Paul W. Farris - Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (2nd Edition)

The Definitive Guide to Measuring Marketing Performance

Paul W. Farris
Neil T. Bendle
Phillip E. Pfeifer
David J. Reibstein

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Printed in the United States of America

Third Printing December 2010

ISBN-10: 0-13-705829-2
ISBN-13: 978-0-13-705829-7

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Library of Congress Cataloging-in-Publication Data

Marketing metrics : The Definitive Guide to Measuring Marketing Performance/ Paul W. Farris [et al.].
p. cm.
Rev. ed. of: Marketing metrics : 50+ metrics every executive should master. 2006.
Includes bibliographical references and index.
ISBN 978-0-13-705829-7 (hbk. : alk. paper) 1. Marketing research. 2. MarketingMathematical
models. I. Farris, Paul.
HF5415.2.M35543 2010
658.83dc22
2009040210

We dedicate this book to our students, colleagues,
and consulting clients who convinced us that
a book like this would fill a real need.

We hope this book will be a step, however modest, toward clarifying the language, construction, and meaning of many of our important marketing metrics. If we have succeeded in making such a step, we owe thanks to a number of people.

Jerry Wind reviewed our initial concept and encouraged us to set our sights higher. Rob Northrop, Simon Bendle, and Vince Choe read early drafts and gave valuable feedback on the most important chapters. Eric Larson, Jordan Mitchell, Tom Disantis, and Francisco Simon helped develop material for important sections and provided their research skills. Gerry Allan and Alan Rimm-Kauffman allowed us to cite liberally from their materials on customers and Internet marketing. We thank Valerie Redd and Kelly Brandon for their help in designing, testing, and administering the survey of the metrics that senior marketing managers use to monitor and manage their businesses.

Marc Goldstein combined business savvy with deft editing touches that improved the readability of almost every chapter. Paula Sinnott, Tim Moore, Kayla Dugger, and their colleagues also made significant improvements in moving from a raw manuscript to the book in your hands.

Erv Shames, Erjen van Nierop, Peter Hedlund, Fred Telegdy, Judy Jordan, Lee Pielemier, and Richard Johnson have collaborated on our Allocator management simulation and Management by the Numbers online tutorials. That work helped us set the stage for this volume. Finally, we thank Kate, Emily, Donna, and Karen, who graciously tolerated the time sacrificed from home and social lives for the writing of this book.

Paul W. Farris is Landmark Communications Professor and Professor of Marketing at The Darden Graduate Business School, University of Virginia, where he has taught since 1980. Professor Farriss research has produced award-winning articles on retail power and the measurement of advertising effects. He has published more than 50 articles in journals such as the Harvard Business Review, Journal of Marketing, Journal of Advertising Research, and Marketing Science. He is currently developing improved techniques for integrating marketing and financial metrics and is coauthor of several books, including The Profit Impact of Marketing Strategy Project: Retrospect and Prospects. Farriss consulting clients have ranged from Apple and IBM to Procter & Gamble and Unilever. He has served on boards of manufacturers, retailers, and e-Business companies. Currently, he is a director of GSI Group, Sto Corp., and The Ohio Art Company.

Neil T. Bendle is a Ph.D. candidate in marketing at the Carlson School of Management, University of Minnesota. While studying for his Ph.D. he has won awards for his teaching, and his thesis has focused on managers difficulties in understanding consumer tastes. He holds an MBA from Darden and has nearly a decades experience in marketing management, consulting, business systems improvement, and financial management. He was responsible for measuring the success of marketing campaigns for the British Labour Party.

Phillip E. Pfeifer, Richard S. Reynolds Professor of Business Administration at The Darden Graduate Business School, currently specializes in direct/interactive marketing. He has published a popular MBA textbook and more than 35 refereed articles in journals such as the Journal of Interactive Marketing, Journal of Database Marketing, Decision Sciences, and the Journal of Forecasting. In addition to academic articles and a textbook, Mr. Pfeifer is a prolific case writer, having been recognized in 2004 as the Darden Schools faculty leader in terms of external case sales, and in 2008 with a Wachovia Award for Distinguished Case writer. His teaching has won student awards and has been recognized in Business Weeks Guide to the Best Business Schools. Recent consulting clients include Circuit City, Procter & Gamble, and CarMax.

David J. Reibstein is Managing Director of CMO Partners and William Stewart Woodside Professor of Marketing at the Wharton School. Regarded as one of the worlds leading authorities on marketing, he served as Executive Director of the Marketing Sciences Institute, and co-founded Whartons CMO Summit, which brings together leading CMOs to address their most pressing challenges. Reibstein architected and teaches the Wharton Executive Education course on marketing metrics. He has an extensive track record consulting with leading businesses, including GE, AT&T Wireless, Shell Oil, HP, Novartis, Johnson & Johnson, Merck, and Major League Baseball. He has served as Vice Dean and Director of Whartons Graduate Division, as visiting professor at Stanford and INSEAD, and as faculty member at Harvard. He serves on the Board of Directors of Shopzilla, And1, and several other organizations.

Despite its importance, marketing is one of the least understood, least measurable functions at many companies. With sales force costs, it accounts for 10 percent or more of operating budgets at a wide range of public firms. Its effectiveness is fundamental to stock market valuations, which often rest upon aggressive assumptions for customer acquisition and organic growth. Nevertheless, many corporate boards lack the understanding to evaluate marketing strategies and expenditures. Most directorsand a rising percentage of Fortune 500 CEOslack deep experience in this field.