03 Metrics

Question 1

What 2 types of marketing metrics exist? Explain them.

Answer 1

1. Perceptual marketing metrics
2. Behavioral marketing metrics

Question 2

Formula and Interpretation

Break-even volume (in units)

Answer 2

• Break-even volume (in units) = Fixed Costs / Unit contribution
• Interpretation: The quantity that yields zero profits, i.e. how many units need at least to be sold to break-even on total costs

Question 3

Formula and Interpretation

Target volume [units]

Answer 3

• Target volume [units] = (Fixed Costs + Profit) / Unit contribution
• Interpretation: The quantity that yields a required level of profits, i.e. how many units need at least to be sold to yield the required profit?

Question 4

Price-volume trade-offs:

Sketch the ispoprofit curve, interpret it, and state the weakness of the concept.

Answer 4

Question 5

Formula and example

Selling price for a targeted unit margin

Answer 5

Selling Price = Costs per Unit / (1 - Targeted Margin)

Example: Clothing retailer buys scarf for $3.57 and seeks to sell scarf at 0.40 margin (40% unit margin on selling price). What is the selling price?

Selling Price = $3.57 / (1-0.4) = $5.95

Question 6

APPLICATION: Henkel Annual Report 2014

What are two important takeaways for marketing from annual reports in general?

Answer 6

1. Marketing opportunity: Annual reports are not only a required legal document but serve as a marketing opportunity that firms use to market their firm and their products to the investment community
2. Understanding of the firm: You are able to reconstruct the strategies that firms pursue, what their longer-term vision is, how they generate money and why they did well or not so well in a period.

Question 7

APPLICATION: Henkel Annual Report 2014

Give 4 takeaways of the report

Answer 7

1. 3 different divisions: Henkel operates in 3 divisions, Laundry & Home Care, Beauty Care, Adhesive Technologies
2. Ownership structure: >50% of shares are in family ownership which allows the firm to invest more value-oriented instead of facing myopic management problems due to the need to satisfy short-term shareholders.
3. Intangible assets are very important: Even the intangible assets on the balance sheet are considerably higher than the tangible assets (Property, plant and equipment). Since only a fraction of Henkel’s intangible assets is reported, the ‘true’ value of intangibles is much higher and makes them very important to the firm.
4. Acquisition strategy: Henkel reported a loss for 2014 due to an acquisition strategy to grow further.

Question 8

How does the chain of marketing productivity look like?

Rust, R. T., Ambler, T., Carpenter, G. S., Kumar, V., & Srivastava, R. K. (2004). Measuring marketing productivity: Current knowledge and future directions. Journal of Marketing, 68(4), 76-89.

Answer 8

Question 9

Definition

marketing metric

Answer 9

Statistical measurements by which firms judge the effectiveness and efficiency of their marketing efforts

Question 10

What is the difference between financial and marketing metrics?

Answer 10

• Financial metrics focus on dollars and periods of time: How do profits, cash and assets change?
• Marketing metrics focus on customers: How do products, prices, channels, competitors, and brands change in generating revenues and profits?