Study Guide

Applied Marketing Metrics

(AMM401P)

This module forms a compulsory core module for the following Postgraduate
academic programmes:
Postgraduate Diploma in Marketing Management

Notional Hours: 200

Credits: 20
NQF: 8
Weeks: 16

©IMM Graduate School Study Guide (AMM401P) Page 1 of 220

Name & Surname
Cell Number
eMail
Student Number

Published by IMM Graduate School © Copyright Reserved

January 2019 Revised Edition

©IMM Graduate School Study Guide (AMM401P) Page 2 of 220

Icons Explained

©IMM Graduate School Study Guide (AMM401P) Page 3 of 220

Contents
SECTION A: GENERAL INFORMATION ............................................................................... 7
Word of Welcome ......................................................................................................................................... 7
Programme Structure ................................................................................................................................... 8

SECTION B ...................................................................................................................... 23
SECTION 1 - Marketing Objectives and Strategy WEEKS 1 – 7 ASSIGNMENT 1 .............. 23
Study Unit 1 - Introduction to Applied Marketing Metrics Weeks 1 & 2 (Chapter 1 Key
Marketing Metrics) ................................................................................................................ 23
Study Unit 1 - Relevance ............................................................................................................................. 23
Study Unit 1- Key Concepts ......................................................................................................................... 24
Study Unit 1 - Glossary ................................................................................................................................ 24
Study Unit 1 - Learning Path ....................................................................................................................... 25
Study Unit 1 - Introduction ......................................................................................................................... 26
Study Unit 1 - Revision Exercises................................................................................................................. 38
Study Unit 1 - Revision Exercises Solutions ................................................................................................. 38
Study Unit 1 - Progress Check ..................................................................................................................... 41

Study Unit 2 - Product and Portfolio Management (Chapter 3, 4, 5, Key Marketing Metrics) .... 43
Study Unit 2 - Relevance ............................................................................................................................ 43
Study Unit 2 - Key Concepts ........................................................................................................................ 44
Study Unit 2 - Glossary ................................................................................................................................ 44
Study Unit 2 - Learning Path ....................................................................................................................... 45
Study Unit 2................................................................................................................................................. 46
Study Unit 2 - Revision Exercises................................................................................................................. 55
Study Unit 2 - Revision Exercises Solutions ................................................................................................. 56
Study Unit 2 - Progress check ...................................................................................................................... 57

Study Unit 3 - Pricing Strategy Week 4 (Chapter 7 - Key Marketing Metrics) ........................... 59
Study Unit 3 - Relevance ............................................................................................................................ 59
Study Unit 3 - Key Concepts ........................................................................................................................ 59
Study Unit 3 - Glossary ................................................................................................................................ 60
Study Unit 3 - Learning Path ....................................................................................................................... 60
Study Unit 3................................................................................................................................................. 61
Study Unit 3 - Revision Exercises................................................................................................................. 69
Study Unit 3 - Revision Exercises Solutions ................................................................................................. 69
Study Unit 3 - Progress check ...................................................................................................................... 70

SECTION 2 - Sourcing Results Information WEEKS 1-7 ASSIGNMENT 1 .......................... 72

Study Unit 4 – Marketing Database Principles Weeks 5 & 6 ..................................................... 72
Study Unit 4 - Relevance ............................................................................................................................. 72
Study Unit 4 - Key Concepts ........................................................................................................................ 73
Study Unit 4 - Glossary ................................................................................................................................ 73
Study Unit 4 - Learning Path ....................................................................................................................... 74
Study Unit 4................................................................................................................................................. 75
Hints for collection and use ........................................................................................................................ 82

©IMM Graduate School Study Guide (AMM401P) Page 4 of 220

 Study Unit 4 - Revision Exercises................................................................................................................. 86
Study Unit 4 - Revision Exercises Solutions ................................................................................................. 87
Study Unit 4 - Progress check ...................................................................................................................... 88

Study Unit 5 - Channel Management and Sales Force Week 7 (Chapter 6 – Key Marketing
Metrics) ................................................................................................................................. 90
Study Unit 5 - Relevance ............................................................................................................................. 90
Study Unit 5 - Key Concepts ........................................................................................................................ 90
Study Unit 5 - Glossary ................................................................................................................................ 91
Study Unit 5 - Learning Path ....................................................................................................................... 91
Study Unit 5................................................................................................................................................. 92
Study Unit 5 - Revision Exercises............................................................................................................... 101
Study Unit 5 - Revision Exercises Solutions ............................................................................................... 102
Study Unit 5 - Progress check .................................................................................................................... 103

SECTION 3 - Customer Interaction and Promotion WEEKS 8 - 10 ASSIGNMENT 2 ........... 105

Study Unit 6 - Branding Week 8 (Chapter 2 – Key Marketing Metrics) ................................... 105
Study Unit 6 - Relevance ........................................................................................................................... 105
Study Unit 6 - Key Concepts ...................................................................................................................... 105
Study Unit 6 - Glossary .............................................................................................................................. 106
Study Unit 6 - Learning Path ..................................................................................................................... 106
Study Unit 6............................................................................................................................................... 107
Study Unit 6 - Revision Exercises............................................................................................................... 115
Study Unit 6 - Revision Exercises Solutions ............................................................................................... 116
Study Unit 6 - Progress Check ................................................................................................................... 118

Study Unit 7 - Advertising and Media Week 9 (Chapter 9, 10, 12- Key Marketing Metrics) ...... 120
Study Unit 7 - Relevance ........................................................................................................................... 120
Study Unit 7 - Key Concepts ...................................................................................................................... 120
Study Unit 7 - Glossary .............................................................................................................................. 121
Study Unit 7 - Learning Path ..................................................................................................................... 121
Study Unit 7............................................................................................................................................... 123
Study Unit 7 - Revision Exercises............................................................................................................... 138
Study Unit 7 - Revision Exercises Solutions ............................................................................................... 140
Study Unit 7 - Progress check .................................................................................................................... 142

Study Unit 8 - Prospecting to Fulfilment Week 10 (Chapters 6, 7, 10 Key Marketing Metrics).. 145
Study Unit 8 - Relevance ........................................................................................................................... 145
Study Unit 8 - Key Concepts ...................................................................................................................... 145
Study Unit 8 - Glossary .............................................................................................................................. 146
Study Unit 8 - Learning Path ..................................................................................................................... 146
Study Unit 8............................................................................................................................................... 147
Study Unit 8 - Revision Exercises............................................................................................................... 152
Study Unit 8 - Revision Exercises Solutions ............................................................................................... 153
Study Unit 8 - Progress check .................................................................................................................... 154

Section 4 - Selecting the Formulae to Measure Objectives WEEK 11 ASSIGNMENT 2 ... 156
Study Unit 9 - Identifying selected formulae to match selected metrics Week 11 (Chapter 8 Key
Marketing Metrics) .............................................................................................................. 156

©IMM Graduate School Study Guide (AMM401P) Page 5 of 220

 Study Unit 9 - Relevance ........................................................................................................................... 156
Study Unit 9 - Key Concepts ...................................................................................................................... 156
Study Unit 9 - Glossary .............................................................................................................................. 157
Study Unit 9 - Learning Path ..................................................................................................................... 157
Study Unit 9............................................................................................................................................... 158
Study Unit 9 - Revision Exercises............................................................................................................... 164
Study Unit 9 - Revision Exercises Solutions ............................................................................................... 165
Study Unit 9 - Progress check .................................................................................................................... 166

SECTION 5 - Results Analysis of Collected Data WEEKS 12-15 ASSIGNMENT 2..................... 168
Study Unit 10 - Customer Profitability Review....................................................................... 168
Weeks 12 (Chapters 1,2,5 Key Marketing Metrics) ................................................................ 168
Study Unit 10 - Relevance ......................................................................................................................... 168
Study Unit 10 - Key Concepts .................................................................................................................... 168
Study Unit 10 - Glossary ............................................................................................................................ 169
Study Unit 10 - Learning Path ................................................................................................................... 169
Study Unit 10............................................................................................................................................. 170
Study Unit 10 - Revision Exercises............................................................................................................. 185
Study Unit 10 - Revision Exercises Solutions ............................................................................................. 186
Study Unit 10 - Progress check .................................................................................................................. 187

Study Unit 11 - Product Profitability Review Weeks 13 (Chapters 4, 11,12 Key Marketing
Metrics) ............................................................................................................................... 189
Study Unit 11 - Relevance ......................................................................................................................... 189
Study Unit 11 - Key Concepts .................................................................................................................... 189
Study Unit 11 - Glossary ............................................................................................................................ 190
Study Unit 11 - Learning Path................................................................................................................... 190
Study Unit 11............................................................................................................................................. 191
Study Unit 11 - Revision Exercises............................................................................................................. 198
Study Unit 11 - Revision Exercises Solutions ............................................................................................. 198
Study Unit 11 - Progress check .................................................................................................................. 200

Reference List ............................................................................................................... 202

Addendum A: IMM Harvard Referencing Guidelines ..................................................... 206
Addendum B: Action Verbs ........................................................................................... 206
Addendum C: Glossary - Formulas ................................................................................ 207
Addendum D: Glossary – Academic Terms ....................................................................... 217

©IMM Graduate School Study Guide (AMM401P) Page 6 of 220

SECTION A:
GENERAL INFORMATION

Word of Welcome

Welcome to the calculating world of Applied Marketing Metrics.

In order to complete the Postgraduate Diploma in Marketing Management, you will need to
gain an understanding and be able to apply Marketing Metrics in a practical fashion for the
Applied Marketing Metrics module (AMM401P).

In the data driven world that marketers find themselves today it is essential to have a broad
understanding of marketing metrics available to marketing managers. How to use metric-
drive tools and techniques to enhance marketing decisions. This module aims to assist
students to develop the skill to use numerical information to justify and evaluate marketing
strategies. To be able to select, calculate and interpret specific marketing metrics for
marketing decisions. To understand the connection across various marketing metrics. An
ultimately be able to calculate and communicate the return on marketing investment.

The module explores the processes that drive value creation and results measurement for
both the company and customers.
It is recommended to follow the study guide and instruction held within this study guide to
assist you in gaining the knowledge necessary for Applied Marketing Metrics (AMM401P)
module. For Applied Marketing Metrics it is recommended to familiarise yourself and make
use of the following sources:
• Applied Marketing Metrics (AMM401P) Study Guide
• Prescribed textbook
• Recommended readings as per allocated articles for academic background

©IMM Graduate School Study Guide (AMM401P) Page 7 of 220

Programme Structure
Postgraduate Diploma in Marketing Management
Herewith a brief summary of the Postgraduate Diploma in Marketing Management
programme indicating where Applied Marketing Metrics (AMM401P) fits into.

Once you have successfully completed the modules and achieved the module outcomes

covered within the Postgraduate Diploma in Marketing Management programme you will be
competent to do the following:

Purpose:
To create a platform which will provide an opportunity to those with some academic
marketing knowledge with expanded insight, understanding and practical skills about
marketing – from idea conceptualisation to the development, launch and maintenance of
marketing plans and programmes for contributing to the achievement of the strategic
business objectives of the organisation. This is, therefore, a qualification aimed at people
entering the business or professional marketing environment, people at a specific
developmental stage in their careers, or at the phase in their personal development when
they already have suitable knowledge, training and qualifications in their specific field of
knowledge but lacking an in-depth marketing background. The Programme provides a
practical opportunity for students to ensure a personal competitive advantage while
broadening their career prospects.

©IMM Graduate School Study Guide (AMM401P) Page 8 of 220

 Programme Exit-Level outcomes
• Demonstrate advanced skills in implementing marketing knowledge and principles,
appreciating how it contributes to and draws on the other functional areas of
business.
• Understand and take full responsibility for a marketing position as a functional
leader as well as being a contributing member of a management team in an
organisation.
• Provide an assessment of an organisation’s internal strengths and capabilities, as
well as the external environment opportunities, and link the organisational
resources with practical marketing activities in the field when interacting with
clients.
• Demonstrate a practical understanding of the national and international economic
context within which organisations offer their products and services to clients and
institute practical action steps to capitalise on marketing opportunities the
environment presents.
• Demonstrate the application of academic knowledge in evaluating and selecting
relevant information from the field and processing this for the purpose of
developing a plan for identifying results and measuring performance as well as
identifying the potential for the generic expansion of the client base.
• Produce an action plan for identifying sources of metrics information within the
organisation and using appropriate information on the products and services
offered by the business and documenting this for communicating the marketing
plan to management.
• Develop appropriate systems and methods for evaluating business progress and for
quantifying the personal contribution to organisation-wide targets.
• Illustrate an understanding of the ongoing need for mastering life-long learning
strategies in the rapidly changing field of marketing and metrics management.

©IMM Graduate School Study Guide (AMM401P) Page 9 of 220

 Module purpose:
The broaden understanding of the need to set up, monitor and measure the ROI of
marketing spend and the related activities resulting from it.

Module outcomes:
By the end of the module, students should be able to:
• Master core concepts, principles and techniques for developing key success
indicators to guide the management of the relationship with individual clients.
• Developing appropriate and robust marketing and business metrics for each
individual client in accordance with the client needs and the business strategic
objectives.
• Formulation of relevant, ethically sound and commercially rewarding action plans
for interacting with each client.
• Monitoring the client interactions using appropriate metric tools for recording
progress, challenges and implemented corrective actions.
• Formulating an individualised management plan for each client to reflect the unique
requirements of the client and maintaining alignment with the corporate objectives.

This module consists of 11 study units. You are expected to finish (including assignment
completion) these study units in 16 weeks. (Refer to student pacer outlining the 16 week
breakdown)
This module is compulsory and forms part of the Postgraduate Diploma in Marketing
Management. In other words, this module Applied Marketing Metrics forms one of the five
(5) modules in the Postgraduate Diploma in Marketing. The following 5 modules are required
for completion of your Postgraduate Diploma in Marketing Management:
• Applied Brand Management and Communication (ABMC401P)
• Applied Marketing Metrics (AMM401P)
• Applied Global Marketing Dynamics (AGMD401P)
• Applied Marketing Leadership (AML401P)
• Applied Marketing Project (AMP401P)

©IMM Graduate School Study Guide (AMM401P) Page 10 of 220

 Study tips
These module outcomes sound amazing – but how on earth can one achieve these? Here are
a few tips you should follow to ensure you have the best chance to successfully complete this
module:
• Make sure you use and develop all the tools you need to complete this task
successfully.
• Show a POSITIVE attitude and do not blame others for your failures.
• Take responsibility of your own progress and success.
• Communicate! Ask help when you need it. Ask questions. Find out what happens. Find
out when things happen and when you should be doing what! Read all instructions
carefully!
• Use all the available student platforms to ENGAGE with, learn from, solve problems
with, and discuss ideas with other fellow students and IMM Graduate School staff.
• Prioritise what is important. Manage your time and keep constant track of your
progress.
• Think of alternative ways to learn more effectively.
• Get Organised:
o Get all your required study material and buy your prescribed textbooks
o Familiarise yourself with eLearn
o Draw up your study timetable and commit to it (check the student pacer outlined
later in this study guide)
o Set clear objectives to achieve at deadline dates for every study unit

Tips for achieving good marks in your assessments

• Firstly, do not leave the completion of your assignments until the last minute!
• Assignments have been put in place for a good reason – it shows you what you are still
struggling with and what you still need to study. It shows you what you are doing and
what you can or cannot do. It measures your progress and awards marks that will
indicate your level of competence.
• Carefully consider the mark allocation of each question. By doing this it will help you
to achieve the maximum marks possible!

©IMM Graduate School Study Guide (AMM401P) Page 11 of 220

• For example: If a question counts 10 marks, ensure you include at least 10 keywords
or 10 steps or 10 core facts – depending on the requirement of the question. If a
question counts only one mark, it is more than likely that only one fact will be required.
• If for example a question requires the listing of a process which includes 6 steps,
ensure you cover all 6 steps – marks are usually allocated according to the actual
process / steps – thus your response must be factually correct.
• Be careful to not rewrite the content word-for-word out of your study guide or any
other learning material, firstly you are making yourself guilty of plagiarism and
secondly it does not indicate that you actually understand the concept. Use your own
words – specifically when you need to answer a question using your own thinking or
interpretation.

“Our jobs as marketers are to understand how the customer wants to buy and help them do
so” - Bryan Eisenberg

Assessments explained
• Learning assessment comprises both assignments and examinations. Please ensure
that you thoroughly read the 2019 IMM Graduate School Yearbook Assessment
section for a complete understanding of the rules and regulations governing
assignments and exams. There are specific rules that should be followed in terms of
required font, font size, formatting and layout, as well as referencing guidelines. These
should be adhered to as you will be penalised for not following these instructions.
• The marks grading system is as follows:
o 75% or more = Pass with distinction
o 50% - 74% = Pass
o 0% - 49% = Fail

Note: Assessment of this module consists of submitting two assignments and will test your
skills level as described in the exit-level module outcomes.

Assignments
Why do you need to complete assignments?
• Assignments help you to apply what you have learnt
• Assignments help to show you what you are still struggling with and what you still
need to learn or spend time on
• Assignments help the tutor or yourself to see what you are doing and what you can
or cannot do

©IMM Graduate School Study Guide (AMM401P) Page 12 of 220

• Assignments help you to measure your own progress and award marks that will
indicate your level of competence

NOTE: UNDER NO CIRCUMSTANCES WILL YOU BE ALLOWED TO SUBMIT THE SAME TOPIC
OR SIMILAR REPORT FOR MORE THAN ONE OF YOUR POST-GRADUATE MODULES!

Assessment
The assessment of this module requires that you submit your assignment in two separate
submissions:
• Submission 1 contributes 50% towards your final mark,
• Submission 2 contributes 50% towards your final mark.

The framework for this assignment is clearly outlined in the assignment question paper which
you will find on the module website. Your assignment submission dates are as follows:
• Submission 1: Monday 1 April 2019 by 15h00. Refer to the report guideline in the
assignment question paper –here you will be given a guideline in terms of what is to
be included in both submission 1 and submission 2.
• Submission 2: Monday, 6 May 2019 by 15h00. An additional assignment guideline
will be issued later in the semester in terms of what is to be included in this submission.

Examination
This module consists of one formative assessment comprising 2 different submissions,
Submission 2 building on Submission 1. The assignment submissions will, collectively,
contribute 100% of your final mark. This module does not require the writing of an
examination.

Academic Ethics
Any assignment allows you to utilise various reading material that will assist you in the
completion of your assignment. Read the material with full attention and ensure you fully
understand each concept before you try and apply the learnt theory.
Use your own words to explain what you have read when answering a question. The marker
needs to see that you have understood the questions and are able to apply the learnt theory
to your answers. You have to use your own words and cannot simply “cut and paste” or “copy”
the content from any learning material.

©IMM Graduate School Study Guide (AMM401P) Page 13 of 220

When using something from any textbook, website, or any other material as part of your
assignment answers you have to acknowledge the original source be referencing the source
in your text as well as at the end of your document. Please consult the IMM Graduate School
Harvard referencing Guide (Addendum A and also available on our eLearn platform) for a
detailed explanation of how you should reference correctly.

The IMM Graduate School takes the copying of any material without proper referencing
extremely serious as this is known as plagiarism and you will face a disciplinary action if you
make yourself guilty of such a plagiarism practice. Please ensure you are familiar with the
IMM Graduate School Harvard referencing style guide as not to inadvertently commit such an
offence.

Planning your AMM401P studies

The IMM Graduate School has designed student pacers for each module. These pacers will
assist you in planning your studies to ensure you cover the entire syllabus and to schedule
your studies at manageable intervals. Distance learning requires careful planning and
scheduling of your studies and the student pacer will provide you with a guideline on how to
plan and not fall behind. Adhering to the student pacer will guide you and provide you with a
good start to achieve the targets set out for each module and to ensure you plan beforehand
to hand in your assignments before or on the due date.

©IMM Graduate School Study Guide (AMM401P) Page 14 of 220

 Study Plan

Learning process per study unit

Not only should you adhere to the student pacer guidelines, you should also ensure you
understand the learning process that takes place during each of the study units.

