Data-Driven Marketing
Fifteen marketing metrics and how to hold advertising spending accountable
Summary
Jeffery, who taught at Kellogg, argues that most marketing spending is not measured and that a small number of metrics would let executives distinguish what works from what does not. His central claim is that roughly half of marketing spending in the companies he studied could not be connected to any outcome.
His framework identifies fifteen metrics organised into classic marketing measures and internet-specific ones. The classic set includes brand awareness, test drive meaning trial, churn, customer satisfaction, take rate, profit, net present value, internal rate of return, payback and customer lifetime value. The internet set includes cost per click, transaction conversion rate, return on advertising spend, bounce rate, word of mouth and its measurement through referral behaviour.
His argument for customer lifetime value as the central measure is that it connects acquisition spending to the actual return, which allows a company to determine what it can afford to pay for a customer rather than setting a budget by precedent.
He covers the organisational obstacles, including that marketing departments resist measurement because it exposes ineffective spending, that data is held in incompatible systems, and that the incentives reward campaign activity rather than measured return. His testing material argues for controlled experiments with holdout groups rather than before-and-after comparisons, since the second cannot separate the campaign from everything else that changed. The reference has verified the framework rather than every case. The book is from 2010 and the internet metrics and the attribution technology have changed considerably. The fifteen metrics and the argument for holdout testing remain applicable.
Key takeaways 8
- Roughly half of marketing spending in the companies studied could not be connected to any measurable outcome.
- A small number of metrics, around fifteen, is sufficient to distinguish marketing spending that works from spending that does not.
- Customer lifetime value connects acquisition spending to actual return, which determines what a company can afford to pay for a customer.
- Setting a marketing budget by precedent or by percentage of revenue substitutes for the calculation that would determine the right amount.
- Controlled experiments with holdout groups are required, since before-and-after comparisons cannot separate the campaign from everything else that changed.
- Marketing departments resist measurement because it exposes ineffective spending, which is an organisational obstacle rather than a technical one.
- Brand metrics and financial metrics must both be tracked, since optimising only for immediate response degrades the brand that makes response possible.
- The specific internet metrics and the attribution technology have changed substantially since publication.
Who should read it
Marketing leaders and executives who want a defined metric set and the argument for holdout testing, with the digital specifics treated as dated.
Who recommended it 2 · 1 direct
Similar books 6
Chosen by shared topics, the entries that hold them, and the people who recommended both.
How to build and manage a brand, using the four parts of brand equity.
Challenger-brand economics against a dominant incumbent.
Recommended by: Vinod Khosla
Keeping customers, employees and investors is what drives profit and growth.
“In his seminal book, The Loyalty Effect, Fred Reichheld shows that a 5 percentage point improvement in retention rate” — Michael Mauboussin
Source: The Economics of Customer Businesses (Legg Mason Capital Management)
Recommended by: Michael Mauboussin
Customers hire products to do a job; innovate by finding the job, not the buyer type.
Price is the strongest profit lever and the least managed; how to set it well.
Recommended by: Michael Mauboussin
Where it sits in the reference 4
Topics