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A View From INSEAD

The Importance of Marketing Metrics

Professor David J. Reibstein

Programme Co-Director of AIMS: Advanced Industrial Marketing Strategy
William Stewart Woodside Professor, Professor of Marketing, Wharton
November 2013


What aspect of marketing are you focused on?

Am focused on marketing metrics. By that I mean the quantification of marketing and looking at how marketing actions have an impact on financial statements. I look at how to link marketing to financial metrics. When I teach at Wharton, for example, I have a classroom which is half marketing and half finance. There’s a good mix and they learn from each other as they come from different perspectives. From a marketer’s point of view, marketing is about building awareness, preferences, distribution, and other dimensions leading to sales. From the finance point of view, marketing is an expense. Finance executives ask: ‘where is the value in marketing?’ And marketers ask, ‘how do I gauge my value for finance?’, ‘how do I justify my budget to finance?’ I’ve written three books about this from the marketing point of view: what and how do we spend, how does this expense flow through the organisation and what does it contribute to the financial well-being of the company, the bottom line?

How important are marketing metrics today?

Short answer is: very! If, for example, you badly segment your market, or go down the wrong path, it can have disastrous results. When establishing any marketing strategy, you need to be able to quantify the information at your disposal to make better decisions. Most executives in the B2B function have not quantified much before. Yet, when they start to, they realise they can learn a tremendous amount from market research. In the simulations we carry out during the programme, they end up witnessing significant performance enhancements when using market data.

And these days, marketers are constantly being asked to justify their marketing spend. To do this, they need to put together a case for their spending and why it is justifiable. They need to be able to quantify it. They need to ask themselves: ‘How will we add value to the firm?’ During the recent recession, marketing budgets got slashed because marketers could not justify how their activity was contributing to the greater value of the firm.  It was not that marketing was not contributing to the value of the firm, it was that marketing struggled with demonstrating this.

Metric are the new world. It used to be about creatives. It’s not where we are anymore.

Do you see this shifting even further?

We are getting data at increasing frequency and greater details. Data are being disaggregated. We used to get information quarterly, then monthly, the weekly. Now it’s in real-time.

Whereas in the past, data used to be about markets, segments and geographies, it’s now about individuals. There is going to be a greater use of data to determine how to target people and customers. Companies will be able to customise according to individual needs and preferences.

By doing this, marketers will be able to communicate to individuals rather than whole markets. You can take it down to the nth degree. The Future of marketing is about numbers and taking information that is out there to understand each every single person. And the insights companies will get on customers will be their competitive advantage.

The way we gather and interpret data is changing all the time. It’s about testing and learning. For example, Amazon runs over 100 experiments a day. If x person likes this, maybe they would like this.

Finally, a little bit on how have you found teaching on the AIMS programme?

I’ve found the students to be very engaged. That’s mostly to do with the INDUSTRAT simulation we carry out. They are in a highly competitive environment with specific goals and outcomes. ‘How are we going to spend? What are we going to spend on? And what is that going to deliver? How is it going to contribute?’ Most continue to work in their groups outside of class hours.

This simulation helps them think about how they can do things differently. It takes the concepts and puts them into practice and teaches them how to apply them. The idea is to get all the mistakes out of their system before they go back to work.

One of the interesting things about the programme is the mix of participants. Many industries are represented. Each has their own problems to tackle. Often, participants have been quite insular in their roles. They’ve never thought about marketing from another perspective, other than their own. Mostly because they’ve been doing what they do in their field for a long time. The programme is their chance to share experiences and to learn from each other. 

I’m a big believer in student to student learning in business schools. It’s about sharing ideas. And a lot of the learning comes outside the classroom, when participants talk amongst themselves.

And what do you hope participants come away with?

During the programme, we try to teach participants many different principles. Some they already know and others which they might not. We want to reinforce these principles. And we want participants to not see them just as concepts. We want them to apply them when they go back to work.

To learn more about marketing metrics, and a host of other B2B marketing challenges, consider enrolling on AIMS: Advanced Industrial Marketing Strategy, directed by Professors David Weinstein and David J. Reibstein.

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