SEMESTER 1 - 2019

When What Completed  or 

Section 1: Marketing Objectives & Strategies
Week 1 & 2 Study Guide: Study Unit 1: Section1
Introduction to Applied Marketing Metrics
 Understanding metrics, and the importance of
measuring marketing activities to justify
expenditure and Return on Marketing
Investment.
 Explain the roles played by marketing metrics in
enterprise management relating to the
prescribed textbook.
 Define and identify key objectives and
strategies for measurement.
 Use an Interactive Model to identify
measurable metrics hot spots.
 Discuss basic research metrics.
 Quantify target setting metrics.
 Identify results predictions for promotions and
estimate capacity of elements required to
deliver.
Prescribed textbook: Chapter 1

©IMM Graduate School Study Guide (AMM401P) Page 15 of 220

 Study Guide: Study Unit 2: Section 1
Week 3 Product and Portfolio Management
 Analyse margins and profits.
 Review product costs for acquisition and
retention.
 Identify fixed and variable costs.
 Relate to front and back-end costs
Prescribed textbook: Chapters 3, 4, 5

Study Guide: Study Unit 3: Section 1

Week 4 Pricing Strategy Metrics

 Identify the components of pricing.

 Formulate different pricing strategies to meet
market demand for B2C and B2B.
 Adapting the price in the context of market
competition.

Prescribed textbook: Chapter 7

Section 2: Sourcing Results Information

Week 5 & 6 Study Guide: Study Unit 4: Section 2
Marketing Database Principles
 Review key elements of a marketing database.
 Identify points of data entry for marketing
information.
 Recommend the key data fields for data
capturing.
 Select the extraction criteria for populating the
required information for marketing metrics
analysis.
Prescribed reading: other sources

©IMM Graduate School Study Guide (AMM401P) Page 16 of 220

 Week 7 Study Guide: Study Unit 5: Section 2
Channel Management
 Identify the importance of supply and value
chains and the role players.
 Discuss the role of the sales force.
 Review sales force territories and coverage.
 Identify sales force goals and results.
 Analyse reporting measurements.
Prescribed textbook: Chapter 6
Week 8 Section 3: Customer Interaction and Promotion
Study Guide: Study Unit 6: Section 3
Branding
 Explain market share and brand penetration.
 Review awareness, attitudes, liking and usage.
 Analyse the importance and methods of
assessing customer satisfaction.

Prescribed textbook: Chapter 2

Week 9 Study Guide: Study Unit 7: Section 3
Advertising and Media
 Identify the different methodologies for
measuring the success of media advertising.
 Analyse the key metrics required for identifying
on-line interactions.
 Explain the reasons for and principles of testing
prior to full scale promotions.
 Discuss the key steps in design of a testing trial
model to provide the required metrics results.
Prescribed textbook: Chapters 9, 10, 12,13

Week 10 Assignment 1 submission (units 1 – 6)

01 April 2019

©IMM Graduate School Study Guide (AMM401P) Page 17 of 220

 Week 10 Study Guide: Study Unit 8: Section 3
Prospecting to Fulfilment
 Discuss the concept of prospecting to fulfilment
loop.
 Prepare a 3-step process for interactive
communication.
 Identify the metrics for outbound
communication.
 Identify the requirements for response
handling.
 Identify the components of fulfilment and
relate to the key metrics for tracking results at
each stage.
Prescribed textbook: Chapter 8, 11
Section 4: Selecting the Formulae to Measure
Week 11 Objectives.
Study Guide: Study Unit 9: Section 4
Identifying selected formulae to match selected
Metrics
 Review of Interactive Model to identify location
source of key metrics.
 Select the specific formulae to match the
required metrics for measuring promotions.
 Identify the location of sources for retrieving
data.
 Apply data to populate the formulae.

Prescribed reading: Chapter 8 & other sources

Section 5: Results Analysis of Collected Data
Week 12 Study Guide: Study Unit 10: Section 5
Customer Profitability Review
 Identifying the changing dynamics of customer
relationships and satisfaction.

©IMM Graduate School Study Guide (AMM401P) Page 18 of 220

  Differentiate between customer acquisition
and retention costs.
 Discuss options for Customer Lifetime Value.
 Identify the scope for implementing Customer
Relationship Management throughout all life
stages for long term profitability .
 Review the value of loyalty programmes.
Prescribed textbook: Chapter 1,2, 5
Week 13 Study Guide: Study Unit 11: Section 5
Product Profitability Review
 Identify the required product and brand
metrics for continual management monitoring.
 Decide the key metrics for marketing
dashboard reporting.
 Specify who to receive results and how often.
 Identify corrective actions and predictions for
future roll-out.
Prescribed textbook: Chapters 4, 11, 12,13
Week 15 Assignment 2 submission (units 6 - 11)
06 May

©IMM Graduate School Study Guide (AMM401P) Page 19 of 220

 Student support at your finger tips
You are registered for this module on a distance learning basis and you are expected to work
on your own 70% of the time. However, this does not mean that you are completely on your

©IMM Graduate School Study Guide (AMM401P) Page 20 of 220

own. Please use the available IMM Graduate School Student Support resources to help you
during your studies.

Contact the IMM Graduate School support staff for clarity when you need it and
ask them to explain issues which you may find confusing or challenging: academic-
ug@[Link]
Don’t leave your queries to the last day before you write your examination or
before the assignment submission due dates.

You are required to constantly visit eLearn as it is an essential source of

information that is continuously updated with topical material, additional
guidance, messages and tutorial letters.

eLibrary is an excellent place for you to peruse additional reading of your own.
This tool will be extremely valuable when conducting research for your
assignments / projects / research reports. For access to the virtual library please
follow the instructions available on eLearn.

Information Centres - the IMM Graduate School has libraries in all Student Support Centres
with textbooks and additional materials that could help you in your assignments when you
need to reference additional sources. For opening times at facilities please enquire at your
Student Support Centre. You have access to free internet at the Information Centre.

Online Tutorials - in our on-going efforts to support our students, the IMM
Graduate School hosts Online Tutorials in modules which we have identified as
ones where students need additional guidance and support. Subject matter experts
share their knowledge through the use of a presentation/video conferencing
addressing learning outcomes/assignment preparation/examination preparation
etc. giving ample opportunity for student feedback and interaction.

Group Forums or weekend tutorials – join group forums and/or weekend tutorials
for discussions, to post questions and to receive updates on specific modules.

The Journal of Strategic Marketing - the official publication of the IMM Institute of Marketing
Management, which keeps you up to date with the latest news and trends of what is
happening in the industry.

©IMM Graduate School Study Guide (AMM401P) Page 21 of 220

 Your checklist for your learning process
At this point you should understand the learning process explained above, as well as what
Applied Marketing Metrics (AMM401P) is all about and you should be ready to start your
journey towards the successful completion of your module.
Checklist Done / still to do / still to buy or
access
Do you have access to all the prescribed – and
additional learning material? (LIST ALL RESOURCES)
 Prescribed textbook
 AMM401P study guide
 IMM Graduate School eLearn platform
 IMM Graduate School eLibrary platform

Do you have a quiet place to study?

Do you have support from your close family / friends /
colleagues?
Do you know who to contact at the IMM Graduate
School when needed?

©IMM Graduate School Study Guide (AMM401P) Page 22 of 220

SECTION B

SECTION 1 - Marketing Objectives and Strategy

WEEKS 1 – 7 ASSIGNMENT 1

Study Unit 1 - Introduction to Applied Marketing

Metrics
Weeks 1 & 2 (Chapter 1 Key Marketing Metrics)

You can’t manage, what you can’t measure.”

- Peter Drucker

“The holy grail of metrics is the return on marketing investment, which shows leads and revenue
generated by a marketing expenditure.”
- Paul Butcher

A. Study Unit 1 - Relevance

This chapter will assist you in getting an overview of why Marketing Metrics is essential to
the success of marketing activities. Applying Marketing Metrics allows an organisation to
measure performance over time and informs decision making regarding marketing.
Marketing activities touches all other areas of an organisation and the appropriate metric to
measure that effect needs to be applied. The chapter provides a framework and an Interactive
Model that helps identify which Marketing Metrics should be used in which circumstances.
The framework also indicates which Marketing Metrics can be associated with which other
functions within the organisation.

©IMM Graduate School Study Guide (AMM401P) Page 23 of 220

 B. Study Unit 1- Key Concepts
Let’s recap what the relevant module learning outcomes are for this study unit
After completing Unit 1 of this study guide, you should be able to:
• Understand the need to set-up, monitor and measure the return on investment (ROI)
of marketing spend.
• Be able to select, calculate and interpret relevant marketing metrics for marketing
decisions and to articulate the return on marketing investment.
• Understand the framework models that indicates the different areas marketing
influences in the organisation and the associated marketing metric for that marketing
activity.
• Understand what senior management would expect marketing to contribute to
achieve the overall business needs and objectives.
• Understand how to demonstrate to senior management what marketing has
contributed.
• Understand the typical obstacles to successful implementation of marketing metrics.
• Know how effective marketing metrics can assist in identifying performance and
profitability.

C. Study Unit 1 - Glossary

Marketing Metrics - A set of measures that help an organisation to quantify, compare,
and interpret their marketing performance against specific targets.
Net Profit - Sales revenue less total costs.
Return on Sales (ROS) - Net profit as a percentage of sales revenue.
Return on Investment (ROI) - Net profits over the investment needed to generate the
profits.
Payback Period - the projected length of time until a marketing initiative pays for itself

©IMM Graduate School Study Guide (AMM401P) Page 24 of 220

 D. Study Unit 1 - Learning Path
Week 1 Time allocation: 30 hours
Learning Activities completed Material used / Time / Week Progress
elements accessed / check
assistance
Introduction to Know how to Start to familiarise Week 1
Applied measure profits while yourself with the
Marketing accounting for textbook Assessed in
Metrics required returns on Know how the the Project
marketing textbook
expenditure. categorised the
various marketing
metrics
See fig 1.1 p10

How to measure the Start to familiarise Week 1

rate at which yourself with the
spending on textbook Assessed in
marketing Know how the the Project
contributes to profits. textbook
categorised the
various marketing
metrics
See fig 1.1 p10
How to identify where Familiarise yourself Week 2
key data information with the Interactive
is located within the Marketing Model.
range of marketing
activities.
Know how to use Week 2
research techniques
to accumulate
primary and
secondary data.

©IMM Graduate School Study Guide (AMM401P) Page 25 of 220

 E. Study Unit 1 - Introduction
As a result of computers capability to process and store much more information than ever
before marketers find themselves in an era where there is an abundance of data. Never
before has there been so much information available on your customers, your competitors
and market conditions. In this data-based marketing environment it more important than
ever that marketers use the correct metrics to measure marketing strategies and
performance. A marketer will need to discern what to measure, for how long, why, at what
cost and for what benefit to the marketing efforts and overall organisational success,
otherwise they risk falling into the trap of analysis paralysis.
The information required for the metrics covered in this programme comes mainly from a
marketing database. Identifying the principles of marketing database and the need for a
marketer to know where to find and how to use relevant data will be covered in unit 4.

Defining key concepts

• Metric: can be defined as measuring system that quantifies a trend, dynamic or
characteristic.
• Absolute value: the actual magnitude of a numerical value or measurement,
irrespective of its relation to other values.
• Ratio: the quantitative relation between two amounts showing the number of times
one value contains or is contained within the other.
• Variances: the fact or quality of being different, divergent, or inconsistent.
• Trends: a general direction in which something is developing or changing and should
be identified through research.

Marketing Metrics
Marketing Metrics can be defined as a set of measures that help an organisation to quantify,
compare, and interpret their marketing performance against specific targets. Brand Managers
usually use marketing metrics to design marketing programmes while senior management
uses marketing metrics to decide on financial allocations.
Refer: Rebecca Jennings – The Interactive Marketing Metrics You Need

Measurement Principles
There are five measurements principles according to Figliuolo (2017) to consider when
deciding on key success indicators for company and marketing activities:

©IMM Graduate School Study Guide (AMM401P) Page 26 of 220

• What is the purpose of the measurement? Know what the significance of a metric will
be and how management will change in the business due to the outcome of the
results.
• What data source will be used to calculate the measurement? Different sources of data
can contribute into different results.
• How will the measurement be calculated? What formula will be used. Sometimes it
will be necessary to adapt a measurement to what the organisation requires which
can complicate a measure.
• How frequently will the measurement be done? Be efficient in only measuring what
the organisation needs. Analysis paralysis can be very expensive and take up
unnecessary resources.
• Who will review the measurement? Who will be using the reports. This is usually
stakeholders from different areas within the business. Knowing who the audience is
will determine the amount of detail to be included in the repots. (Figliuolo 2017)

Type of metrics in marketing

One can define 3 key types of metrics in marketing and each one of the metrics is suitable for
a specific view:
• Activity: What is being done
• Milestones: Progress against targets
• Outcomes: Results Achieved
The interval of measuring each of these types of metrics is important. An activity type of
metric one would measure more frequently. On a marketing project, one will set certain key
milestone targets to be achieved along the project critical line path. Outcomes would only be
measured at the end of a marketing campaign or the end of a quarter.

Typical milestone marketing metrics and frequency of measurement

The typical milestone marketing metrics that you would use for your business marketing
strategy along with the potential frequency could include:
• Cost/lead measured every 3 months.
• % Sales which can be measured monthly or rolled up in a six months view.
• Brand perception can be measured quarterly or bi-annually.
• Return on Investment (ROI) can be measured quarterly, bi-annually or annually.
These are merely example of frequency of these metrics. The decision to include which
measurements should be measured and how frequently will be summarised in section 5,
results analysis of collected data.
There is no point in spending too much time to measure every possible metric. This would be
a waste of the organisations financial and human resources allocated to these activities. There

©IMM Graduate School Study Guide (AMM401P) Page 27 of 220

is a trade-off that a marketing manager needs to find between which metrics to measure and
how frequently within the constraints of a budget.
It is also very important to take into consideration the effect of macroeconomic market
conditions when looking at certain metrics and understanding what might has been taking
place in either the industry or country’s overall economy, as this would have had an influence
on metrics.
Industry seasonal trends are also vital to take into consideration. Every industry has peak
periods where demand for product or service is high; and periods where demand will taper
off and be low.

Structure of marketing at the core of the organisation – refer prescribed textbook Chap 1,
fig 1.1

(Farris et el. 2017)

©IMM Graduate School Study Guide (AMM401P) Page 28 of 220

It is important for a marketing manager to take a high-level view and see the influence that
marketing has across other business units / business functions in the organisation. This
structure is very useful to sort the different marketing metric tools according to these
categories in the marketing metrics toolbox.
• Share of hearts, minds and markets: Customer perceptions, market share and
competitive analysis.
• Margins and profits: Revenues, cost structures and profitability.
• Product and portfolio management: The metrics behind product strategy, including
measures of trial, growth, cannibalisation and brand equity.
• Customer profitability: The value of individual customers and relationships.
• Sales force and channel management: Sales force organisation, performance and
compensation. Distribution coverage and logistics.
• Pricing strategy: Price sensitivity and optimisation, with an eye toward setting prices
to maximise profits.
• Promotion: Temporary price promotions, coupons, rebates and trade allowances.
• Advertising metrics: The central measures of advertising coverage and effectiveness,
including reach, frequency, rating points and impressions. Models for consumer
response to advertising.
• Online, email and mobile metrics: Specialised metrics for Web-based, mobile and
email campaigns.
• Marketing and finance: Financial evaluation of marketing programmes.

These concepts are graphical presentations of the structure of the textbook, showing the
interlocking nature of all marketing metrics. Each of these chapters are referenced in the
student pacer. The pacer has been constructed into five sections.

Section 1: Marketing Objectives and Strategies – to cover the broader view of where
marketing should be heading, and the key metrics needed for products and pricing. This is
demonstrated with an Interactive Model identifying data hot spots and touch points of
marketing within an organisation.

Section 2: Sourcing Results Information – metrics all tie back to data information. If you can’t
identify where the data is situated and how to source it, you can’t measure, and therefore
can’t manage. You will cover key principles of database management, leading into channel
management, and focusing on the role of the sales force.

©IMM Graduate School Study Guide (AMM401P) Page 29 of 220

Section 3: Customer Interaction and Promotion Activities – this covers the outbound
communication, the media and the follow up loop for responses and fulfilment in order to
fulfil the sale.

Section 4: Selecting the Formulae to Measure Objectives – at this stage you will review the key
formulae that you can now populate with extracted data that you have identified throughout
the process so far.

Section 5: Results Analysis of Collected Data – this is where you will consolidate the results of
customer and product profitability and identify the key metrics for ongoing monitoring and
analysis on your company management dashboard.

Marketing Goals
Marketers are there to support the company’s effort to be profitable. Unless the company is a
non-profit, companies are in business to show a Return on Investment (ROI). Once marketers
know the company’s goals, they can begin to identify measurable business outcomes that can
have a positive impact. The table below indicates a list of possible marketing goals that will
impact the business outcomes.

Best, R. J. 2009)

“By linking cascading goals, the organization can better understand the importance of
individual tactics. Establishing a target when using a specific metric for the first time can be
challenging. Without examining past results, it can be difficult to realistically set targets for
marketing tactics. However, with continued, and consistent use, metrics promote
benchmarking within the organization and the identification of best practices as marketing

©IMM Graduate School Study Guide (AMM401P) Page 30 of 220

effectiveness can be meaningfully compared across the organization.” (Stanko, M.A. and
Fleming M. 2014.)
Objectives should be stated in precise terms. They must be quantitative and measurable,
otherwise they can be reduced to vague and soft statements. The most accepted way to
define an objective is to use the SMART criteria, namely:
S - Specific, be focussed and state in precise terms as to what is to be achieved.
M - Measurable, quantitative metrics that can be sourced accurately.
A - Actionable, be able to implement with required resources and capacity.
R - Realistic, set after a detailed analysis of what can be achieved.
T - Time based, deliverable dates within a set time period.

Target setting
This is a key part of setting objectives. Objectives must follow the SMART principle, but it is
not possible to set targets without having access to all the relevant data. When you apply the
SMART principles to sales predictions, you need to identify past performances and actual
achieved results based on circumstances at that time. Although predictions can be made on
this basis, market conditions could change, or capacity deliverables could alter in the future
which can alter the predictions in a positive or negative way. Setting promotion targets is one
thing but knowing the capacity to handle and deliver are core potential restrictions. These
limitations have to be identified and built into predictive calculations. These issues are
covered in more detail in unit 4, Database Principles, and unit 5, Channel Management and
Sales Force targeting.

The Marketing Productivity Chain

Based on the potential marketing goals above, the model below indicates how marketing
activities lead to creating value for the business. The model of marketing productivity chain
enables the analysis of how non-financial marketing indicators can contribute to the
company’s results based on the concept of the flow of the productivity chain.

©IMM Graduate School Study Guide (AMM401P) Page 31 of 220

(Rust et al. 2004)

“Establishing targets for performance is one of every manager's essential functions and is the
first in in the processes of marketing performance evaluation. Marketing metrics can be
thought of as a way to link individual marketing tactics (such as online ad, a public relations
campaign or a channel promotion) to overall strategy. While strategic objectives for the
business unit might include comprehensive end-results metrics (such as probability gains or
10% over the fiscal year), individual tactics should each have relevant goals that allow for the
discrete measurement of performance of each tactic.” (Stanko, M.A. and Fleming M. 2014.)

The Interactive Marketing Model

This model was originally developed as a base platform for identifying the steps of developing
an integrated promotion. (Bird & Duckles 2000) From a metrics perspective the model can act
as an overview of metrics “hot spots” where key information can be located for the
measurement of marketing activities. The relevant data elements that can be uplifted into
required formulae can be selected according to the set objectives. The model intends to
answer the statement by Peter Drucker, “the purpose of business is to create and keep
customers” – to which you add, ‘at a profit.’

©IMM Graduate School Study Guide (AMM401P) Page 32 of 220

Not all the components of the model will be covered in the course, but more detailed
explanations of the relevant subjects are covered in the tutorials. The model is constructed
into three sections –
i) Planning – covering marketing objectives and strategies, and the role of marketing
in delivering on the set targets.
ii) Acquisition – getting new customers and the following the steps to identify them
and leading them to the point of purchase. You identify the target market, then
you select the appropriate media to communicate to this market. You could select
several for an integrated communications approach. When communicating with
the prospects, you need to decide on an offer, which could relate to your product,
your pricing, or your distribution. Handling the responses, selling your product,
supported with brand recognition, and completing the fulfilment process leads
through to customer retention.
iii) Retention – keeping existing customers consists of a range of optional sequenced
contact steps and can be supported by loyalty programmes and a CRM strategy.
The three sections are supported by additional organisational functions and all are
underpinned by the critical element of a marketing database from which the metrics data for
the formulae will be retrieved. The ‘hot spots’ for underlying costs can be identified across
all three sections and are identified during the course.

