Who says summer reading should be ephemeral? Wharton School Publishing introduces two new titles that can have year-round impact on your business. First, David Reibstein, Wharton’s William Stewart Woodside Professor and Professor of Marketing, offers a refresher and an update to his popular marketing strategy courses. Or take a broader look at strategy with Must-Win Battles, co-written by two Wharton MBAs: Thomas Malnight, WG’79, Professor of Strategy and General Management at IMD, and Tracey Keys, WG’95, a consultant and manager with 20 years of experience working on complex strategy and organizational issues.
Numbers That Matter: Marketing Metrics to Transform Your Business
Marketing Metrics: 50+ Metrics Every Executive Should Master
By Paul Farris, Neil Bendle, Philip Pfeifer, and David Reibstein
Wharton School Publishing (2006)
John Wanamaker’s legendary Philadelphia department store is long gone. But its founder’s rueful words still echo in the ears of executives everywhere: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” You wouldn’t tolerate that level of mystification elsewhere in your business. And, according to the authors of Marketing Metrics: 50+ Metrics Every Executive Should Master, you shouldn’t accept it in marketing, either.
This new Wharton School Publishing book aims to present the entire modern toolbox of marketing metrics, showing what each metric can (and can’t) measure, how to use it — and how not to use it, too. The book details how to measure share, margins, profitability, products and portfolios, the value of individual customers and prospects, sales force performance and compensation, distribution issues, pricing, promotions, conventional advertising, media planning, Web media, e-commerce sites, even brand value.
This book’s breadth is a reflection of its authors’ experience as academics and as consultants in a wide range of industries. Wharton Professor of Marketing David Reibstein, co-founder of Wharton’s CMO Summit, created Wharton’s pioneering executive education course on marketing metrics. Phillip Pfeifer teaches marketing and quantitative analysis at the University of Virginia’s Darden School; down the hallway from him, Paul Farris leads advanced research on building coherent systems for evaluating business and marketing metrics. Co-author Neil Bendle’s marketing measurements for the U.K.’s Labour Party have helped Tony Blair retain his office.
Their book is more than a reference to individual metrics, or a plug-and-play “cookbook” (though many marketers will doubtless use it that way). It’s best read as a guide to creating a complete dashboard of metrics, then using them to gain multiple perspectives, minimize error, and “triangulate” better strategies.
For each category of metric, the authors start with the simplest examples, then incrementally introduce more subtle and revealing measurements. For instance, their chapter on customer profitability begins with counting how many customers you serve (admittedly, not nearly as easy as counting units).
Building on this, the book describes how to evaluate the past financial performance of any customer relationship. Next, it looks forward, projecting the much-discussed “customer lifetime value.” Finally, and most important, Reibstein and his co-authors relate how to use that information to inform decisions about retention and prospecting.
Similarly, the authors’ pricing chapter begins with relatively simple calculations of price premium: the percentage by which a product’s selling price exceeds (or falls short of) a benchmark. They move on to price optimization— including determining the likely impact of a potential price increase. Many marketers are familiar with price elasticity, of course. But when it comes to reflecting competitors’ responses, most fall back onto intuition. This book shows how to bring rigor to those calculations, as well.
Marketing Metrics is especially strong when it comes to helping managers identify hidden snares that can compromise their analyses. Take a basic (but crucial) example: measuring market share. First, define the market you’re measuring — but not too broadly (diluting your focus), or too narrowly (missing opportunities and emerging threats).
Having established scope, define data parameters and timeframes with equal care. As the authors observe, “Different methods may yield not only different computations [of share] at a given moment, but also widely divergent trends over time.” (GM’s 25% market share can mean very different things, depending on context.)
You’ll also need to weed out “noise,” such as the effects of recent promotions. Finally, there may be biases buried in “objective” data: for example, customer-reported usage surveys that skew towards well-known brands.
Senior marketers must coordinate closely with other areas of the business, typically using the language of finance. This book gives a foundation for doing so, reviewing essentials like ROI and EVA, and introducing nascent attempts to measure Return on Marketing Investment (ROMI). The authors also show how marketing metrics can augment traditional financial metrics, uncovering emerging problems and hidden opportunities, and shedding light on future financial performance.
