The best marketing metric (so far)

Marketers are constantly struggling with the fact that ROI of marketing activities is difficult to track. Seggie et al have evaluated 6 types of metrics common in market academia on 7 dimensions that are relevant for determining ROI and its source.

The assessment shows that customer equity is a promising candidate for most valuable metric, being able to cover 5 of the 7 dimensions. A system for evaluating customer equity can provide insights about marketing returns on the dimensions: financial, forward-looking, long-term, micro and causal. Objectivity and relativity are the missing dimensions, whereof only the last can be handled by other types of metrics.

Rust et al offer a way of implementing customer equity tracking, based on 20 questions in a customer survey. The system estimates every respondent’s Customer Lifetime Value to the company and links it to 3 major equity drivers: perceived value, brand equity, and relationship characteristics.

The area of marketing metrics has seen an up-trend in academic research, and results begin to show. Customer equity gives at least a partial answer to the old problem of determining pay-back of marketing activities.

Sources: Seggie S H, et al. 2007. Measurement of return on marketing investment: A conceptual framework and the future of marketing metrics. Industrial Marketing Management, 36.

Rust R T, et al. 2004. Return on Marketing: Using Customer Equity to Focus Marketing. JoM, Vol 68, Issue 1.