©IMM Graduate School Study Guide (AMM401P) Page 33 of 220

Basic Research Metrics
When identifying the metrics that are needed, you need to consider the ’value of information’
– is it worth doing more market research, or alternative testing? (prescribed textbook p9)
Testing concepts and processes are explained in unit 7 which covers advertising.
Research basics are referred to in this unit 1, as the principles will be utilised throughout the
course.
Basic research is divided into two main processes for data sourcing. Primary research data is
gathered when there is no available data, or what is available is out of date or deemed
inaccurate and unreliable. These methods can include:
• Focus group research with gatherings of selected people who are questioned by a
moderator to discuss a product or service.
• Observational research where researchers mingle with existing customers or
competitors to gather comments from current users. “mystery shopper” experiments
fall into this category.
• Survey research conducted using specific questions.

©IMM Graduate School Study Guide (AMM401P) Page 34 of 220

• Behavioural data tracking of actions conducted by consumers. This research reflects
reality of action, as it shows what consumers actually did, not just what they say they
think they will do.
Secondary research is already available in one form or another and can be found while sitting
at your desk. Information from books, industry journals, internet searches, research reports
from industry bodies, university research papers, advertising agency reports, statistics
generated by government agencies – these are just a few of the wide scope of options for
collecting secondary data.
Two further types of statistical research analysis are:
Quantitative research which seeks structured responses that can be summarised in numbers.
Qualitative research that seeks in-depth open-ended responses. This can be views and
opinions of products or brands and will form the basis of focus group studies.

The major list of metrics that relate to each component of the textbook model (p10) you will
find on p12-13. These metrics below provide an overview of the key formulae you will
encounters during this course. As you progress through each unit, more formulae will be
added to build up your portfolio of metrics.

Net Profit Sales revenue less Revenue and costs The basic profit
total costs. can be defined in a equation.
number of ways
leading to confusion
in profit calculations.

Financial Performance Metrics

Net Profit (R) Sales Revenue (R) − Total Costs (R)
Return on Net profits over the Often meaningless in A metric that
Investment (ROI) investment needed the short term. describes how well
to generate the Variations such as assets are being
profits. return on assets and used.
return on
investment capital
analyze profits in
respect of different
inputs.
Return on Net Profit (R)
Investment—ROI (%) Investment (R)

©IMM Graduate School Study Guide (AMM401P) Page 35 of 220

 Return on Sales Net profit as a Acceptable level of Gives the percentage
(ROS) percentage of sales return varies of revenue that is
revenue. between industries being captured in
and business models. profits
Many models can be
described as high
volume/low return
or vice versa.
Return on Sales— Net Profit (R)
ROS (%) Sales Revenue (R)
Earnings Before Rough measure of Strips out the effect Ignores important
Interest, Taxes, operating cash flow. of accounting and factors, such as
Depreciation, and Earnings Before financing polices depreciation of
Amortization Interest, Taxes, from profits. assets.
(EBITDA) Depreciation, and
Authorization.
EBITDA (R) Net Profit (R) + Interest Payments (R) + Taxes (R)
+ Depreciation and Authorization Charges (R)

Marketing Return on Investment

Marketing return on Investment is a measure of the rate at which spending on marketing
contributes to profits. Marketing Return on Investment (MROI) can be calculated by the
estimate of the incremental financial value generated by identifiable marketing expenditures,
less the cost of those expenditures as a percentage of the same expenditures.

Return on Marketing Incremental revenue Marketers need to Compares the sales

Investment (ROMI); attributable to establish an accurate generated in revenue
Revenue marketing over the Baseline to be able to terms with the
marketing spending. meaningfully state marketing spending
what revenue is that helped generate
attributable to the sales. The
marketing. percentage term
helps comparison
across plans of
varying magnitude.

©IMM Graduate School Study Guide (AMM401P) Page 36 of 220

 Return on Marketing [Incremental Revenue Attributable to Marketing (R) x
Investment (ROMI) Contribution Margin % − Marketing Spending (R)]
(%) Marketing Spending (R)

In calculating the ROMI estimating incremental revenue, contribution and net profits
attributable to marketing can be problematic. To measure the impact, valuation of various
marketing activities needs to be done first. The table below indicates five ways the financial
returns can be assessed for each of the marketing activities.
Valuation Financial return assessed Metrics
methods
Comparable costs Coast saving for achieving equivalent Advertising & Web metrics
valuable contracts
Funnel Future period incremental sales and Promotion & Market Share
conversions profits based on estimated conversion metrics
rates
Baseline-lift Current period incremental sales and Sales Management & sales
profits metrics
Customer equity Changes in customer lifetime value Customer Lifetime Value (CLV)
metric
Marketing assets Changes in brand and firm valuations Brand equity metric

Payback Period
Also, closely associated with ROI is payback period. Payback period is the projected length of
time until the marketing initiative pays for itself. Given estimates of the costs to develop a new
product and the projected profit flows over time, the payback period can be calculated.
(Stanko, M.A. and Fleming M. 2014.)

Conclusion
You should now have a basic overview of Marketing Metrics. The type of metrics that relate
to marketing activities and knowing the purpose of each one. The problem many students
and practitioners face is how to identify the core metrics that can be used in a practical way.
The danger is falling into analysis paralysis. By using the Interactive Marketing Model as a
visual platform, you can pinpoint the appropriate areas on which to focus to extract the data
information to populate your required formulae.

©IMM Graduate School Study Guide (AMM401P) Page 37 of 220

 F. Study Unit 1 - Revision Exercises
Revision Discussion Questions
Briefly discuss why marketing metrics is important for any marketer to know.
Discuss the three different types of metrics in marketing, and the respective view each
will provide. Not to be confused with actual marketing metrics.
How will a marketer demonstrate what success a marketing campaign or marketing
activities contributed to the company’s bottom line.
Identify the metrics ‘hot spots’ for sourcing information from the Interactive
Marketing Model.

Multiple Choice Questions

Return on Marketing Investment (ROMI) revenue:
A. Incremental revenue attributable to marketing over the marketing spending.
B. Marketers need to establish an accurate baseline to be able to meaningfully state
what revenue is attributable to marketing.
C. Compares the sales generated in revenue terms with the marketing spending that
helped generate the sales.
D. None of the above

What is payback?
A. The length of time taken to return the initial investment
B. Will favour projects with quick returns more than long term success
C. Simple return calculation
D. None of the above

Which of the following fit Drucker’s purpose of business?

A. Increase Customer Satisfaction, increase profitability and reduce Cost per lead
B. Reduce customer Service Costs, acquire New Customers and reduce Cost per lead
C. Acquire new Customers, retain Existing Customers & create a Profit
D. Increase Customer Satisfaction, acquire new Customers and retain Existing Customers

G. Study Unit 1 - Revision Exercises Solutions

Briefly discuss why marketing metrics is important for any marketer to know.

©IMM Graduate School Study Guide (AMM401P) Page 38 of 220

• The marketer needs to discern what to measure and use correct metrics from an
abundance of data.
• If you can’t measure – you can’t manage.
• Metrics helps an organisation to quantify, compare and interpret marketing
performance against targets.
• Guides brand management to design marketing programmes and set targets.
• Helps to set milestones targets to be achieved along project critical line path.

Discuss the three different types of metrics in marketing, and the respective view each
will provide. Not to be confused with actual marketing metrics.
• Activity – a metric that is measured more frequently to identify what is being done.
• Milestones – a check on progress against targets to be achieved along the project
critical line path.
• Outcomes – are a measurement of the results achieved which would be measured at
the end of a specific target period, such as the end of a marketing campaign or end of
a progress period such as a quarter.

How will a marketer demonstrate what success a marketing campaign or marketing

activities contributed to the company’s bottom line.

Identify the metrics ‘hot spots’ for sourcing information from the Interactive
Marketing Model.
Key result areas that marketers can pinpoint for extracting information to populate their
metrics are covered in the course in these units (refer student pacer)
• Branding – unit 6

©IMM Graduate School Study Guide (AMM401P) Page 39 of 220

• Media – advertising and social – unit 7
• Testing – unit 7
• Customer offers & pricing – unit 3
• Product costs – unit 2
• Response handling – unit 8
• Fulfilment – unit 8
• CRM & loyalty programmes – unit 10
• Retention and Lifetime value – unit 10
• Value chain and channels – unit 5
• Internal marketing & sales – unit 5
• Analysis - units 9-10-11
• IT & Database – unit 4

Multiple Choice Questions

Return on Marketing Investment (ROMI) revenue:
A. Incremental revenue attributable to marketing over the marketing spending.
B. Marketers need to establish an accurate baseline to be able to meaningfully state
what revenue is attributable to marketing.
C. Compares the sales generated in revenue terms with the marketing spending that
helped generate the sales.
D. None of the above

What is payback?
A. The length of time taken to return the initial investment
B. Will favour projects with quick returns more than long term success
C. Simple return calculation
D. None of the above

Which of the following fit Drucker’s purpose of business?

E. Increase Customer Satisfaction, increase profitability and reduce Cost per lead
F. Reduce customer Service Costs, acquire New Customers and reduce Cost per lead
G. Acquire new Customers, retain Existing Customers & create a Profit
H. Increase Customer Satisfaction, acquire new Customers and retain Existing Customers

©IMM Graduate School Study Guide (AMM401P) Page 40 of 220

 H. Study Unit 1 - Progress Check
You have come to the end of Study Unit 1.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

Your Progress Checklist

Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
• Understand the need to set-up, monitor and measure the return on
investment (ROI) of marketing spend.
• Be able to select, calculate and interpret relevant marketing metrics for
marketing decisions and to articulate the return on marketing
investment.
• Understand the framework models that indicates the different areas
marketing influences in the organisation and the associated marketing
metric for that marketing activity.

©IMM Graduate School Study Guide (AMM401P) Page 41 of 220

 • Understand what senior management would expect marketing to
contribute to achieve the overall business needs and objectives.
• Understand how to demonstrate to senior management what marketing
has contributed.
• Understand the typical obstacles to successful implementation of
marketing metrics.
• Know how effective marketing metrics can assist in identifying
performance and profitability.

Are you ready to tackle the questions relevant to Study Unit 1 in Assignment
1?

DO Assignment 1, Q 1

©IMM Graduate School Study Guide (AMM401P) Page 42 of 220

 Study Unit 2 - Product and Portfolio Management
(Chapter 3, 4, 5, Key Marketing Metrics)

Even though the main aim of the business may seem to be to attract and maintain
relationships with customers, the business cannot survive by only doing this. It is essential for
a profit to be made from this relationship. In calculating the profit margin of a business,
knowing which numbers to use, which activities to include and which figures to look for, are
key in providing relevance and authenticity to the calculation.

The first part of this unit examines the process of determining margin levels. It looks at the
various associated costs to be considered, such as fixed and variable costs that needs to be
taken into consideration when adding a margin and selecting a selling price. Setting a price
per unit is also explained.

“There should be no guesswork as to whether your activities have line of

sight to results.”
- Nick Panayi

A. Study Unit 2 - Relevance

This unit gives you the core platform for identifying the main areas where you will incur costs
in any of your marketing activities, specifically for conducting promotions. If you cannot
identify your costs and allocate them to the appropriate part of your budgets, you will be
unable to identify if you ever made a profit.
Marketers have to be in control of costs and the financial metrics. The future reputation of
marketers depends on this. A survey by Marketing Week UK 2012, showed that:
• 80% of CEOs are not impressed by the performance of their marketing teams
• Marketers fail to align their efforts with financial reality
• CFOs think marketers are “fluffy and weak”
• 83% of marketers are unable to quantify ROI from their marketing
This is quite a concerning impression of the reputation of marketers. But if you are able to
master the fundamental metrics, this will go a long way to overcoming these views. The main
objective of this course is to equip you with the skill and knowledge to justify your role and
change this perception.

©IMM Graduate School Study Guide (AMM401P) Page 43 of 220

 B. Study Unit 2 - Key Concepts
Let’s recap what the relevant module learning outcomes are for this study unit
After completing unit 2 of this study guide, you should be able to:
• Understand prices and channel margins to be able to calculate selling price for each at
each level in the distribution channel.
• Know how to calculate meaningful average selling prices within a product line that
includes items of different sizes.
• Understand how costs change with volume with specific reference to variable costs
and fixed costs
• Be able to calculate marketing spending into total and differentiate between variable
and fixed cost to forecast marketing spending and assess budgeting risks.
• Understand break-even analysis and contribution analysis.
• Decide how to allocate budget between front and back end costs for promotional
activities.

C. Study Unit 2 - Glossary

Unit Margin - Unit price less the unit cost.
Margin (%) - Unit margin as a percentage of unit price.
Channel Margins - Channel profits as percentage of channel selling price.
Average Price per Unit - Can be calculated as total revenue divided by total unit sales.
Price per Statistical Unit - SKU prices weighted by relevant percentage of each SKU in
a statistical unit.
Variable and Fixed Costs - Divide costs into two categories: those that vary with
volume (variable) and those that do not (fixed).
Marketing Spending – Analyse costs that comprise marketing spending.
Contribution per Unit - Unit price less unit variable cost. Ensure that marketing
variable costs have not already been deducted from price.
Contribution Margin (%) – Contribution per unit divided by unit price.
Break-Even Sales - Level for unit breakeven, divide fixed costs by contribution per unit.
Target Volume - Adjust break-even calculation to include profit target.

©IMM Graduate School Study Guide (AMM401P) Page 44 of 220

 D. Study Unit 2 - Learning Path
Week 3 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
• Understand prices Know where to Review prescribed Week 3
and channel margins locate the source textbook
to be able to calculate of costs within an Chapters 3-4-5
selling price for each organisation.
at each level in the
distribution channel.
• Understand how costs
change with volume
with specific Relate to
reference to variable Interactive
costs and fixed costs Know how to Marketing Model
• Be able to calculate identify relevant
marketing spending costs involved in
into total-, variable- any promotional
and fixed cost to activity
forecast marketing
spending and assess
budgeting risks.
• Understand break-
even analysis and
contribution analysis.

©IMM Graduate School Study Guide (AMM401P) Page 45 of 220

 E. Study Unit 2

Margins and Profit

Unit Margin Unit price less the What are the Determine value of
unit cost. standard units in the incremental sales.
industry? May not Guide pricing and
reflect contribution promotion.
margin if some fixed
costs are allocated.

Unit Margin (R) Selling Price per Unit (R) − Cost per Unit (R)

The important difference to remember between mark-up and margin is that a mark-up % is
applied against the cost, whereas margin % is applied against the selling price. But make a
mental note that some retailers and companies use the terms interchangeably.

©IMM Graduate School Study Guide (AMM401P) Page 46 of 220

 Margin (%) Unit margin as a May not reflect Compare margins
percentage of unit contribution margin across different
price. if some fixed costs products/sizes/ forms
are allocated. of product.
Determine value of
incremental sales.
Guide pricing and
promotion decisions.

Margin (%) Unit Margin (R)

Selling Price per Unit (R)

An example of a distribution channel margins:

This evaluates the effect of price changes at one level of the channel on other levels in the
supply chain. A question to ask is does the product change form giving a value add, or is there
no change, but instead a mark-up at each stage in the channel.

Channel Margins Channel profits as Distinguish margin Evaluate channel

percentage of on sales (usual) from value added in
channel selling mark-up on cost context of selling
price. (also encountered). price. Calculate
effect of price
changes at one level
of channel on prices
and margins at
other levels in the
same channel
(supply chain).

Supplier Selling Customer Selling Price (R) − Customer Margin (R)

Price (R)

Customer Supplier Selling Price (R)

Selling Price (R) [1 − Customer Margin (%)]

©IMM Graduate School Study Guide (AMM401P) Page 47 of 220

Averages – Pricing & Costs
Average Price per Can be calculated as Some units may Understand how
Unit total revenue have greater average prices are
divided by total unit relevance from affected by shifts in
sales. producers’ pricing and product
perspective than mix.
consumers’ (e.g.,
ounces of shampoo
vs. bottles). Changes
may not be result of
pricing decisions.

Average Price per Unit Revenue (R)

(R) Units Sold (#)
Or
[Price of SKU 1 (R) ∗ SKU 1 Percentage of Sales (%)] [Price of SKU 2 (R)
∗ SKU 2 Percentage of Sales (%)]

Price per StatisticalSKU prices weighted Percentage SKU mix Isolate effect of price
Unit by relevant should correspond changes from mix
(Stock Keeping Unit) percentage of each over medium-term changes by
SKU in a statistical to actual mix of standardising the
unit. sales. SKU mix of a
standard unit.

Price per Total Price of a Bundle of SKUs Comprising a Statistical Unit (R)
Statistical Unit
(R)

The Range of Costs

Identifying costs is a critical step in overall marketing budgeting. There are various types of
costs, which can be allocated in different sections of budgets. Interpreting these costs can
affect your decisions on whether a marketing activity is profitable or not, or whether to
continue down the same track with a further activity. Once you have consolidated all the
costs from the first activity, you may find to repeat the activity (a run-on or roll-out) could
cost less and so improve your return.

©IMM Graduate School Study Guide (AMM401P) Page 48 of 220

Average and Marginal costs
These costs can be used by marketers to have a broad perspective of a campaign. An average
is simply the total of all costs involved in the particular area being measured divided by the
number of units involved. If the total cost of a mailing of 50,000 items is R250,000, the average
cost of each unit is R5.00. And if the total orders received is 8,000, and the value of these is
R960,000, the average order value is R120. Average cost = Total Cost
Number of units
Marginal cost is the cost of producing the next additional unit after all set up costs have been
accounted for and is used to assess the cost of run-ons. It can be argued that the cost of
extending the campaign will be cheaper than the main campaign as the run-on costs of the
product and producing the promotional material are lower once set-up fixed costs have been
recovered. If the average cost of the mailing item up to 50,000 is R5.00 per unit, that average
has taken into account all the origination costs. However, the run-on costs may not need to
include some of the set-up costs, therefore the marginal cost may reduce, for example, to
R4.50 a unit, so the run-on projections can be calculated at that lower rate. This will obviously
improve the net return.

Opportunity costs
Another cost to consider is opportunity cost. These are not costs that you would put in your
budget as an absolute cost. These are the costs of opportunities foregone i.e. how much could
have been made by using the same resources to do something else, such as another campaign
to a different target audience, using different media, with a different offer, which may
produce more profit. The difference between the return on the first campaign, which may be
R100,000 and the second option, which may be R120,000, is the opportunity cost, which
means you could have made R20,000 more by conducting the second campaign instead.

Types of costs
Costs can be classified as fixed, variable and overheads (indirect fixed costs)
Fixed costs are not influenced by any changes in activity, i.e. creative and artwork origination
cost is the same no matter how many units are used in a promotion.
Variable costs are defined as costs which vary with the amount of a given activity, i.e. the
greater volume mailed, the higher the postage and material costs. Lists purchase and data
capture costs will also be dependent upon the volumes.
Overheads (often termed indirect fixed costs) are costs that are incurred whether or not an
activity takes place, i.e. rents and salaries have to be paid even if there is no activity.
Whereas some costs will increase with quantity, such as a high response will incur extra
resources to handle the processing, (such as additional salary and overtime) other costs, such
as unit costs, will reduce with volume. This happens with printing where the unit cost of a
mail pack reduces substantially with larger volumes. This will also affect the calculations for

©IMM Graduate School Study Guide (AMM401P) Page 49 of 220

testing and roll out, as the roll-out should benefit from a lower cost per unit based on larger
volumes. (Testing will be covered in unit 7)
Variable and Fixed Costs Divide costs Variable costs may Understand how
into two categories: include production, costs are affected by
those that vary with marketing, and changes in sales
volume (variable) selling expenses. volume.
and those that do Some variable costs
not (fixed). depend on units
sold; others depend
on revenue.

Total Costs (R) Fixed Costs (R) + Total Variable Costs (R)

Total Variable Unit Volume (#) x Variable Cost per Unit (R)
Costs (R)

Marketing Spending Analyse costs that Can be divided into Understand how
comprise marketing fixed and variable marketing spending
spending. marketing costs. changes with sales.

Total Selling Total Fixed Selling Costs (R) + Total Variable Selling Costs (R)
(Marketing)
Costs (R)

Contribution per Unit price less unit Understand profit Calculate breakeven
Unit variable cost. Ensure impact of changes in level of sales.
that marketing volume.
variable costs have
not already been
deducted from price.