Right now, mastery of this book’s metrics can powerfully differentiate marketers in most organizations. Soon, however, this expertise will be demanded, not merely welcomed. Senior-level marketers will need “not only familiarity, but fluency… [they] should be able to perform relevant calculations on the fly — under pressure, in board meetings, during strategic deliberations and negotiations.”
When marketing is roughly as measurable as anything else, it ought to be roughly as manageable, too — and the leaders of the marketing function will have gone a long way towards earning the board-level credibility they crave.
Why Do Talented Executives Produce Mediocre Results? Practical Answers to Strategic Ills
Must-Win Battles: How to Win Them, Again and Again
By Peter Killing and Thomas Malnight, WG’79, with Tracey Keys, WG’95
Wharton School Publishing, 2006
Most businesses find that complexity jeopardizes strategic focus. Every product, customer, and market begets its own list of priorities. Year on year, these multiply. Another month, another initiative. The result is that corporate initiatives become generic wish statements such as double-digit growth or “being more innovative.” To quote from Must-Win Battles by Peter Killing, Thomas Malnight, and Tracey Keys, “how could we have such talented executives producing such mediocre results?”
In this book, the authors provide a solution. Their contribution to strategic thought is that success depends on focus and an organization-wide commitment to that focus. They argue persuasively that getting out of the complicated tangle of ever-multiplying priorities to make strategy work, i.e. deliver results, requires a multi-faceted approach. Defining strategic priorities is just part of the equation. Priorities only become real when people across the organization give them full support. A great strategy with no commitment goes nowhere, but a great team without a clear sense of direction will do no better. And without strong, authentic leadership at many levels of the organization, even both together are not sufficient. All three elements — strategy, team, and leadership — must be tackled simultaneously.
The requirement is clear. Must-Win Battles provides a practical guide for establishing, agreeing on, and implementing just three to five must-win battles (MWBs) you must win to achieve your most important goals. “Lots of priorities are no priorities” (write that down on a Post-It note and stick it on your next set of strategy papers).
Phase I is a top management team kick-off to discuss, debate, and select the MWBs and build shared commitment to making them happen. The emphasis on preparation is essential — too often initiatives fail because executives feel the need to jump into action before thinking the issues through adequately.
Chapters 4, 5, and 6 set out a clear, practical agenda for the management off-site event, complete with proposed exercises, discussion points, and reality checks. One idea is to paper the walls with analytical summaries and customer feedback rather than passing out reports. The format makes it easy to incorporate the information into normal conversation without scrabbling to find page references in the binder.
Wisely, the authors suggest that to get to three to five key battles, you should begin by generating many more possible MWBs. Not only does this provide more options, it also brings in more voices to the conversation. To gain commitment you need everyone to feel their voice is heard and has impact. It is a useful reminder that demanding and self-determined performance challenges will create stronger teams hungry for success, far more effectively than any number of team-building exercises. The authors strongly advocate ending the kick-off by affirming the team’s shared commitment to the chosen battles, and to the behaviors that will be needed to underpin them. The “spotlights” process puts every team member in the hot seat to receive feedback on their own statements of actions, behaviours and support needed. It is powerful stuff.
However, establishing the battles is just the start of improving performance. The authors write, “Change cannot occur if it only involves those at the top. Success requires that everyone buys into the journey, understands their contribution to the battles, and the new behaviours.”
The book’s Phase II lays out a specific, cross-functional approach to successful execution with useful tools for communicating the new agenda and aligning the organization behind it. Giving positive messages on areas of focus is vital, as is constant reinforcement across the organization to motivate people. But it is also critical to stop those initiatives that are not central to the new agenda — remember: “lots of priorities are no priorities.” And that’s tough. Faced with the challenges of keeping the momentum going to win the battles, leaders would do well to heed the pragmatic insights peppered throughout phase II. In particular, the chapter written with Kees van der Graf of Unilever offers interesting ideas, as well as a large dose of honesty about how to keep people on-side.
Must-Win Battles delivers on the promise of its title: a practical guide for executives who want to improve performance. As the authors write, “Over time, individual battles will be won or lost: the enduring victory that drives further success is in the new ways of working together that emerge from the must-win battle process. You start by winning battles; you end by transforming your organization.”