want to
look at social media since this demographic uses social media sites
more than other channels.
How to measure marketing effectiveness? Con..

3) Choose marketing metrics

• After selecting the channel to track, choose a marketing metric, or
collection of numerical data, to analyze so the company can measure the
effectiveness of campaign.
• Evaluate the key performance indicators (KPI) to see if the results match
with the objectives. To do this, compare the initial metrics with those
earned after the campaign. Here are a few types of marketing metrics you
might measure:
• Click-through rate: This metric is the KPI that shows the percentage of
people who clicked on a link related to your company’s content. You can
use this metric to determine which links are more popular or receive the
most traffic.
• Bounce rate: This metric can measure how many people exit your website
after only visiting one webpage. It also measures the number of emails that
bounce back after you send out an email campaign.
3) Choose marketing metrics..
• Social media metrics: Companies can measure a variety of
engagement metrics through social media, including likes, comments,
shares and followers. This can help to determine which type of
content connects best with company’s audience on each platform.
How to measure marketing effectiveness? Con..

4 ) Look at the total opportunity revenue

• Focus the measure of success on the overall amount of possible
revenue that comes from marketing influences. A company can find
this by multiplying the total number of goods sold by the average
price per good sold.

• For example, a shampoo company can find its total opportunity

revenue by multiplying its 50,000 bottles sold by the Rs 12 price per
bottle for a total of Rs 600,000 in revenue. This total amount reflects
how much money the company could make if it markets effectively.
How to measure marketing effectiveness? Con..

5. Examine the pipeline growth

• When measuring marketing effectiveness, evaluate the pipeline
growth, or all activities that broaden the overall goal. Pipeline growth
looks at areas, such as advertising channels and marketing campaigns,
that increase sales and engagement.

• Company can review its pipeline growth by considering how its

marketing activities help provide new leads and by considering the
rate of acceleration in your growth. If the rate of growth is continuing
to rise, continue using the marketing methods.
How to measure marketing effectiveness?
Con..
6. Observe conversion rates
• Conversion rates, or the number of users who completed the desired
action, are another factor for measuring marketing effectiveness.
Conversion rates are useful in determining how effective a campaign
is when the overall goal is to get customers to perform a certain
action.
• For instance, if a shoe store website has 200 visitors a month and 50
online sales, its conversion rate would be 50 divided by 200, or 25%.
How to measure marketing effectiveness?
Con..
7) Look at cost per lead
• Evaluate how expensive it is to generate new leads. If the cost per
lead is high, securing new leads may not be the best result to strive
for. However, if the leads become long-term customers, they may
generate more revenue than it cost to secure them, leading to a
greater ROI.
How to measure marketing effectiveness?
Con..
8) Examine search engine traffic
Look to see how much search engine traffic website gets through
referrals from search engine sites. This helps show how effective the
company’s marketing is at optimizing the content in online searches.
When creating online content, it can use search engine optimization
(SEO) to help increase the website traffic.
How to measure marketing effectiveness?
Con..
9) Understand the brand awareness

When the target consumers know a company’s brand well, this can make
them more likely to choose that company’s product or service over a
competitor’s.
While brand awareness can lead to long-term success for a company, it likely
won't see immediate results of brand enhancement efforts.

However, to measure brand awareness, it can look at its pipeline to see how
many conversions the company has. Observe the impressions and the
number of unique visitors to company website or social media platform.
These items can indicate heightened brand awareness among company’s
consumers.
How to measure marketing effectiveness?
Con..
10) Consider using a tracking system
To store all company’s measurable marketing information, consider
setting up an account with an online tracking system.
This helps the company to visually see the progress of different
marketing components over time in a graph or chart form.
It can also track metrics to decide where the company might need to
take action.