Contribution Selling Price per Unit (R) − Variable Cost per Unit(𝑅)4
per Unit (R)

©IMM Graduate School Study Guide (AMM401P) Page 50 of 220

 Contribution Margin Contribution per unit Ensure that variable Same as above, but
(%) divided by unit price. costs are consistently applies to dollar
based on units or sales.
revenue, as
appropriate.

Contribution Contribution per Unit (R)

Margin (%) Selling Price per Unit (R)

Front-end and Back-end costs

“Front-end performance” and “front-end analysis” are terms used by marketers to describe
the process of measuring the initial costs of, and response to, a marketing promotion. The
economic analysis of the process that takes place after an initial response is received is
referred to as back-end analysis, or back-end performance.
Front-end costs account for the expenditure for obtaining an inquiry, new customers, or first
order, and the back-end should cover the cost of converting those inquiries into sales, plus
the ongoing retention and communication programmes with the customers. There are often
grey areas of responsibility within a company as to who is responsible for what costs, and who
covers these costs in the budget allocation.
Front-end costs for a specific promotion will include those costs relating to that promotion,
and this narrower interpretation is how front-end costs are often defined. However, you need
to look at front-end costs from a broader perspective to incorporate all the possible costs
involved for running multiple promotions on a multi-media basis.
• Planning and management costs involve time and expertise, some of which may be
internal (management) and some externally acquired (consultants) which can involve
costs on an hourly basis
• Production costs involve all the design and printing of advertising material, or the
setting up of a contact centre facility, and all costs required to produce the material
• Promotion costs include those add-on costs involved in the marketing and sales
activities that support the promotion, such as sales training and incentives
• Advertising media costs will be included such as print or broadcast, if they are used in
the communication delivery
• Public relations and sponsorship deals may also be involved to create awareness and
support
• Direct Mailing costs will be more than just the production costs. The list of names must
be purchased or rented, or if handled internally, there is a cost for data extraction and
processing. Postage is also required
• Tele-contact promotions may be included, so these costs must be estimated if there is
an internal contact centre, or there is a fee for using an external bureau

©IMM Graduate School Study Guide (AMM401P) Page 51 of 220

Back-end costs are incurred to manage the conclusion of the sales and ongoing customer
retention. These costs are generally variable, related to the number of customers to be
managed. It is important to allocate budget funds to back-end retention, as existing
customers are easier to sell to, and the cost of a repeat sale is less than the cost of a new
acquisition customer.
The type of costs involved for back-end activities are often overlooked, yet the list is quite
substantial and includes:
• Internal operational activities involved for handling the campaigns, such as the
administration to process the orders
• Staff training and motivation, which could include performance incentives
• Setting up lead distribution systems for the sales force when there is still the need to
convert the lead to a sale. Enquiries or leads have to be sent to specific sales people,
and this may be by fax or e-mail and has to be administered and controlled
• Response handling costs when the consumer is offered a freepost reply, or to call in
on a toll-free number. These are part of the promotional costs and are often
overlooked by the marketing department. The greater the response, the greater the
cost
• Contact centre resources are generally used to handle campaign response activities,
where there is often the need to contact the customer to verify information and follow
up to conclude sales. These costs are in addition to the single focus sales campaign
calls budgeted in front-end costs, though they may well be handled and actioned from
the same call centre
• Data capturing and results analysis from the responses received. Leads generated
from the promotions must be data captured and used for follow-up
• Fulfilment of the orders back to the customers or handling the queries. This may
involve both mail and phone, or product delivery charges
• “Nixie” handling for returned mail that has not reached the addressee. There is a cost
to data capture, follow up verification checks and where necessary to flag the data
files to prevent repetitive wasted mailings
• Cancellation of orders where a customer has ordered and then changed their mind.
Costs are incurred for all the processing up to the point of cancellation
• Cost of goods returned involves handling and administration costs for goods that are
either damaged, or returned as the customer did not want them after the free-trial
period had expired
• Bad debts also have to be written off and budgeted for, and there is not just the cost
of the loss owing on the order, but the follow up time and phone calls. Bad debt
customers then have to be flagged on the database so they are not offered further
promotions

©IMM Graduate School Study Guide (AMM401P) Page 52 of 220

• Loyalty programmes require a long-term commitment, and there are a multitude of
costs associated with this form of marketing, so the running costs need to be allocated
in the back-end

The list could go on, but the key point is that any cost that is incurred to action any activity,
needs to be accounted for. Often the marketing department creates new business
opportunities that cause increased volumes of administration processing throughout the
organisation to cope with the increase in sales.
There needs to be careful planning with all parties concerned so there is capacity to cope, and
agreement as to who will pay. If there is internal bickering on this subject, there is a danger
of the business flow being bottlenecked in various departments and new sales and customer
service suffering.
Many of these costs may well sit outside a marketing budget, but they are still real costs that
are incurred by the organisation. These costs have to be allocated somewhere, and if you
review the Interactive Model, you can identify a location where you will find most of these.

Breakeven Review
Breakeven calculations are to determine how many units or Rand’s worth of a product need
to be sold to cover all costs.
• The Breakeven Point is selling enough to just cover fixed costs.
• Unit Breakeven is unit sales required to cover fixed costs
• Revenue Breakeven is sales revenue required to cover fixed costs

At break-even, total costs equals total revenue. Profit is only earned when total revenue
exceeds total cost. Even if you have calculated profit margins per product unit on your total
estimated sales, it does not come into effect until you have passed the breakeven point, and
only then can you claim a return on your activity.

Break-Even Sales Level For unit Variable and fixed Rough indicator of
breakeven, divide cost estimates may project
fixed costs by be valid only over attractiveness and
contribution per certain ranges of ability to earn profit.
unit. For revenue sales and
breakeven, divide production.
fixed costs by
contribution margin
(%).

©IMM Graduate School Study Guide (AMM401P) Page 53 of 220

 Break-Even Fixed Costs (R)
Volume (#) Contribution per Unit (R)

Break-Even Break − Even Volume (Units) (#) x Price per Unit (R)
Revenue (R) Or
Fixed Costs (R)
Contribution Margin (%)

Target Profits
Unless the company is a non-profit a company don’t want to just breakeven on costs, a
company wants to earn profit. Marketers can calculate how many units have to be sold in
order to breakeven on cots and to produce a particular level of profit.

Target volume calculations is to determine how many units or Rand’s worth of a product need
to be sold not just to cover costs, but to achieve a certain profit objective as well. These are
the same target that are communicated through to sales people as their sales targets.
Target Volume Adjust break-even Variable marketing Ensure that unit
calculation to costs must be sales objectives will
include profit target. reflected in enable firm to
contribution achieve financial
margins. Sales hurdle rates for
increases often profit, ROS, or ROI
require increased
investment or
working capital.

Target Volume [Fixed Costs (R) Target Profits (R)]

(#) Contribution per Unit (R)

Target Revenues Convert target Same as above. Same as above,

volume to target applied to revenue
revenues by using objectives.
average prices per
unit. Alternatively,
combine cost and
target data with
knowledge of
contribution margins.

©IMM Graduate School Study Guide (AMM401P) Page 54 of 220

 Target Revenue Target Volume (#) x Selling Price per Unit (R)
(R) Or
[Fixed Costs (R) Target Profits (R)]
Contribution Margin (%)

Know that there is also a Price-Volume relationship at play. While a static relationship like the
target volume and target profit equations provide a sound framework for estimating sales
targets, price points, and budget allocations, often it is necessary for a manager to test various
pieces of these equations in the quest for improving profitability. The price-volume
relationship is not so easy to calculate and are elusive to pinpoint.

F. Study Unit 2 - Revision Exercises

Revision Discussion Questions
Explain the difference between variable costs and fixed costs and why it is important
to know when determining Price.
Refer: The Interactive Marketing Metrics You Need – Rebecca Jennings
Identify core front end and back end costs you need to account for in conducting a
promotion.

Multiple Choice Questions

The difference between revenue and cost before accounting for certain other costs:
A. Gross Margin
B. Unit Margin
C. Channel Margin
D. All of the above

Breakeven occurs when:

A. Profits are marginally positive
B. Variable and fixed costs are equal
C. Total contribution equals the fixed costs
D. Marginal cost equals marginal revenue

©IMM Graduate School Study Guide (AMM401P) Page 55 of 220

 G. Study Unit 2 - Revision Exercises Solutions
Explain the difference between variable costs and fixed costs and why it is important
to know when determining Price.
• Fixed costs are items that will not vary regardless of the level of sales and production.
e.g. rent is a fixed indirect cost that still has to be paid even if there are no sales or
production.
• Variable costs can change and are related to volume. The more you produce -the
higher the production costs.
• The more you market, the higher the advertising and selling costs.
• However, if sales revenue increases more than variable costs, then net profit can
increase. But if variable costs increase e.g. due to need for increased investment or
working capital, the breakeven point will increase. If sales at a set price are insufficient
to generate the revenue, then price would have to be adjusted upwards, but an
increase in price may reduce demand and lower sales.

Identify core front end and back end costs you need to account for in conducting a
promotion.
You may not be responsible for all the costs within marketing, but you need to be aware of
the broad functions that are accountable within different budgets in an organisation.
Marketing activities can have a knock-on effect across to other budgets.
• Front end costs can include and are not limited to:
Planning and management time / production and printing costs for material / sales
promotions / advertising media / public relations support / communication costs –
mailings, telephone, email etc.
• Back end costs can include and are not limited to:
Fulfilment processes / loyalty programmes / response handling / lead processing &
distribution / Data capturing / sales training, motivation and incentives / cost of
goods returned / cancellation of orders

The difference between revenue and cost before accounting for certain other costs:
A. Gross Margin
B. Unit Margin
C. Channel Margin
D. All of the above

©IMM Graduate School Study Guide (AMM401P) Page 56 of 220

 Breakeven occurs when:
A. Profits are marginally positive
B. Variable and fixed costs are equal
C. Total contribution equals the fixed costs
D. Marginal cost equals marginal revenue

H. Study Unit 2 - Progress check

You have come to the end of Study Unit 2.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

Your Progress Checklist

Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:

©IMM Graduate School Study Guide (AMM401P) Page 57 of 220

 • Understand prices and channel margins to be able to calculate selling
price for each at each level in the distribution channel.
• Know how to calculate meaningful average selling prices within a
product line that includes items of different sizes.
• Understand how costs change with volume with specific reference to
variable costs and fixed costs.
• Be able to calculate marketing spending into total and differentiate
between variable and fixed cost to forecast marketing spending and
assess budgeting risks.
• Understand break-even analysis and contribution analysis.
• Decide how to allocate budget between front and back end costs for
promotional activities.

Are you ready to tackle the questions relevant to Study Unit 2 in Assignment
1?

DO Assignment 1, Q 1

©IMM Graduate School Study Guide (AMM401P) Page 58 of 220

 Study Unit 3 - Pricing Strategy
Week 4 (Chapter 7 - Key Marketing Metrics)
“We can now provide better revenue predictions, which make the
business much more confident about making marketing investment
decisions to achieve revenue goals.”
- John Watton

A. Study Unit 3 - Relevance

In this unit the different pricing & promotional strategies available to marketers are reviewed
with their respective metrics. The main pricing strategies discussed in this unit covers what is
the Price Premium that a marketer can put to the market, how to determine the optimal Price,
and determine Price Elasticity.

According to Philip Kotler, Price is the one element of the marketing mix that produces
revenue; the other elements produce costs. Pricing is the easiest marketing-mix element to
adjust; whereas product features adaption, channels and distribution development, and
producing a promotion takes more time.
But in today’s market, organisations are facing a number of difficult challenges of pricing
tasks:
• How to respond to aggressive price cutting
• How to decide on the price of the same product when it is delivered through different
channels
• How to price a new improved product, while there is still demand for the earlier
version

B. Study Unit 3 - Key Concepts

Let’s recap what the relevant module learning outcomes are for this study unit
• To identify the range of choices for pricing strategies
• To determine product pricing in the context of market competition.
• Understand market responsiveness to changes in price.
• Understand price elasticity on a demand curve.

©IMM Graduate School Study Guide (AMM401P) Page 59 of 220

• How to calculate optimal pricing strategy.
• How to utilise a combination of pricing strategies.

C. Study Unit 3 - Glossary

Price Premium - the percentage by which the price of a brand exceeds a benchmark
price.
Reservation Price- is the value a customer places on a product and how much that
individual is willing to pay for it.
Maximum reservation price - is the lowest price at which quantity demand equals
zero.
Maximum willing to buy (MWB) -is the quantity customers will “buy” when the price
of the product is zero.
Percent Good Value - The proportion of customers who considers the product to be
good value
Price Elasticity of Demand - The responsiveness of demand to a small change in price,
expressed as a ratio of percentages.
Optimal Price – is halfway between the maximum reservation price and the variable
cost of the product in a linear demand function.

D. Study Unit 3 - Learning Path

Week 4 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
• To determine product Complete the List recourses Week 4
pricing in the context review exercises such as:
of market competition. Read pages 219-
• Understand market 261 ….
responsiveness to Sign-up for
changes in price. eLearn
• Understand price Check activities
elasticity on a demand on
curve.

©IMM Graduate School Study Guide (AMM401P) Page 60 of 220

 • How to calculate eLearn
optimal pricing Consult eLibrary
strategy. Obtained
• How to utilise a feedback
combination of pricing Call Centre
strategies.

E. Study Unit 3
Pricing Strategy

©IMM Graduate School Study Guide (AMM401P) Page 61 of 220

 Determining the product price (Farris et el. 2017)
When a company is planning to launch a new product, or expanding the distribution choices
or geographic coverage, it needs to decide where to position the product in relation to the
price compared to the quality and value delivered to the customer. This is not an easy
procedure and there are many factors that can influence the final decision. Kotler describes
a six-step procedure for setting a pricing policy.

1 Selecting the pricing The objective will relate to the desired positioning and
objective can be selected from – survival / maximum current
profit / maximum market share / maximum market
skimming / product quality leadership.
2 Determining demand Demand will relate to the different levels of pricing,
generally the higher the price the lesser the demand.
Elasticity of demand will be a determining factor in this
calculation. (refer later in this unit)
3 Estimating costs Demand sets the upper level that price can be set. But
costs set the floor level. Price must at least cover the
costs for production, distribution and selling and a fair
return. (refer unit 2 for costs)
4 Analysing competitors The nearest competitor should be identified not only for
its price, but what else is included in the offer compared
with the offer of the company. This will determine
whether you can pitch slightly higher if you have more
differentiation features or need to go lower if they have
more than you.
5 Selecting a pricing method One you know your demand potential, all your costs,
and competitors range of pricing, you can decide your
price.
6 Selecting the final price There may be other factors such as brand positioning,
psychological pricing relating to price and quality
perceptions, risk issues with certain buyers that may
need an extra price layer to cover for potential losses.

©IMM Graduate School Study Guide (AMM401P) Page 62 of 220

 Adapting alternative pricing options.
Companies can use a range of other options for setting prices. These can include:
Mark-up pricing – this is adding a standard mark-up percentage to the cost of the product. It
is a simple option once fixed costs and variable costs are known. Mark-ups can be adapted
according to other factors. Products with seasonal sales (risk of not selling all the products),
slow moving items, high storage or handling costs.
Unit cost = variable cost + fixed cost
unit sales
If a mark-up of 30% on sales is required –
Mark-up price = ________unit cost__________
(1 - Desired return on sales: 0.3)
Target-return pricing – is where the company decides on the price that would yield the target
rate of return on investment (ROI) If the unit costs are known, the break-even volume can
also be calculated.
Break-even volume = _____fixed cost__________________
(price per unit – variable cost per unit)

Promotional pricing – this can be carried out by the company or could be separately
introduced by a retailer in the supply channel to stimulate purchase. Pricing variations can
include:
• Loss-leader is a common technique. This where the price of a well know product is
dropped substantially to attract customers into a store with the aim of selling them
other products and so making up the initial lower return on the loss leader.
• Special-event pricing is where special prices are offered in certain seasons, such as
January sales after Christmas, and Black Friday discounts in November.
• Cash rebates where cash is offered within a set limited time period, generally used to
help clear stock, and does not alter the set listed price. Often used by car industry
retailers.
• Psychological discounting is a well-used technique, where the price advertised is
dropped below a perceived barrier level. e.g. the one rand off – a R500 price item
promoted as R499. The consumer thinks in terms of R400 and ‘something’ is much less
the R500.
• Seasonal discounting is another form of promotional pricing whereby the price is
lowered for selling products, or services out of season. The travel and tourist industry
offer discounts when they have off-peak periods when demand has a natural seasonal
slowdown. This can be important for industries that have fixed costs to cover, such as
plane seats or hotel bed nights. If these resources are not utilised within a set time
period, the opportunity to recover a return is lost forever.

©IMM Graduate School Study Guide (AMM401P) Page 63 of 220

Differential discriminatory pricing – this occurs when the same product or service is charged
at a different price to customers depending on differing circumstances. These can include:
Channel pricing where the same product can vary in price according to the outlet. e.g. the
same bottle of wine will sell at a different price depending on whether it is through a retail
grocery store, or bulk bottle store outlet, or in a restaurant.
Time pricing is another differential option. Telecoms companies charge differential rates for
off-peak times during evening and weekends. Data providers offer day time rates for usage
and specials rates for night time web surfing. Time pricing also extends to the airline industry
where prices vary according to the time of the flights.
Status pricing can be built into many purchasing options. Airlines will have different fare
structures according to seating class, even though it is the same plane flying to the same
destination arriving at the same time. Further examples would be loyalty club customers who
can get special discounts or rates, and senior citizens who can receive preferential discounts
or rates at selected times.
Two-part pricing can be used where there is a mix of a fixed fee, such as a monthly contract
for a cell phone, and a variable fee for actual usage. Most telecoms providers use this system.
These influences on pricing decisions give you a broad overview of the variety of options.
Now refer to the prescribed textbook for core pricing metrics.

Price Premium
It is important for marketers to monitor price premiums as early indicators of competitive
pricing strategies. When there is a sudden change in price premiums it can be a sign of product
shortages or other changes in the supply and demand relationship.
Price Premium The percentage by Benchmarks include Measures how a
which the price of a average price paid, brand’s price
brand exceeds a average price compares to that of
benchmark price. charged, average its competition.
price displayed, and
price of a relevant
competitor. Prices
can be compared at
any level in the
channel and can be
calculated on a gross
basis or net of
discounts and
rebates.

©IMM Graduate School Study Guide (AMM401P) Page 64 of 220

 Price premium (%) Brand A Price (R) − Benchmark Price (R)
Benchmark Price (R)
Marketing managers can also divide a brand’s share of the market in value terms by its share
in volume terms to calculate price premium.
Price premium (%) Revenue Market SHare (%)
Unit Market Share (%)
Note: using the average price paid benchmark

Reservation Price
Provides a basis for estimating product’s demand seeing that the Reservation price is the
value a customer places on a product and how much that individual is willing to pay for it.
• Maximum reservation price: is the lowest price at which quantity demand equals zero.
• Maximum willing to buy (MWB): is the quantity customers will “buy” when the price
of the product is zero.

Linear demand: Price and quantity demanded

Percent Good Value

The proportion of customers who consider the product to be good value, seeing that the
selling price is below their reservation price.

©IMM Graduate School Study Guide (AMM401P) Page 65 of 220

The diagram below indicates that customers make their decision based not on fair price, but
the fair value (perceived benefit minus the actual price). “The net worth of the value equation
can be thought of as the perceived pleasure (benefits) one receives from the product minus
the perceived pain (the price). Perceived value is a long-term gain while price can be used for
short-term gains.” (Kothari 2018) Please note that the equation has no reference to the actual
cost of producing a product.

Kothari, S. (2018).

Price Elasticity of Demand

Price elasticity measures the responsiveness of quantity demanded to a small change in price.
It can greatly assist a marketer to determine the optimal price. If there is a considerable
change in demand, it is counted as elastic, but if there is a small change in price and demand
hardly changes, it is counted as inelastic. This could happen if buyers don’t want to change
their buying pattern and are slow to react, often described as ‘inertia’, or if they think the
increase is justified and passively accept it.

Price Elasticity of The responsiveness For linear demand, Measures the

Demand of demand to a small linear projections responsiveness of
change in price, based on elasticity quantity to changes
expressed as a ratio are accurate, but in price. If priced
of percentages. elasticity changes optimally, the margin
with price. For is the negative
constant elasticity inverse of elasticity.
demand, linear
projections are
approximate, but
elasticity is the same
for all prices.

Price Elasticity of Change in Quantity (%)

Demand (I) Change in Price (%)

©IMM Graduate School Study Guide (AMM401P) Page 66 of 220

 Optimal Price
The optimal price is halfway between the maximum reservation price and the variable cost of
the product in a linear demand function
Optimal Price For linear demand, Optimal price Quickly determines
optimal price is the formulas are the price that
average of variable appropriate only if maximizes
cost and the the variable cost per contribution.
maximum unit is constant, and
reservation price. there are no larger
For constant strategic
elasticity, optimal considerations.
price is a known
function of variable
cost and elasticity.
In general, optimal
price is the price
that maximizes
contribution after
accounting for how
quantity changes
with price.

Optimal Price for a [Maximum Reservation Price (R) + Variable Cost (R)]
Linear Demand 2
Function (R)

Gross −1
Margin at Elasticity (I)
Optimal Note: The gross margin on a product at its optimal price will be the
Price (%) negative inverse of its price elasticity

Residual Elasticity
Residual Elasticity Residual elasticity is Rests on an Measures the
“own” elasticity plus assumption that responsiveness of
the product of competitor reaction quantity to changes
competitor reaction to a firm’s price in price, after

©IMM Graduate School Study Guide (AMM401P) Page 67 of 220

 elasticity and cross changes is accounting for
elasticity. predictable. competitor reactions.

Residual Price Own Price Elasticity (I)

Elasticity (I) + [Competitor Reaction Elasticity (I) x Cross Elasticity (I)]
(Farris et el. 2017)
If a marketer wants to account for both customer’s price elasticity and potential competitive
reactions when planning price changes the residual price elasticity can be utilised and consists
of three factors:
• Own price elasticity: The change in units sold due to the reaction of a company’s
customers to its changes in price.
• Competitor reaction elasticity: The reaction of competitors to a company’s price
changes.
• Cross price elasticity: The reaction of a company’s customers to price changes by its
competitors.

Residual Price Elasticity

Conclusion
This unit unpacked main categories of metric tools available to marketers to decide on pricing.
Pricing strategies can vary according to multiple market variations, and there is generally no
single clear-cut view. Marketers must be flexible in their decision making and be able to
respond to competitive actions.

©IMM Graduate School Study Guide (AMM401P) Page 68 of 220

 F. Study Unit 3 - Revision Exercises
Revision Discussion Questions
Explain the concept of Percent Good Value and how it relates to the price for a
product.
Explain the two points on the linear demand function graph in terms of price.

Multiple Choice Questions

The price above which a customer will not buy a product, also known as maximum
willingness to buy:
A. Price Premium
B. Relative Price
C. Reservation Price
D. Price Elasticity

Residual Price Elasticity is the combination of three factors. Which one is not a factor?
A. “own” price elasticity
B. “supplier” price elasticity
C. “competitor” reaction elasticity
D. “cross” price elasticity

G. Study Unit 3 - Revision Exercises Solutions

Revision Discussion Questions
Explain the concept of Percent Good Value and how it relates to the price for a
product.
• The proportion of customers who consider the product to be good value.
• The selling price is below their reservation price which is the price the customer places
on the product and how much they are willing to pay for it.
• The decision is based on perceived value, not on price.
• Perceived value is a long-term gain, price can be perceived as a short-term gain.
• PGV is the individual’s maximum willingness to pay.

©IMM Graduate School Study Guide (AMM401P) Page 69 of 220

 Explain the two points on the linear demand function graph in terms of price.
• Linear demand graph is when reservation prices are equally spaced.
• Each increment in price will reduce quantity by an equal amount.
• Only two points to determine a straight linear line –
• Upper point - Maximum Willingness to Buy (MWB) is the quantity sold when the price
is zero and potential customers only buy one unit. It is an artificial concept used to
anchor a linear demand function.
• Lower point - Maximum Reservation Price (MRP) is a number slightly greater than the
highest reservation price among all those willing to buy.
• If a firm set its prices for its product at or above MRP, no-one will buy.

Multiple Choice Questions

The price above which a customer will not buy a product, also known as maximum
willingness to buy:
A. Price Premium
B. Relative Price
C. Reservation Price
D. Price Elasticity

Residual Price Elasticity is the combination of three factors. Which one is not a factor?
A. “own” price elasticity
B. “supplier” price elasticity
C. “competitor” reaction elasticity
D. “Cross” price elasticity

H. Study Unit 3 - Progress check

You have come to the end of Study Unit 3.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

©IMM Graduate School Study Guide (AMM401P) Page 70 of 220

 Your Progress Checklist
Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
• To identify the range of choices for pricing strategies
• To determine product pricing in the context of market competition.
• Understand market responsiveness to changes in price.
• Understand price elasticity on a demand curve.
• How to calculate optimal pricing strategy.
• How to utilise a combination of pricing strategies.

Are you ready to tackle the questions relevant to Study Unit 3 in Assignment
1?

DO Assignment 1, Q 2

©IMM Graduate School Study Guide (AMM401P) Page 71 of 220

SECTION 2 - Sourcing Results Information
WEEKS 1-7 ASSIGNMENT 1

Study Unit 4 – Marketing Database Principles

Weeks 5 & 6

“In five years time there will be two types of companies. Those who use the computer database
as a marketing tool, and those who face bankruptcy”’
- Warren MacFarlane

A. Study Unit 4 - Relevance

The database had become a critical component of marketing. No longer is the database the
preserve of just the IT team. Marketers have to become engaged with all elements of
databasing if they are to cope and progress on today’s business environment. Indeed, the role
of marketers could well lead in a different direction to previous traditional career paths. The
question can be asked for the future - do marketers need to add financial and risk analysis
skills to their portfolio, and will they need to become the new “data scientists” who will need
a level of skills across the range of maths, statistics, programming and analytical ability?
What will be the profile of the main players in the future data driven world?

Marketers will need to be multi-tasked. Therefore, this unit is an important addition to the
overall structure of marketing metrics. You may know what you want to measure to identify
if you have a ROI, you may identify the relevant formulae, but unless you know what data
information is available, and from which source, you will not be able to complete the metrics
analysis.

In earlier units you will have identified metrics ‘hot spots’. Now you need to identify what
data is being captured, and what information you want to extract. If you review the
Interactive Marketing Model again, you will see that the database underpins the whole model
to which all activities are linked.

“Knowledge is not power – it’s what you do with knowledge that is power”
- Director of Market Research: Dell Computers

©IMM Graduate School Study Guide (AMM401P) Page 72 of 220

 B. Study Unit 4 - Key Concepts
Let’s recap what the relevant module learning outcomes are for this study unit
• Understand the key elements and importance of a marketing database for providing
information for metrics.
• Be able to identify the various points of entry into an organisation for marketing
information to be captured.
• Understand and select the key data fields that are required for capturing information.
• Know how to identify extraction criteria that will give information for populating
metrics formulae.
.

C. Study Unit 4 - Glossary

Data field – a group of data elements relating to a detail about a customer, such as a
name or date of birth.
Data record – a collection of fields relating to one customer.
Marketing database – a collection of customer records.
CIF – Customer Information File, a unique number identifying a specific customer.
Customer contact rules - the “rules of engagement “determine how you will
communicate with customers.
Propensity scores - a method of using statistical models that identify which product a
customer is more likely to buy.
Points of contacts – an entry point of information into an organisation.
Descriptive data – describes details of a customer.
Predictive data – projects future potential using descriptive data.
Data extraction – a documented brief identifying required data fields for a marketing
activity.
Suppression data – what is filtered out from an extraction brief.
Deduplicate – a system of removing names and addresses which appear on a database
more than once.

© IMM Graduate School Study Guide (AMM401P) Page 73 of 220

 D. Study Unit 4 - Learning Path
Week 5-6 Time allocation: 30 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
 Understand the value Complete the Sign-up for eLearn Week 5-6
and importance of a review Check activities on
exercises eLearn
database for
Consult eLibrary
marketing.
Obtained
 Know where to find feedback
the key sources of data Call Centre
within an organisation
and identify core data
fields required for
marketing and
measurement
purposes.
 Identify the main
points where contact
points where customer
data enters an
organisation.
 Understand how to
select the marketing
information required
for extraction for
marketing activities

© IMM Graduate School Study Guide (AMM401P) Page 74 of 220

E. Study Unit 4
Data is at the core of all the elements of the marketing metrics model.

(Farris et el. 2017)

The volume of business data worldwide across all companies doubles every 1.2 years. The
role of Big Data is to deliver deep insights and understanding intelligence about customers,
markets and operational efficiencies. This unit will give you the background to the importance
of using a marketing database.

Key elements
There are three distinct capabilities that are required to support sophisticated database
marketing.
An operational campaign management system facilitating the management of
customer communication across multiple delivery channels.

© IMM Graduate School Study Guide (AMM401P) Page 75 of 220

 Analytical / statistical / data mining tools to support the ongoing analysis of customer
data that is required as a feed into the campaign planning process.
Management information delivery tools that provide usable information on desktops
of product / customer managers to allow them to both evaluate ongoing campaigns
and view customer in a user-friendly way.

There are a number of key elements that must be in place to conduct ongoing analysis of the
customer base. These are:
• Customer contact rules – the “rules of engagement “determine how you will
communicate with customers. You need to decide the media options, ensure there is
control over different departments to prevent different messages being sent out, and
the rules for frequency of customer contact.
• Contact history – it is essential to know how often customers have been contacted on
which campaigns, and equally important, if they responded and via which media.
• Customer value – all customers are not created equal. The more valuable customers
will influence where the marketing budget is spent.
• Propensity scores – a method of using statistical models that identify which product a
customer is more likely to buy. This falls into the scope of predictive modelling.
• Risk profiles – the understanding of the potential risk of lending or extending credit to
customers can influence the type of promotional offers that can be offered.
• Channel usage – the tracking of which channels a customer transact through, and how
this influences customer communications.

The strengths of database marketing

A database allows a company to actually implement all the strategic advantages and benefits
of direct marketing. Without the database much of the action associated with direct
marketing could not take place. The strengths allow us to:
• Measure the results of a campaign to determine its effectiveness and decide whether
to make any changes and conduct a future roll out.
• Select the specific audience to whom the communication is relevant, and not have to
communicate to an untargeted mass market with the resultant waste of expenditure.
With the rising cost of advertising and personal selling, correct use of the database
allows for a saving on marketing expenditure.
• Test different elements, such as the product offer, the price, the selected
communication medium, or the range of the target market. (testing is covered in unit
7)
• Personalise the communication to the individual customer or prospect. This has the
added advantage of looking more professional and thus developing the relationship,
which in turn will help to increase the response rates.
• Be flexible in the timing of the communication to know when to approach prospects

© IMM Graduate School Study Guide (AMM401P) Page 76 of 220

 and when they are most likely to react to the offer and respond. Knowledge of
individual buying patterns, seasonal trends, product replacement and repurchasing
times, all becomes critical information for effective targeted communication.
Here are some examples:
• Contact centre operations that are driven almost entirely by database information,
especially with predictive dialling.
• Field sales support where the sales force calling schedules on customers is managed
through the customer database for leads and sales information.

What is a marketing database?

 “A marketing database is a list of customers’ and prospects’ records that enables
strategic analysis and individual selections for communication and customer service
support.
 The data is organised around the customer.”
A. Tapp: Principles of Database Marketing

This means you need to be able to access different sets of information and get an overview
of the customer from the inter-related data, and use the data for different purposes, such as
marketing, accounts, customer service, call centre support, and get it on time when you need
it.
The data must also be accurate. You don’t want one set of information about a customer in
one section of your database, and different information in another. If data is kept in separate
silos, when a customer updates their address you run the risk of the new address not being
updated in all silos, so you need to have this information on a common accessible platform.
In simple terms, a marketing database can best be pictured as an electronic version of an
office filing cabinet, holding records of customers. Each customer card is held in various files.
The entire set of records is cross-referenced against the other files so that the customers can
be selected according to different characteristics.

Points of entry
Internal data
A database is only as powerful as the data it houses, so we must determine the scope of the
data and how we are going to control the inflow of the information from the various points
of entry.
Furthermore, data decays very quickly, that is it gets out of date, thus forcing you to
continually spend time and money on updating your data.
When assessing internal data it is necessary to go through what is often a maze of sources
and people in order to get to the core information that is required. A marketer has to conduct
an investigation in order to:
 identify what is available

© IMM Graduate School Study Guide (AMM401P) Page 77 of 220

  find where it is stored, in what format, and who controls the retrieval and extraction
process
 assess the quality and accuracy of the information, how it was captured, and when it
was last updated (its currency)
 identify what is not available, and what still needs to be sourced
 decide if all the data available is actually necessary
 review how it can be maintained, and the extent of its shelf life

Intelligent use of internal data - The Data Chain --> Unprocessed to Refined
Data Information Intelligence
A clutter of facts A collection of facts The results and interpretation
of information analysis

The way to identify where marketing data comes from is to conduct a marketing data audit.
This helps you to identify all the points of contact or entry points for information that needs
to be collected.
However, you will also need to monitor the quality of data captured at each point of entry.
Staff handling some of the points of entry may enforce strict quality controls, but others may
not check the correctness of the data as carefully. For instance, staff may not be ensuring that
the correct customer address details are being captured, which could cause serious marketing
problems later on.

© IMM Graduate School Study Guide (AMM401P) Page 78 of 220

 CUSTOMER CONTACT RESPONSE - POINTS OF ENTRY

DIRECT ADVERTISING

C
Telephone Print
U

Electronic S TV
T
Mail O Radio
M
Magazine E Sponsorship
R
S
Inserts FACE TO FACE

Sales personnel

INDIRECT
Agents

Word of Accounts staff

mouth
Delivery staff

Social
Media Customer
Servicing
outlets

A convenient way to classify data is to divide it into inbound and outbound flows. “Inbound
data” can arrive at the company from such sources as:
• Sales force contact with customers
• Inbound calls to a contact centre where the customer asks for information
• Customer service staff at outlets, such as retail stores or branches
• Customer surveys conducted by research companies
• Responses to promotions in advertising media or direct mailings
• External third-party data

© IMM Graduate School Study Guide (AMM401P) Page 79 of 220

“Outbound data” could include data used for:
• Direct mailshots to existing or prospect customers
• Outbound telemarketing campaigns from a contact centre
• Technical support follow-up to customer requests for assistance or information
• Electronic contact with customers via individual or batched communication using e-
mail or web site messages
• Sales contact with customers either directly or through the sales force

Key data fields

Defining information requirements
It is important for marketers to be involved in the identification and specification of
applications requirements, for these will determine what data needs to be stored. This leads
directly to the question of what technology should be used.
Often marketers become involved after the IT department has already designed the database
and then find the information they require has not been specified into the system.
Marketers need to identify the use of the information available. This is the “application” of
the data. Ideally, the applications should allow the marketer to:
• Target the best customers
• Identify future customers and future market trends
• Know customer response patterns to promotions, and know why they respond to
specific promotions
• Communicate with customers relevantly by having total knowledge about them
• Focus on the lifetime value of customers for repeat business and not just on one- off
sales
• Input additional customer data gathered from responses from individuals, either by
mail or phone
• De-duplicate and verify data to ensure an individual customer’s records are not
captured onto the database in several different places. This causes a higher cost when
mailing, as there is wastage in sending the same information several times to the same
person. In addition, duplicate mailings can be source of irritation to clients
• Manipulate and interrogate data to review optimum volumes for a specific
communication exercise
• Flag customers of a specific campaign in order to track how many times they have
been contacted
• Track responses from those who have been contacted via specific promotions to
measure the effectiveness of the media
• Breakdown customer segments using, for example, decile analysis that ranges from
high to low levels of profitability (refer unit 10, Customer profitability)

Data fields for recording customer information

© IMM Graduate School Study Guide (AMM401P) Page 80 of 220

Again, the database is only as powerful as the data it houses, yet many times far too much is
expected from data that quite simply does not exist on the database. This can occur because
the data has never been captured correctly or has not been updated and has decayed and is
too old to be of value.

When deciding what data needs to be captured, it is advisable to split the data into two
different categories:
i) Descriptive, which describes the customer
ii) Predictive, which uses existing descriptive information to estimate what will happen
in the future if certain activities take place.
Descriptive data
Descriptive data consists of basic factual information, it describes what is captured on record
for individual customers.
Marketers will relate data to three main categories namely, people, products and promotions.
If data is collected, maintained and stored correctly, the marketer should have information
pertaining to customer profiles, (for segmentation of customers) customer purchase
information, (to know the recency, frequency and monetary values of product sales) and
customer promotion history (to know from which campaign, which offer type, and from which
medium the customer responded)
Customer data as outlined below, relates to individual consumers and incorporates basic
demographic information. (Data that is required for Business to Business marketing will vary
slightly, and require more detail about the company and those staff involved in the buying
process)

Demographic data
Demographic consumer data can be split between “people data” (basic information about
individuals) and “contact data” (all the information needed to reach them with whatever
direct medium is selected)

TYPES OF DESCRIPTIVE DATA

Demographic – People data Hints for collection and use
Name Ask for title, first name and surname
Identity Decide the choices that are acceptable
Date of birth This is fixed information – don’t ask for age as age this
year is out of date next year
Marital status You may need this for legal purposes
Language Do not make an open offer - only state those languages
you can provide from your staff

© IMM Graduate School Study Guide (AMM401P) Page 81 of 220

 Income level Be clear whether it is monthly, yearly, gross package
or net disposable. Let them tick a range option and not
a specific amount for each customer
Occupation Don’t leave this open – it could be too vague. Specify
the occupation groups you need and let them tick

Demographic – Contact data Hints for collection and use

Address Make sure you specify if residential or postal or both,
as they can be different
Post code Vital for your mailing information and sorting at SAPO
Telephone Specify preferred choice for contact, generally select
two options
Fax / cell Collect all options you can with codes
e-mail Build this in on every occasion and start collecting as it
becomes a powerful low-cost method of contact

Product data
Product data can be divided into account purchase and activity behaviour, or transaction
history. Account purchase would show basic purchase details that would be customised
within each company

Activity behaviour would show patterns relating to individual customers. For instance, how
often they purchase, and how much they purchase each month. And to which media they
respond, or their preferred method of buying, such as from a store or via mail order.
The following tables give you an overview of the main types of information that marketers
store on a database:
Product – Account Purchase Hints for collection and use

Account number For referencing back to customer unique ID

First purchase Lets you know how long they have been with you –
useful for loyalty tracking
Home site Where do you want to domicile this customer?
Customer rating Allocates a “worth” code to identify value of customer

Account or transactional purchase details would include:

Product – Transaction Activity Hints for collection and use
Behaviour

© IMM Graduate School Study Guide (AMM401P) Page 82 of 220

 Recency of purchase When did they last buy – has there been a dormancy
period?
Frequency of purchase How often do they buy – can you increase this?
Value of purchases How much do they spend over a period – do you have
the potential to increase this?
Types of products Lets you assess the potential for cross selling
Response media Lets you know which advertising is reaching the
customer
Purchase method Shows the customer preference for buying direct by
mail, ordering by phone, or going in a store

Promotion
Promotion activity behaviour details track the effect of specific promotions in order to
measure the response rates and financial return. The information can include:
Promotion Hints for collection and use
Products Make sure you get all the sales volumes metrics from
all sources to measure results against projections
Response pattern Lets you know who responds to which offers and you
can measure which media is attracting the most
response
Purchase method Lets you know customers preferred way of buying. This
allows you to focus your advertising media offers and
allocate stock for the most popular channel
Testing Lets you find out which combination of media
variables, offers, pricing and segments work best
Contact strategy Lets you know which combination of media and sales
approaches work most effectively, so you can allocate
your resources accordingly

Business to Business data elements

So far, the focus has been concentrated on consumer data fields. Business to Business also
needs to be considered. Market segmentation in B2B marketing is complex and differs for the
various sectors of the economy. Market segmentation attempts to identify groups of firms
similar in their purchasing needs, product expectations, and responses to marketing
programmes. Therefore, you need a wider selection of data fields to cater for the required
information.

© IMM Graduate School Study Guide (AMM401P) Page 83 of 220

 B2B Data fields Hints for collection and use
Company name Primary name / or trading as
SIC code Defines company classifications
Addresses For mailing, invoice, delivery, sales calls
Contact details Telephone #’s / e-mail / web site
Contact names & titles May need several fields for the range of contacts in
different department roles
Acquisition source Shows where contact originated
Acquisition date Records the length of the business relationship
Sales area Who is responsible for the relationship in that territory
Purchasing strategy Financial year, budgets and buying cycle timings
Response to contacts Identifies best contact approach
Communication history Any suppression requirements need to be recorded
Credit limits Identifies level of approach offers and risk profile
Competitive penetration Identifies which other companies they deal with

Predictive data
The next stage after capturing descriptive data is to develop predictive data models. This takes
the marketer beyond analysing basic raw data, and into modelling techniques to turn the
basic data into usable information, from which intelligent decisions can be made for
marketing strategies.

Predictive data uses are:

• segmentation and targeting to identify who is most likely to buy and who is most likely
to leave.
• selection of offers relevant to individual customers, based on who is most likely to
respond and their reaction to different pricing strategies.
• the optimum timing for these offers from a seasonal impact.
• projection of sales volumes to order sufficient stock requirements for additional
demand caused by the promotions.
• foreseeing bad debt potential and initiating financial damage control.

A way of using descriptive data and converting it to predictive data to identify potential
customer loss, or defection, is to use an attrition model. This is a software programme that
tracks existing customers who have stopped dealing with the company and calculates the
pattern of behaviour prior to their final leaving.
This applies particularly in the financial services industry where customers have several
products and generally exit gradually over time by using the bank less and less.

© IMM Graduate School Study Guide (AMM401P) Page 84 of 220

If you identify the profiles and behaviour of the customers who have already left, you can use
this profile model to analyse existing customers and see who is acting in a similar pattern and
is likely to leave. Generally, a company reacts to a defection, or closure, after it happens, but
this is often too late. You need to predict the likelihood of the event beforehand so you act to
prevent it.

Extraction
One of the common problems for marketers is having access to correct data for a
communications campaign. The biggest source of frustration is being able to extract the data
with the required fields. There is always a danger of miscommunication between what the
marketer wants and what the people in charge of the data think they want. This problem can
be solved with a proper data extraction brief, which specifies exactly what fields are needed
and for what purpose.

Criteria for extraction & data extraction brief

The target market selection must first be decided. Then you must conduct a pre-run of the
data to see the quantities involved. This may be more or less than the number you want for
your communication which is generally controlled by your budget limits. If this is the case
then you need to adjust the parameters of the selection so you end with the optimum number
required to match your budget.

A data extraction brief is designed so that the person requesting the data for a specific
promotion can think through exactly what they need. The marketer who wants the data is
generally not the person who extracts the information from the database. This is why you
need to have a close working relationship with the IT staff, and make sure each person
understands what the other actually needs.

A verbal request never works. A request has to be in writing to make sure each party knows
exactly what is required. Remember information you want for marketing is not always
programmed from a marketing perspective. The data extractors may need to translate your
request into their way of handling data.
A data extraction brief layout would include the business objectives, timings, reason for
request.
It would also include the descriptive details, and the contact details, as specified above.
One of the areas of data extraction that requires careful attention is that of the Suppression
criteria. These are the customers who you do not want included in the communication for
whatever reason. These suppression selections are a second layer of filtering over the original
selection criteria, and can include:

TYPES OF PREDICTIVE DATA

© IMM Graduate School Study Guide (AMM401P) Page 85 of 220

 SUPPRESSIONS You select what you want filtering out so you
don’t contact by mistake
VIP’s Protected from general contact if allocated
to topo contact person
Preference list People who have asked not to be contacted
by mail or phone
Out of date contact details A waste to send on repeat communications

Declines to previous offers You will annoy customers if you repeat an

offer when they have been turned down
already
Debtors Do not want to make new offers when
already owed money
Dormant or inactive Depends on the strategy whether to
reactivate or delete from communications
to restrict costs
Deceased Customer details could still be in the system
but marked as deceased. Bad PR to contact
when you have already been informed by
family
Frequency of contact restrictions Should the next communication be over the
set company limit for contact frequency so
as not to overexpose or create conflicting
messages

F. Study Unit 4 - Revision Exercises

Revision Discussion Questions
“the data is organised around the customer” A. Tapp. Describe your reasons for
supporting this statement.
Describe the difference between descriptive and predictive data and explain how
predictive can be projected from descriptive data.

Multiple Choice Questions

A capability that does not support sophisticated database marketing.
A. An operational management system
B. Staff career profiling

© IMM Graduate School Study Guide (AMM401P) Page 86 of 220

 C. Tools for analysis and statistics
D. Management information delivery tools

Data intelligence is:

A. A clutter of facts
B. A collection of facts
C. The result and interpretation of information analysis
D. A capturing of competitors information

What is not considered inbound data.

A. Responses to promotions
B. Customer information captured at retail outlets
C. External third-party contact lists
D. Monthly statements batched communications

G. Study Unit 4 - Revision Exercises Solutions

Revision Discussion Questions
“the data is organised around the customer” A. Tapp. Describe your reasons for
supporting this statement.
• If not based on a customer CIF, data could be stored in silos and not inter-related.
• You need a complete single view of a customer with all information connected,
otherwise different information in different locations may not provide a complete
picture.
• If data is separated, accuracy becomes a problem with updating of changes in
customer details not being cross referenced.
• The complete picture needs to be available to marketers for targeting for promotions
otherwise selection of relevant offers and frequency of previous communications can
be overloaded and cause annoyance to customers.

Describe the difference between descriptive and predictive data and explain how
predictive can be projected from descriptive data.
• Descriptive describes the customer and can take a range of data fields of factual
information.
• Descriptive relates to mainly people /products / promotions which when combined
correctly gives a customer profile.
• Data can cover demographics information of customer’s contact details, products
purchasing history and buying behaviour patterns.

© IMM Graduate School Study Guide (AMM401P) Page 87 of 220

• Promotion information can cover offer response patterns, purchase methods and
media preferences.
• B2B data is also descriptive with a wider range of data fields along with business
performance records.
• Predictive data allows for modelling techniques to use raw data descriptive data into
usable information. An example of data intelligence.
• Intelligent predictions can include improved targeting, focussed offers, optimum
timing, sales projections and identifying bad debt potential.

Multiple Choice Questions

A capability that does not support sophisticated database marketing.
A. An operational management system
B. Staff career profiling
C. Tools for analysis and statistics
D. Management information delivery tools

Data intelligence is:

A. A clutter of facts
B. A collection of facts
C. The result and interpretation of information analysis
D. A capturing of competitors information

What is not considered inbound data.

A. Responses to promotions
B. Customer information captured at retail outlets
C. External third-party contact lists
D. Monthly statements batched communications

H. Study Unit 4 - Progress check

You have come to the end of Study Unit 4.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 88 of 220

 Your progress checklist:

Progress checklist YES / NO?

Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
• Understand the key elements and importance of a marketing database
for providing information for metrics.
• Be able to identify the various points of entry into an organisation for
marketing information to be captured.
• Understand and select the key data fields that are required for capturing
information.
• Know how to identify extraction criteria that will give information for
populating metrics formulae.

Are you ready to tackle the questions relevant to Study Unit 4 in Assignment
1?

DO Assignment 1. The database will support your answers to Q 1 & 3

© IMM Graduate School Study Guide (AMM401P) Page 89 of 220

 Study Unit 5 - Channel Management and Sales Force
Week 7 (Chapter 6 – Key Marketing Metrics)

“The successful sales person cares first for the customer, second for the
products”.
- Philip Kotler

A. Study Unit 5 - Relevance

For an organisation to produce its products, the supply chain is important to manage. Once
the product or service is ready for distribution, the choice of channels is critical for success.
Generally, the most important channel is the sales force. Without sales efforts products would
not move, there would be no revenue and companies would not survive.

B. Study Unit 5 - Key Concepts

Let’s recap what the relevant module learning outcome is for this study unit
After completing unit 5 of this study guide, you should be able to:
• Identify the importance of the role players in the supply and value chains
• Understand the role of the sales force
• Identify the need for measuring sales force targets and goals
• Know how to analyse sales force results
• Review the factors influencing sales force compensation
• Understand the elements of evaluating a sales territory
• Identify key supply chain metrics

© IMM Graduate School Study Guide (AMM401P) Page 90 of 220

 C. Study Unit 5 - Glossary
Marketing channels – sets of interdependent organisations involved in the process of
making a product or service.
Sales leads – enquiries that could result in a sale and can be a cold (not much prospect)
or warm (has potential)
Sales force territories – a cluster of customers for which a sales person is responsible
Workload – the hours required to service clients and prospects.
Sales Potential Forecast – comprises the number of prospects and their buying power.
Sales goal – a target set for individual sales personnel and territories.
Sales Force Effectiveness – Analyses sales in terms of various criteria to measure
salespeople’s efforts.
Compensation – total payment made to a sales person which can have multiple
components.
Sales funnel – shows the stages of the selling process
Sales pipeline – tracks the progress of sales efforts to current and potential customers
and the likelihood of closing.
Inventories – level of physical stock held.
Markdowns - % discount from regular selling price.

D. Study Unit 5 - Learning Path

Week 7 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
• Understand the link Complete Read pages 181-218 Week 7
between marketing revision Sign-up for eLearn
efforts and sales exercises Check activities on
forces achieving eLearn
sales goals.
Consult eLibrary
Obtained feedback
Call Centre
• Identify the
importance of the
sales force in
channel
management

© IMM Graduate School Study Guide (AMM401P) Page 91 of 220

 • Know how to
identify key metrics
factors in
establishing a sales
force compensation
system
• Understand the
factors involved in
sales territory
management

E. Study Unit 5
Product versus Service-based Businesses
Whether your business is product or service-based you are still able to measure core
performance drivers. Product-based businesses due to the physical nature of the product
makes metrics easier, however there are also valuable service-based business metrics, but it
just takes more effort to collect the data for those service-based business. Product-based
businesses are often referred to Fast Moving Consumer Goods (FMCG) and are typically retail
types of business while the service-based are typically represented by financial services,
medical services and telecommunication services to name a few.

• Product-based: For a product-based business to monitor the movement of the product

through the value chain, consider the different steps of turning a raw material into a
final product as it moves through the value chain. Defining a metric for every step
through the value chain will assist the organisation to know what the critical measures
are.

Service-based Value Chain Analysis

• Service-based: For service-based businesses there will still be a value chain, but it will
be much more conceptual. Outbought logistic is the servicing of the customer. A
customer is usually part of the service experience and plays a role in the service
interaction.
• (Please see Chapter 4 for Customer Experience Management).

“Marketing channels are sets of interdependent organisations involved in the process of

making a product or service available for use and consumption.” (Kotler)

The supply chain originally used to be viewed as the flow of raw materials to the end
manufactured product. But nowadays each partner in the chain should be adding something

© IMM Graduate School Study Guide (AMM401P) Page 92 of 220

extra, so creating a ‘value chain’, which is more of a partnership that a firm creates throughout
the process. A marketing channel performs the work of moving goods from producers to
consumers. Companies need to select their channel members carefully, as customers
consider they are all part of the same company. If one of the members does not perform, it
affects the brand reputation of the main upfront company.

Sales Force
Sales Force and Channel Management
A company cannot have a strong business without a strong sales team. The sales portion of
the value chain is perhaps one of the most measured functions when it comes to Marketing
Metrics. This is due to the great deal of data available and the data is very accurate seeing
that it forms part of the accounting and audit requirements.

The Value Chain and Sales Force

According to Kotler, the sales force has a range of tasks which include:
• Prospecting for leads.
• Targeting between prospects and customers for time allocation.

© IMM Graduate School Study Guide (AMM401P) Page 93 of 220

• Communicating the Features, Advantages and Benefits of company’s products and
services.
• Selling using the steps of a sales process.
• Servicing and support to customers.
• Information gathering on existing and prospect companies and customers for
research.
A company needs to decide how to allocate the selling process between the various channel
options which include -
• Sales force for key accounts for more complex products. Generally key account sales
people are more senior and experienced and at a higher level than the general
salesforce.
• Internal customer service staff for lower-end less complex selling.
• Web ordering for direct sales.

Sales Force Territories

Sales force territories are the customer groups or clusters for which a salesperson or team is
responsible. A territory may be defined on a basis of geography, segment, industry, sales
potential, history or a combination of factors. It is the responsibility of the sales force manager
to:
• define their territories effectively,
• while striving to maximize potential and
• trying to minimize costs
• while accounting for company objectives and personnel

Key aims for companies to strive towards should be:

• Balance workloads (see metric below) so there is a fair allocation and optimum results
of existing and potential business.
• Balance sales potential (see metric below) for new prospects and size of potential.
• Develop compact territories relating to size and potential to ensure the area is not
under or over-serviced and travel time factors are taken into account. This will relate
to calling cycles where customers are graded as to buying patterns and potential and
the timing periods for calling to make sure stocks are replaced without causing any
out-of-stock periods and lost sales potential.

Sales force size

Sales reps can be productive, but also costly. To achieve optimum size of the sales force, Kotler
recommends you can use a “workload approach”.
• Customers are grouped into size segments according to annual sales volume.

© IMM Graduate School Study Guide (AMM401P) Page 94 of 220

• Desirable call frequencies are decided for each segment, relating to the number of
annual calls.
• Multiply the number of accounts by the call frequency to identify the total workload
in sales calls per year.
• The number of sales reps needed is determined by the total annual calls divided by
the number of calls achieved by a rep per year.

Workload Hours required to Prospect numbers To assess the number

service clients and may be debatable. of salespeople
prospects. Time spent trying to required to service a
convert prospects can territory, and to
vary by territory, ensure balanced
salesperson, and workloads.
potential client.

Workload [Current Accounts (#)x Average Time to Service an Active Account (#)] +
(#) [Prospects # x Time Spent Trying to Convert a Prospect into an Active Account (#)]

*Note that salespeople often have additional responsibilities that may contribute to their
personal workload which should also be taken into consideration.

Sales potential is more difficult to estimate, but one approach is provided below.

Sales Potential This comprises the Doesn’t assess the To determine sales
Forecast number of prospects likelihood of targets. Can also help
and their buying converting “potential” identify territories
power. accounts. Definitions worthy of an
of buying power are allocation of limited
more an art than a sales resources.
science.

Sales Potential (R) Number of Possible Accounts (#) x Buying Power (R)

Setting Sales Force Objectives

The purpose of setting sales objectives or goals for the sales force is to motivate sales
personnel and to establish expectations for evaluating and rewarding their performance. The
individual sales goals should be appropriate for their territories and circumstances, and, when
aggregated, also match the company’s overall objectives.

© IMM Graduate School Study Guide (AMM401P) Page 95 of 220

It is important for the company’s success that each salespersons compensation is based
directly on sales data and sales metrics. Seeing that sales people directly influence the overall
turnover and profitability, one can understand why salespeople tend to get measured in
detail. They are also measured quite frequently, as their earnings generally are commission
based which needs to be measured based on performance against targets.

Sales Goal Individual sales Setting individual To set targets for

projections may be targets on the basis of individual
based on a prior year sales can salespeople and for
salesperson’s share of discourage optimal territories.
forecasted sales, on performance, as
prior year sales and a strong performance in
share of increased one year leads to
district projections, or more aggressive
on a management targets in the next.
designed weighting
system.

A sales goal based on prior year sales can be calculated as:

Sales Goal (R) Salesperson’s Share of Prior Year Sales in District (%)
x Forecasted Sales for District (R)

A sales goal based on prior sales and the sales potential for a territory can be:
Sales Goal (R) Salesperson’s Prior Year Sales (R) +
[Forecasted Sales Increase for District (R) x Territory’s Share of Sales
Potential in District (%)]

Sales Force Effectiveness

Performance can be a function of sales force effectiveness, pricing, or product quality. It is
important for a marketer to identify from customers what is the key driver in their buying
decision, so the company can focus on improving any shortfalls.

Sales cycle duration tells a marketer how long it takes salespeople to go from initial contact
with a prospect to actual sale occurring. It's a gauge of their selling effectiveness and follow-
up. It indicates whether they're staying on top of their sales pipeline with this metric.

© IMM Graduate School Study Guide (AMM401P) Page 96 of 220

Note: that customer dynamics, budget cycles, and contracting processes can have a huge
impact on this metric.

Existing customer renewals are important, because they'll drive future sales. Measure how
many customers the company lose or how many renew in a giving period of time, as well as
what the renewal trends are. This metric is most relevant when the company has a contractual
relationship or subscription-based revenue with customers.
Refer: 9 Performance Metrics

Selling costs assess how much money the company is spending to make sales. Look at
adherence to budget, spending trends, and key ratios, such as spend per sales person and
spend per Rand of revenue.

Sales Force Effectiveness Depends on factors To assess the

Effectiveness metrics analyse sales that also affect performance of a
in the context of sales potential and salesperson or team.
various criteria, workload.
including calls,
contacts, potential
accounts, active
accounts, buying
power of territory,
and expenses.

There are other ways to measure sales force effectiveness other than just total annual sales.
Sales Force Sales (R)
Effectiveness Ratios Contacts with Clients (Calls) (#)
or/and
Sales (R)
Potential Accounts (#)
or/and
Sales (R)
Active Accounts (#)
or/and
Sales (R)
Buying Power (R)
or/and

© IMM Graduate School Study Guide (AMM401P) Page 97 of 220

 Expenses (R)
Sales (R)
Last one also known as cost of sales

These metrics can also identify how effective an individual sales person is performing. For
instance, they may not be covering their territory effectively, or seeing enough prospects.
Also, they may not be maximising the potential of existing customers, or not closing a
sufficient number of deals.

Sales Force Compensation

Salespeople act in a manner that maximizes their commissions. Sometimes those
behaviours aren't good for the company. Measuring the right metrics helps eliminate
bad behaviours, such as giving excessive discounts or favouring a more expensive
product if the commission will be a higher % of that sale.

“Tell me how you measure me, and I will tell you how I will behave.” - E.M. Goldratt

When designing a compensation plan, managers face four key considerations:

• Level of payment is what is planned to pay over a year and can include salary and
commissions
• The mix is the ratio of guaranteed salary to incentives. A bonus is a fixed lump
sum for reaching a target, whereas commission incentive is incremental and
earned on each sale.
• The measures of performance
• The performance / payout relationships

Thus, ensuring that the correct performance metrics are in place to obtain the correct
type of behaviours from salespeople is very important. If a company does not have the
right sales incentive plan; discounts and rebates can be abused, because they make
other metrics look better, such as conversions, sales, and renewals.
Compensation Total payments Perceived To motivate
made to a relationship maximum sales
salesperson, between incentive effort. To enable
typically consisting reward and salespeople and
of base salary, controllable management to
bonus, and/or activities may vary track progress
commission. widely among toward goals.
industries and firms.

© IMM Graduate School Study Guide (AMM401P) Page 98 of 220

A multi-bonus system:
Compensation (R) = Salary (R) + Bonus 1 (R) + Bonus 2 (R)

A commission system:
Compensation (R) Salary (R) + [Sales (R) x Commission (%)]

Refer: 4 Step digital Marketing Process – p7 Todays Consumer Decision Making Process

Sales Funnel
The sales funnel shows the stages of the selling process and identifies the steps involved to
conclude the sale. (refer Key Marketing Metrics p199)
• Creating interest which consists of building awareness through advertising and trade
shows
• Pre-purchase by identifying prospects from cold to warm leads and identifying
customer needs
• Purchase, where the selling process takes place
• Post-purchase, where the fulfilment of the process takes place and follow up with
customer service. (refer to study unit 8 for more detail)
Leads generated assesses how many new prospects are being contacted and qualified as
potential buyers. Look at absolute numbers and trends of contacts generated, the percentage
of contacts that are qualified as buyers, and how quickly they're qualified. They need to
identify the difference between ‘cold leads’ and ‘warm leads’ – when to pull back and stop
wasting time on cold leads, and how much time to spend on warm leads to close a sale.

Conversion rates (closing the sale) measure the percentage of leads that become buyers. This
measures how effectively the company’s salespeople are qualifying leads and getting them to
buy the products or services.

Sales Pipeline
Pipeline analysis is used to track the progress of sales efforts in relation to current and
potential customers in order to forecast short-term sales. Generally, management ask for a
report from the sales force showing the number of prospects they are dealing with, what is
the potential value of the business, and what is the % likelihood of closing the sales. From
these calculations management can predict an estimation of sales over the next set time
period, which will help identify required resources and stock needs.

© IMM Graduate School Study Guide (AMM401P) Page 99 of 220

 Supply Chain Metrics - Out-of-Stock
Out-of-stock can affect many aspects of a company. Whenever a product is out-of-stock it
means lost sales potential. This affects loss of revenue and sales force performances, as sales
are not occurring which reduces performance against targets.

Out-of-Stock Percentage of outlets Out-of-stocks can be To monitor the

that “list” or measured in ability of logistics
normally stock a Numeric, ACV, or systems to match
product or brand but PCV terms. supply with demand.
have none available
for sale.

Out-of-Stocks (%) Outlets Where Brand or Product Is Listed But Unavailable (#)
Total Outlets Where Brand or Product Is Listed (#)

Marketers must note whether out-of-stock relates to numbers of products not available or
number of stores. Products could be a supplier problem, whereas stores could also be a
delivery problem.

Supply Chain Metrics - Inventories

Inventory is the level of physical stock held and can be measured at different points in a
pipeline. Inventory can be thought of as an investment sitting idly on a retail floor until it is
sold. The longer inventory sits, the greater the need for markdowns to move the stock out,
and the higher the risk for shrinkage, theft or damage.

Inventories Total amount of May be held at different To calculate ability

product or brand levels and valued in to meet demand and
available for sale in a ways that may or may determine channel
channel. not reflect promotional investments.
allowances and
discounts.

Inventory Turns is a key inventory productivity metric. It measures how many times a
company sells its inventory over a period of a year.
Inventory Turns (I) Product Revenues (R)
Average Inventory (R)

Another useful metric associated with inventory turns is inventory days – the speed with
which inventory moves through the sales process. If you take a full year divided by the number
of inventory turns, this will give you the number of days the stock is carried by the company.

© IMM Graduate School Study Guide (AMM401P) Page 100 of 220

This helps calculate stock replacement and the time expected before they encounter a ‘stock
out’.
Inventory days ( # ) Days in year (365)
= Inventory turns (I)

Supply chain metrics - Markdowns

This metric quantifies the reduction in the price of a Stock Keeping Unit (SKU), and generally
expressed as a % of regular price.
For the service industry such as a hotel, the number of available rooms is the equivalent to
inventory. Rooms that are not sold on a specific evening are the same as perishable goods in
the retail environment. Therefore, similar concepts need to be kept in mind in a service
environment, to make sure that that the necessary promotion or markdowns are done in time
to optimise room bookings.

Markdowns Percentage discount For many products, a To determine

from the regular certain percentage of whether channel
selling price. markdowns are sales are being made
expected. Too few at planned margins.
markdowns may reflect
“under-ordering.” If
markdowns are too high,
the opposite may be
true.

Markdown (%) Reduction in Price of SKU (R)

Initial Price of SKU (R)

Conclusion
The role of the sales force in the channel management is vital to support the movement of
stock. If sales do not occur there are a range of problem costs that affect an organisation’s
overall return.

F. Study Unit 5 - Revision Exercises

Revision Discussion Questions
Explain your view of the expected role of a salesperson.
Discuss what should be considered when designing a compensation system.

© IMM Graduate School Study Guide (AMM401P) Page 101 of 220

Multiple Choice Questions
The successful sales person cares first for:
A. Available product range to sell
B. The Customer
C. The size of their territory
D. Performance metrics

Typical service-based industries do not include:

A. Financial services
B. Tourism industry
C. FMCG
D. Medical services

A territory may be defined for the general sales rep on the basis of: (select incorrect)
A. Geographic size
B. Scope of sales potential
C. Segmentation of customer types
D. Number of prime key accounts

G. Study Unit 5 - Revision Exercises Solutions

Explain your view of the expected role of a salesperson.
• Prospecting for leads and identifying between cold and warm leads for follow up.
• Targeting between prospects and customers for efficient use of time allocation.
• Identifying the potential customer’s needs.
• Communicating the Features, Advantages and Benefits of company’s products and
services to match the needs
• Selling using the steps of a sales process to close the sale.
• Servicing and after sales support to customers.
• Information gathering on existing and prospect companies and customers for
research.

Discuss what should be considered when designing a compensation system.

• A system should ensure the correct metrics are established in order to measure and
manage the sales people correctly.

© IMM Graduate School Study Guide (AMM401P) Page 102 of 220

• Bad behavior will be encouraged if the commission and discount structures favour
selective product sales against correct product choices for customer needs and
satisfaction.
• Sales incentives plans need to be balanced between base salary, bonus and/or
commission.
• Total focus on maximizing short term sales to achieve sales targets and earn bonuses
can be at the expense of longer term relationships with customers and suppliers.
• Compensation also needs to be based on territory potential for high quality leads and
the ability of the sales person to manage the workload that has been targeted.
• A fair allocation of current business and prospects is balanced among the territories.

Multiple Choice Questions

The successful sales person cares first for:
A. Available product range to sell
B. The Customer
C. The size of their territory
D. Performance metrics

Typical service based industries do not include:

A. Financial services
B. Tourism industry
C. FMCG
D. Medical services

A territory may be defined for the general sales rep on the basis of: (select incorrect)
A. Geographic size
B. Scope of sales potential
C. Segmentation of customer types
D. Number of prime key accounts

H. Study Unit 5 - Progress check

You have come to the end of Study Unit 5.
Time to do a progress check to determine whether you have gone through all the
required content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 103 of 220

 Your progress checklist:

Progress checklist YES / NO?

Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
• Identify the importance of the role players in the supply and value chains
• Understand the role of the sales force
• Identify the need for measuring sales force targets and goals
• Know how to analyse sales force results
• Review the factors influencing sales force compensation
• Understand the elements of evaluating a sales territory
• Identify key supply chain metrics

Are you ready to tackle the questions relevant to Study Unit 5 in Assignment
1?

DO Assignment 1, Q 3

© IMM Graduate School Study Guide (AMM401P) Page 104 of 220

SECTION 3 - Customer Interaction and Promotion
WEEKS 8 - 10 ASSIGNMENT 2

Study Unit 6 - Branding

Week 8 (Chapter 2 – Key Marketing Metrics)

“Most companies take the easy way out to market their brands. They buy a lot of
expensive advertising and make cliched claims. But distinctive brands require
something more. They have to be powered up to deliver a full sensory and
emotional experience. “
- Philip Kotler

A. Study Unit 6 - Relevance

Branding is a critical component of marketing. It rests at the core of a company and product
image. If you look at the Interactive Marketing Model you will see that the brand sits in the
centre of the model. All planning and strategies pass through the brand and you must ensure
that all of the plans support and build the brand positioning.

With acquisition you can go through all the activities to communicate and lead the prospect
to the point of closing a sale, but the impression of the brand in their mind will be the final
deciding factor. Keeping the customer with all the elements and activities of retention, will
not be effective if the brand positioning is not maintained. The activities will have lesser
impact and the customers could drift away.

In this unit, we will review the components of branding and the metrics that can be used to
measure the effectiveness.
However, a thought for you to take to the future – with the impact of social media, many
marketers are saying “a brand is no longer what we tell the consumer it is – it is what the
consumers tell each other it is”
But is the future already today? You’ll review these issues in unit 7, Advertising and Media.

B. Study Unit 6 - Key Concepts

Let’s recap what the relevant module learning outcomes are for this study unit
After completing Unit 6 of this study guide, you should be able to:

© IMM Graduate School Study Guide (AMM401P) Page 105 of 220

• Be aware of the different metrics to measure market share-related information and
brand penetration.
• Be able to position a product on the BCG matrix.
• Identify the various metrics which measure customer satisfaction and perception
awareness of a brand.

C. Study Unit 6 - Glossary

Market Share – is a measure of how much of the market the company owns.
Revenue Market Share - Sales revenue as a percentage of market sales revenue. -
Unit Market Share - Unit sales as a percentage of market unit sales.
Relative Market Share - Brand market share divided by largest competitor’s market
share.
Market Penetration - Purchasers of a product category as a percentage of total
population.
Brand equity – the amount of value in the marketplace
Brand Penetration - Purchasers of a brand as a percentage of total population.
Brand Awareness - Measure of whether people know your brand
Top of Mind - First brand to consider.
Purchase Intent - Probability of intention to purchase.

D. Study Unit 6 - Learning Path

Week 8 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
• Be aware of the Add actual Sign-up for Week 8
different metrics to learning eLearn
measure market- activities or Check activities
related information instructions on eLearn
like Market Share / review Consult eLibrary
• Be able to position a exercises Obtained
product on the BCG feedback
matrix.
Call Centre
• Identify the various
metrics which measure

© IMM Graduate School Study Guide (AMM401P) Page 106 of 220

Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
customer perception Review
of a brand prescribed
textbook
Chapter 2

E. Study Unit 6

The American Marketing Association defines a brand as a name, term, sign, symbol or design,
or a combination of them. A brand owner is granted exclusive rights to use the brand name
in perpetuity. Other assets, such as patents and copyrights, have expiration dates.
A brand is a complex symbol that can convey different levels of meanings according to Kotler:
Attributes – brings certain ones to the mind of the consumer, such as automobiles - well built,
durable, or safety.

© IMM Graduate School Study Guide (AMM401P) Page 107 of 220

Benefits – these attributes can be translated into functional or emotional benefits that appeal
to a consumer.
Values – the brand reflects on the producer who must portray this perception, such as quality.
Personality – a brand can be portrayed as a person, which would be a reflection of the profile
of the most dominant users. This is called ‘personification’ of a company into the image of a
person.

Brand equity is the amount of power and value they have in the marketplace. This equity
ranges through a process from brand awareness through to brand acceptability, to brand
preference. Finally, the brand strives for brand loyalty.
Brand equity is an asset and the extent to which customers are willing to pay more for the
particular brand is a measure of brand equity.
Perhaps the most distinctive skill of professional marketers is their ability to create, maintain,
protect and enhance brands.

Branding gives the seller several advantages.

• The brand name and trademark provide legal protection of unique product features.
• Branding gives the opportunity to have loyal and more profitable customers, which
will help give protection against competition.
• An overall brand image allows for a company to sell several different product lines
under the same brand umbrella.
• Retailers and distributors prefer dealing with strong brand names as they are easier to
handle and stock turnover is faster, and so profits are higher.

But if branding is such an important factor, you now have to identify the metrics that can
justify it.

Brand Awareness
Awareness of the organisations brand is an important step in the customer journey towards
buying the company’s product. Customers are far more likely to buy from a company if they
are familiar with that company’s brand.

It is therefore no surprise that most companies treat brand awareness as one of the first
critical metric in their marketing campaign.

Brand Awareness can be defined as a measure of whether people know your brand. There
are different ways to measure this.

© IMM Graduate School Study Guide (AMM401P) Page 108 of 220

• Unaided Brand Awareness: This is when people can name your brand without any
assistance. You ask customers to name any fast food restaurant chain and they are
able to list your company’s brand along with others.
• Aided Brand Awareness: This is where the research company provides respondents
with a list of brands and ask them which of the following fast food restaurant chains
are you familiar with?
• Top of Mind: Is when people mention the company’s brand name first when asked to
list all the fast food restaurant chains they are familiar with.

Purchase Intent
Purchase intent is a method whereby a company can estimate who will actually purchase the
company’s product. One usually gets an overly optimistic estimate when asking people directly
if they will buy the company’s product. Therefore, to estimate real demand for a product it
makes sense to adjust the purchase intent downwards by a safety margin %.

The AIDA Funnel Hierarchy of Effects

Awareness can be created through advertising, (refer to unit 7) and can be measured by the
processes above.
Attitude is a combination of what consumers believe, and how strongly they feel about it.
This can be measured by research surveys where consumers can rate a level i.e. out of a 1-5
score, where they rate their level of agreement. Purchase intent will be further identified in
this process.
Usage becomes the real bottom line. It is a measure of customers’ self-reported behaviour,
what they actually did compared to what they said they would do. Usage can show what
product customers bought, how much, how often, and from where. This information should
be sourced from your data base (refer to unit 4) but can still be collected from surveys, though
these may not be as statistically accurate as real data.

© IMM Graduate School Study Guide (AMM401P) Page 109 of 220

 Market Share
Market share is a measure of how much of the market the company owns. “When market
share (or sales) is used as a primary goal, the company tend to emphasize sales at the expense
of margins. It is easy to gain market share by giving away a product. The most profitable
company in the market is not the market share leader. To focus on leading an industry in
market share can lead to pursuits that harm profitability.” (Stanko, M.A. and Fleming M.
2014.)

Revenue Market Share

This measures sales of a brand or product relative to the overall size of the market. Typically,
a company will measure this in terms of revenue called Revenue Market Share.

Revenue Market Share Sales revenue as a Scope of market Time period

percentage of market definition. Channel level covered.
sales revenue. analysed. Before/ after Measure of
discounts. competitive
ness.

Revenue Market Share (%) Sales Revenue (R)

Total Market Revenue (R)

Market Share is an indicator of how a brand is doing relative to the competition. It includes
not only a customer’s assessment of a brand’s value proposition, but also other factors that
influence sales such as advertising and distribution.

Unit Market Share

Unit sales relative to competition also may have an impact on unit costs if higher volumes of
production lead to lower production costs. This may provide a competitive advantage to a
company. If a company has a higher revenue market share than unit market share it means
they have a higher price relative to the competition.
Unit Market Share Unit sales as a Scope of market Time
percentage of market definition. Channel level period
unit sales. analysed. covered.
Measure of
competitiv
eness.

© IMM Graduate School Study Guide (AMM401P) Page 110 of 220

 Unit Market Share (%) Unit Sales (#)
Total Market Unit Sales (#)

Relative Market Share

Relative market share indexes a firm or their brand’s market share against its leading
competitor. This provides managers with a measure to compare the relative market positions
of their brands across markets.

Relative Market Share Brand market share Can use either unit or Assesses
divided by largest revenue shares. comparative
competitor’s market market
share. strength.

Relative Market Share (I) (%) Brand’s Market Share (R, #)

Largest Competitor’s Market Share (R, #)

The relative market share metric was further popularised in the 1960s by the Boston
Consulting Group in its famous growth – share matrix, where relative market share is a
surrogate for competitive strength. The other axis, market growth rate, is a surrogate for
market attractiveness and potential. While there are many issues with the use of the BCG
Matrix, it remains a popular visual representation of a firm’s brand positioning, partially
because of its simplicity.

Products with high relative market shares in growing markets are deemed stars and should
be supported with strong marketing. A high investment return may be generated by cash
cows, usually established products with high relative shares in low-growth markets. Problem
child products may have potential for future growth but currently hold weak competitive
positions. Finally, dogs have neither strong competitive position nor growth potential. A
decision is then required as to continuing any further.

© IMM Graduate School Study Guide (AMM401P) Page 111 of 220

The BCG Matrix

(Farris et el 2017)

Market Penetration
It is important to note that market share calculations only consider actual sales, not potential
customers who ultimately decided against purchasing. This introduces the concept of market
penetration which considers the total population of a market. Low rates of market
penetration may indicate unmet potential demand for products or low interest in the product
category as a whole within the selected population. Penetration measures a brand or
category popularity.

Market Purchasers of a product Based on Measures category

Penetration category as a percentage population. acceptance by a
of total population. Therefore, defined population.
unit/revenue Useful in tracking
consideration not acceptance of new
relevant. product categories.

Market Penetration (%) Customers Who Have Purchased a Product in the Category (#)
Total Population (#)

© IMM Graduate School Study Guide (AMM401P) Page 112 of 220

 Brand Penetration. Purchasers of a brand as Based on population. Measures
a percentage of total Therefore, unit/revenue brand
population. consideration not acceptance
relevant. by a
defined
population

Brand Penetration (%) Customers Who Have Purchased the Brand (#)
Total Population (#)

But a caution on focussing only on market share percentage for measurements. A company
may report a percentage share of 30% of the market, and next year a massive increase to
60%.
But does this mean the company is being successful? You need to look at all the metrics, as
the total market size may actually be diminishing, and competitors are closing down and
pulling out. You could be having a greater share of less! This could happen where the product
is out of date and there is no longer any demand. In this situation you need to have the
foresight to adapt to a different future.

An example of this was the period before mobile phones were launched. The pager industry
was the strong player for business people to use their devices to be contacted with messages.
Once mobile phones were launched, the pager became redundant. Those companies in this
industry who saw this coming were able to focus on their database of customers with
contracts, set up as a provider of mobile handsets, and transfer existing customers over to
the new product. Those companies who did not adapt to the future had no market for their
out of date pager product. The core success factor here was not the fact the product needed
changing, but the use of the database to know the customer’s needs and service them.
Refer: The Ultimate Guide to Content Marketing ROI

Customer Satisfaction
Knowing whether customers are satisfied is important for every aspect of the business,
whether it is for a specific project, marketing campaign or business in general. Customer
Satisfaction is a key metric to know whether the company is keeping customers happy.
Customer Generally measured Subject to response Indicates likelihood
Satisfaction on a 1–5 scale, in bias. Captures views of repurchase.
which customers of current customers, Reports of
declare their not lost customers. dissatisfaction show
satisfaction with Satisfaction is a aspects that require

© IMM Graduate School Study Guide (AMM401P) Page 113 of 220

 brand in general or function of improvement to
specific attributes. expectations. enhance loyalty.

Customer satisfaction is measured at an individual level, but generally reported at an

aggregate level. it can be measured along various dimensions according to the profile of the
company and industry. Generally, it is measured on a five-point scale, but seven and ten
points are also options that are used.

General research on customer satisfaction has shown that customers who have had a
problem which has been resolved, are more likely to buy more again and recommend to more
people than someone who is satisfied with no problem. The ‘no problem’ customers are
deemed passive loyals, whereas when a customer has seen that a company can resolve a
problem, it has demonstrated their ability and actually gives the customer more confidence
in them having witnessed solutions in action. But of course, if the problems are not resolved,
the satisfaction levels drop right down.
IBM found that:
Satisfaction Would buy again Would recommend
No problem - satisfied 84% 91%
Problem - resolved 92% 94%
Problem – not resolved 46% 48%

The American Customer Satisfaction Index (ACSI) framework is a used to measure customer
satisfaction. The index study consists of standardised questions, consistent for all industries,
and incorporates critical drivers of customer satisfaction and delight for each industry. More
importantly, the questionnaire does not only measure performance, but also expectations.

The American Customer Satisfaction Index (ACSI) framework

© IMM Graduate School Study Guide (AMM401P) Page 114 of 220

(Fornell, Johnson, Anderson, Cha and Bryant 1996)

The satisfaction-loyalty curve

(Council on Financial Competition 2004)

Customer satisfaction has a strong correlation to loyalty, and this is covered in unit 10.

F. Study Unit 6 - Revision Exercises

Revision Discussion Questions

© IMM Graduate School Study Guide (AMM401P) Page 115 of 220

 How would you describe the concepts of a brand and what advantages does it give
the seller?
Discuss the value of market share as a metric for evaluating market performance, and
comment on any potential shortfalls in this analysis.

Multiple Choice Questions

Which one of the following metrics would be a measure of competitiveness:
A. Unit Market Share
B. Revenue Market Share.
C. Relative Market Share
D. None of the above

First brand mentioned when questioned about the category by researchers is known
as:
A. Aided Brand awareness
B. Top-of-mind awareness
C. Unaided Brand Awareness
D. None of the above

Which of the following metrics is a measure of pre-shopping disposition to purchase:

A. Purchase Intentions
B. Purchase Habits
C. Loyalty
D. Likeability

G. Study Unit 6 - Revision Exercises Solutions

How would you describe the concepts of a brand and what advantages does it give
the seller?
The American Marketing Association defines a brand as a name, term, sign, symbol or design,
or a combination of them. A brand owner is granted exclusive rights to use the brand name
in perpetuity. A brand is a complex symbol that can convey different levels of meanings
• Attributes – brings certain ones to the mind of the consumer, such as automobiles -
well built, durable, or safety.
• Benefits – these attributes can be translated into functional or emotional benefits that
appeal to a consumer.

© IMM Graduate School Study Guide (AMM401P) Page 116 of 220

• Values – the brand reflects on the producer who must portray this perception, such as
quality.
• Personality – a brand can be portrayed as a person, which would be a reflection of the
profile of the most dominant users. This is called ‘personification’ of a company into
the image of a person.
• Brand equity is an asset and the extent to which customers are willing to pay more for
the particular brand is a measure of brand equity.
Perhaps the most distinctive skill of professional marketers is their ability to create, maintain,
protect and enhance brands.
Branding gives the seller several advantages.
• The brand name and trademark provide legal protection of unique product features.
• Branding gives the opportunity to have loyal and more profitable customers, which
will help give protection against competition.
• An overall brand image allows for a company to sell several different product lines
under the same brand umbrella.
• Retailers and distributors prefer dealing with strong brand names as they are easier to
handle and stock turnover is faster, and so profits are higher.

Discuss the value of market share as a metric for evaluating market performance, and
comment on any potential shortfalls in this analysis.
• Market share is a measure of how much of the market the company owns.
• Unit sales relative to competition also may have an impact on unit costs if higher
volumes of production lead to lower production costs. This may provide a competitive
advantage to a company. If a company has a higher revenue market share than unit
market share it means they have a higher price relative to the competition.
• Relative market share indexes a firm or their brand’s market share against its leading
competitor. This provides managers with a measure to compare the relative market
positions of their brands across markets.
Potential shortfalls include:
• When market share (or sales) is used as a primary goal, the company tends to
emphasize sales at the expense of margins. It is easy to gain market share by giving
away a product. The most profitable company in the market is not necessarily the
market share leader.
• To focus on leading an industry in market share can lead to pursuits that harm
profitability.
• It is important to note that market share calculations only consider actual sales, not
potential customers who ultimately decided against purchasing. This introduces the
concept of market penetration which considers the total population of a market.
• Low rates of market penetration may indicate unmet potential demand for products
or low interest in the product category as a whole within the selected population.

© IMM Graduate School Study Guide (AMM401P) Page 117 of 220

• You need to look at all the metrics, as the total market size may actually be
diminishing, and competitors are closing down and pulling out. You could be having a
greater share of less! This could happen where the product is out of date and there is
no longer any demand.

Multiple Choice Questions

Which one of the following metrics would be a measure of competitiveness:
A. Unit Market Share
B. Revenue Market Share.
C. Relative Market Share
D. None of the above

First brand mentioned when questioned about the category by researchers is known
as:
A. Aided Brand awareness
B. Top-of-mind awareness
C. Unaided Brand Awareness
D. None of the above

Which of the following metrics is a measure of pre-shopping disposition to purchase:

A. Purchase Intentions
B. Purchase Habits
C. Loyalty
D. Likeability

H. Study Unit 6 - Progress Check

You have come to the end of Study Unit 6.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 118 of 220

 Your Progress Checklist
Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
• At this point, you should be able to:
• Be aware of the different metrics to measure market share-related
information and brand penetration.
• Be able to position a product on the BCG matrix.
• Identify the various metrics which measure customer satisfaction and
perception awareness of a brand.
Are you ready to tackle the questions relevant to Study Unit 6 in Assignment
2?

DO Assignment 2

© IMM Graduate School Study Guide (AMM401P) Page 119 of 220

 Study Unit 7 - Advertising and Media
Week 9 (Chapter 9, 10, 12- Key Marketing Metrics)

“A reach-to-conversion metric gives a clear picture of both the scale and

effectiveness of your marketing activity.”
- Lex Bradshaw-

Zanger

A. Study Unit 7 - Relevance

For many decades traditional advertising media dominated the communications mix. But the
market place is changing rapidly. Traditional media is facing many challenges. Some media
are still gaining in share of advertising, e.g. television, but others are losing share, with the
biggest medium being print. Media rates are increasing, cost per thousand is increasing, while
performance, the number of people reached, is declining.
Consumers want information, entertainment, and the young also want conversation.
(Koekemoer 2014). Digital media is here to stay and causing debates within companies as to
the allocation of the Integrated Marketing Communications budgets.
The challenge will be to measure and justify the spend to reach the relevant markets and get
the best return for the expenditure.
Understanding the value of metrics in this sector of marketing will therefore be critical.

B. Study Unit 7 - Key Concepts

Let’s recap what the relevant module learning outcome is for this study unit
After completing unit 7 of this study guide, you should be able to:
• How to compare the costs of advertising campaigns within and across different media.
• How to split out total impressions into the number of people reached, net reach and
the frequency.
• How assumptions about the effect of advertising frequency are used in media
planning.
• How to measure that advertising audiences are being reached with sufficient
frequency.
• How to assess Web site traffic and activity.
• How to measure clickthrough rates as customers’ initial response to Web sites.

© IMM Graduate School Study Guide (AMM401P) Page 120 of 220

• Know how to calculate the cost-effectiveness of Internet Marketing.
• To use a measure of abandonment rate to understand website user behaviour.
• Measuring the effectiveness of social media and social networking presence.
• Know how to identify the variables for testing.
• Design the implementation steps for a testing model.

C. Study Unit 7 - Glossary

Impressions - An impression is generated each time an advertisement is viewed.
Gross Rating Points (GRPs) - Impressions divided by the number of people in the
audience for an advertisement.
Cost per Thousand Impressions (CPM) - Cost of advertising divided by impressions
generated (in thousands).
Net Reach - The number of people who receive and are exposed to an advertisement.
Average Frequency - The average number of times that an individual receives an
advertisement, given that he or she is indeed exposed to the ad.
Share of Voice - Quantifies the advertising “presence” of a brand, campaign, or firm
in relation to total advertising in a market.
Effective frequency – the number of times an individual must see an advert in order
to respond.
Wear-in – frequency required to achieve a minimum level of effectiveness.
Wear-out -frequency at which an advert begins to lose effectiveness.
Testing -a trial of two or more variants.
Test Control – the best performing communication piece against which a test sample
is measured.

C. Study Unit 7 - Learning Path

Week 9 Time allocation: 15 hours
Learning elements Activities Material used Time / Progress
completed / accessed / Week check
assistance
• How to measure the Complete the Sign-up for Week 9
audience for an review exercises eLearn
advertisement. Check
• How to compare the costs of activities on
advertising campaigns within eLearn
and across different media.

© IMM Graduate School Study Guide (AMM401P) Page 121 of 220

• How to split out total Consult
impressions into the number eLibrary
of people reached, net reach Obtained
and the frequency. feedback
• How to measure that Call Centre
advertising audiences are Review
being reached with sufficient
prescribed
frequency.
textbook
• How to calculate the
Chapters 9-10-
comparative level of
12
advertising committed to a
specific brand or product.
• Identifying metrics for on-
line interactions.
• Understanding the reasons
for testing and the process to
implement.

© IMM Graduate School Study Guide (AMM401P) Page 122 of 220

E. Study Unit 7
1. Advertising Metrics

(Farris et el. 2017)

Advertising
Advertising is the cornerstone of many marketing strategies. Often sets the tone and timing
for many other sales and promotions efforts. But it is expensive and difficult to evaluate.
Advertising is…..
‘The promotion of a company, product or service through the use of advertisements, which
are-paid for communication intended to inform and influence, to sell a product or service, or
to modify or change people’s attitudes.’
It is important to be able to measure the effectiveness of advertising, impressions exposures
and opportunities to see (OTS) are the ‘atoms’ of media planning, as every advert has a
number of planned exposures.

© IMM Graduate School Study Guide (AMM401P) Page 123 of 220

 Impressions
An impression is generated each time an advertisement is viewed. The number of impressions
achieved is a function of an ad’s reach (the number of people seeing it) multiplied by its
frequency (number of times they see it).
Impressions are the basic unit of advertisement measurement. Each time a person has an
opportunity to see an ad, an exposure, or impression is counted. More accurately, these are
Opportunities to See as we don’t know if the person actually paid attention
Metric Construct Consideration Purpose
Impressions An impression is As a metric, To understand how
generated each time impressions do not many times an
an advertisement is account for quality of advertisement is
viewed. The number viewings. In this viewed.
of impressions regard, a glimpse will
achieved is a have less effect than
function of an ad’s a detailed study.
reach (the number of Impressions are also
people seeing it), called exposures and
multiplied by its Opportunities-To
frequency (number See (OTS).
of times they see it).

Impressions (#) Reach (#) x Average Frequency (#)

Gross Rating Points (GRPs)

Gross Rating Points quantify impressions as a percentage of a population reached. Therefore,
if an advertisement is shown on TV 4 times and that show is watched by 10,000 people out of
a population of 100,000, that advertisement would generate 40 rating points
(4 x 10,000 / 100,000). Because people can be exposed to an advertisement multiple times,
this measure is often greater than 100.
Metric Construct Consideration Purpose
Gross Rating Points Impressions divided Impressions To measure
(GRPs) by the number of expressed in relation impressions in
people in the to population. GRPs relation to the
audience for an are cumulative number of people in
advertisement. across media the audience for an
vehicles, making it advertising
possible to achieve campaign.
GRPs of more than
100%. Target Rating

© IMM Graduate School Study Guide (AMM401P) Page 124 of 220

 Points (TRPs) are
measured in relation
to defined target
populations.

Gross Rating Points Reach (%) x Average Frequency (#)

(GRPs) (%)

Gross Rating Points Impressions (#)

(GRPs) (%) Defined Population (#)

Gross rating points is the sum of all rating points delivered by the media carrying an advert.

Cost per Thousand Impressions (CPM)

CPM is a measure of cost per advertising impression, reckoning impressions in thousands.
This makes it easier to measure the cost-effectiveness of the generation of impressions,
rather than working on the basis of cost per single impression.
CPM stands for Cost per Mille – (Latin for a thousand) – although no-one says that anymore,
the letters are still used to represent the calculation.

To measure the cost efficiency of campaigns, advertisers monitor the cost per impression.
Given this is likely to be an impractically small number (fraction of a cent) CPM is more often
quoted.
Metric Construct Consideration Purpose
Cost per Thousand Cost of advertising CPM is a measure of To measure the cost-
Impressions (CPM) divided by cost per advertising effectiveness of the
impressions impression, generation of
generated (in reckoning impressions.
thousands). impressions in
thousands. This
makes it easier to
work with the
resulting dollar
figures than would
be possible on the
basis of cost per
single impression.

© IMM Graduate School Study Guide (AMM401P) Page 125 of 220

 Reach
The number of people, or % of population, who are exposed, or receive an advertisement at
least once. This measures unique viewers of an advertisement. It measures the breadth of an
advertisement’s spread across a population.

If impressions are the basic unit of measurement in advertising, a company might also be
interested in how those impressions are distributed across a target population. The company
might want to know how many different people are actually being exposed to their
advertisement (known as “reach”). They also might be interested in knowing how often (on
average) someone sees their advertisement (known as “frequency”).
Metric Construct Consideration Purpose
Net Reach The number of Measures unique To measure the
people who receive viewers of an breadth of an
an advertisement. advertisement. Often advertisement’s
Equivalent to reach. best mapped on a spread across a
Venn diagram. population.

Reach (#) Impressions (#)

Average Frequency (#)

The qualifier “net” is often used to emphasize that individuals are not double counted when
calculating reach. The Venn Diagram is often the best way to illustrate reach and assists in
ensuring that audience exposed to both advert A and advert B is counted only once.

Reach of an advertising campaign

(Farris P. 2009)

© IMM Graduate School Study Guide (AMM401P) Page 126 of 220

 Frequency
Metric Construct Consideration Purpose
Average Frequency The average number Frequency is To measure how
of times that an measured only strongly an
individual receives an among people who advertisement is
advertisement, given have in fact seen the concentrated on a
that he or she is advertisement under given population.
indeed exposed to study.
the ad.

Average Frequency Impressions (#)

(#) Reach (#)

Effective frequency: the number of times a certain advertisement must be exposed to a

particular individual in a given period to produce a desired response.
Effective reach: the number of people that receive an advertising message with a frequency
equal to or greater than the effective frequency.
A simpler explanation is, Impressions are the product of the number of people (Reach) & how
many times they see it (Frequency)

The advertiser must determine the number of times a message must be repeated in order to
be useful. But this will depend on market circumstances, media selection, type of ads used
and campaign support.

Refer: The Ultimate Guide to Content Marketing ROI

Refer: The Interactive Marketing Metrics You Need – Rebecca Jennings p1-6

Frequency Response Function

Frequency Response Functions are three common assumptions about responses to
advertising:
• Linear: e.g. Steady progress. As
advertising spend increases, the
response increases.
The assumption is that each advert exposure is
equally valuable regardless of how many other
exposures have preceded it.

© IMM Graduate School Study Guide (AMM401P) Page 127 of 220

• Learning or S-Curve: e.g. Accelerating
response followed by decelerating
marginal effectiveness.
This assumes the initial times the advert is
shown it does not register, but after repetition it
becomes more effective. And then gradually
declines.

• Threshold: e.g. Complete effect at a

certain point or threshold.
The assumption is that advertising has no effect
until its exposure reached a certain level, then it
is fully effective. Beyond that, further
advertising is wasteful.

Wear-in: The frequency required before a given advertisement or campaign achieves a

minimum level of effectiveness
Wear-out: The frequency at which a given advertisement or campaign begins to lose
effectiveness or even yield a negative effect

Share of Voice
Share of voice is an indication of how much a company is dominating advertising in
comparison to their competitors. It is the portion of total advertising activity within the
product category conducted by a given brand. It does not, however, capture the overall
effectiveness of the advertising campaign.
“Share of voice has been shown to be associated with market share, particularly during
economic downturns when it is easier to increase share of voice due to competitors’ declining
advertising spending. This metric (as with cost per impression) measures advertising activity
rather than accomplishment. Most firms would prefer to have a lower share of voice (and
thus lower advertising costs) while more efficiently attracting customers through distinct,
memorable ads.” (Stanko, M.A. and Fleming M. 2014)

Metric Construct Consideration Purpose

Share of Voice Quantifies the Market definition is To evaluate the
advertising central to meaningful relative strength of
“presence” of a results. Impressions advertising program
brand, campaign, or or ratings represent a within its market.
firm in relation to conceptually strong
basis for share of

© IMM Graduate School Study Guide (AMM401P) Page 128 of 220

 total advertising in a voice calculations.
market. Often, however, such
data are unavailable.
Consequently,
marketers use
spending, an input, as
a proxy for output.

Share of Voice (%) Brand Advertising (R, #)

Total Market Advertising (R, #)
This represents an estimate of a company’s advertising as compared to that of its competitors.

E. On-line metrics
Pageviews
Pageviews The number of times Represents the To provide a top
a Web page is number of Web level measure of the
served. pages served. Hits, popularity of a Web
by contrast, site.
represent pageviews
multiplied by the
number of files on a
page, making it as
much a metric of
page design as of
traffic.

Pageviews (#) Hits (#)

Files on the Page (#)

Hits (#) Pageviews (#) x Files on the Page (#)

Hits is a count of the number of files on the web. But web pages contain multiple files, so a
hit is a function not just of pages visited, but the number of files on each page. E.g. if a web
site served 4 files per page and generated 300,000 page views, then hits would be 300,000 x
4 =1,200,000.

Rich Media
A term used for interactive media that allows consumers to be more actively engaged than
with static advertising. Rich media metrics are also called ‘audience interaction metrics’.

© IMM Graduate School Study Guide (AMM401P) Page 129 of 220

Rich media tracks viewers ability to interact – it gives a better idea of potential customers
reactions. It distinguishes between passive viewing or engaged with traceable action.
Metric Construct Consideration Purpose
Rich Media Display Time The average Can be heavily To measure average
time that rich media influenced by viewing time of rich
are displayed per unusually long display media.
viewer. times. How data is
gathered is an
important
consideration.

Average Rich Total Rich Media Display Time (#)

Media Display Total Rich Media Impressions (#)
Time (#)

Metric Construct Consideration Purpose

Rich Media Interaction Rate The definition of Measures relative
Provides fraction of interaction should attractiveness of rich
viewers interacting exclude actions media and ability to
with the rich media. unrelated to the rich generate viewer
media (a mouse engagement.
crossing the rich
media to reach
another part of the
screen).

Rich Media Total Rich Media Impressions with Interactions (#)

Interaction Total Rich Media Impressions (#)
Rate (%)

Rich Media interaction rate represents an important way of tracking the success of internet
advertising.

Clickthrough rate
Metric Construct Consideration Purpose
Clickthrough Rate Number of An interactive To measure the
clickthroughs as a measure of Web effectiveness of a
fraction of the number advertising. Has Web advertisement
of impressions. great strengths, but by counting those

© IMM Graduate School Study Guide (AMM401P) Page 130 of 220

 clicks represent only customers who are
a step toward sufficiently intrigued
conversion and are to click through it.
thus an intermediate
advertising goal.

Clickthrough Clickthroughs (#)

Rate (%) Impressions (#)

Clickthrough rate is a percentage of impressions that lead a user to click on an advert that
motivates users to then click on a link, causing a re-direct to another web location. But, this
only measures one step along the path towards a sale, which is a click on the “buy now”
button.
Clicks are the number of times the advert was interacted with, not the number of customers
who clicked, as the same customer could have clicked several times.

Metric Construct Consideration Purpose

Cost per Click Advertising cost, Often used as a To measure or
divided by number billing mechanism. establish the cost
of clicks generated. effectiveness of
advertising.

Cost per click is a critical concept in search engine marketing and is used by search engines in
charging for their services.
Cost per Advertising Cost I
Impression Number of Impressions (#)

Metric Construct Consideration Purpose

Cost per Order Advertising cost, More directly related To measure or
divided by number to profit than cost establish the cost
of orders generated. per click, but less effectiveness of
effective in advertising.
measuring pure
marketing. An
advertisement may
generate strong
clickthrough but
yield weak
conversion due to a

© IMM Graduate School Study Guide (AMM401P) Page 131 of 220

 disappointing
product.

Cost per Order I Advertising Cost I

Orders (#)

Abandonment rate
Abandonment rate usually refers to shopping carts that are started but not completed, which
is counted as abandoned.

Metric Construct Consideration Purpose

Abandonment Rate The rate of purchases Can warn of weak To measure one
started but not design in an e- element of the
completed. commerce site by close rate of
measuring the Internet business.
number of
potential
customers who
lose patience with
a transaction
process or are
surprised and put
off by “hidden”
costs revealed
toward its
conclusion.

Abandonment Carts Not Completed (#)

Rate % Customer baskets Initiated (#)

Bounce rate
A measure of effectiveness of a web site to encourage visitors to continue their visit. A high
bounce rate generally means the web site isn’t doing a good job.

Metric Construct Consideration Purpose

Bounce Rate Fraction of Web site Requires a clear Often used as an
visitors who view a definition of when a indicator of site’s
single page. visit ends. Usually relevance and
considers bounce

© IMM Graduate School Study Guide (AMM401P) Page 132 of 220

 rate with respect to ability to generate
visits rather than visitor interest.
visitors.

Bounce Rate (%) Visits That Access Only a Single Page (#)
Total Visits (#) to the Web site

Friends
A high number of friends indicates an active interest in the page owner and an indication of
loyalty. ‘Likes’ also measure the number of individuals who have shown favour.
Metric Construct Consideration Purpose
Friends/ Followers/ Number of Success depends on To measure size of
Supporters individuals joining a target group and the social network, but
social network. social nature of the unlikely to measure
product. This metric engagement.
is unlikely to reflect
the ultimate aim of a
marketing campaign.

Friends (#) Number of friends of the entity registered on a social networking page (#)

Cost per Total Cost to Provide Social Networking Presence I

Friend Number of Friends (#)

Downloads
Downloads is a way of tracking engagement with an organisation and measures the success
at getting their application distributed to users.

Metric Construct Consideration Purpose

Downloads Number of times an Counts the times a To determine
application or file is file was effectiveness in
downloaded. downloaded, not getting applications
the number of out to users.
customers who
downloaded a file. It
is often useful to
monitor downloads

© IMM Graduate School Study Guide (AMM401P) Page 133 of 220

 started but not
completed.

Downloads (#) Number of times that an application or file is downloaded (#)

Email metrics
This measures the response of consumers to the email – was it delivered? – was it opened?
The metrics to consider for email marketing are similar in some cases to web metrics:
Email open rate The percentage of deliveries that get opened.
Clickthrough rate The percentage of deliveries that gets clicked on.
Unsubscribe rate The percentage of those who opt out of the list used for the
emails.
Email Bounce rate This is different from web marketing which measures the
consumer action on the web. With emails, the bounce rate is a
measure of the list quality and is independent of any consumer
action.

F. Testing
The concept of testing
There is an old African proverb which states – “don’t test the depth of the water with both
feet”.
Despite this sage advice, it is still amazing how many marketers go headfirst into a major
campaign with no consideration for testing. The principle is often mentioned, but lesser so
implemented. Many marketing textbooks refer to testing and can mention split run A/B
testing as though that is the catch-all process, but in most cases the student is left stranded
for practical information. This section of the unit is to give you a deeper understanding of the
principles and practical processes to conduct testing and was developed from discussions with
the Institute of Direct Marketing (IDM) in London.

Testing can be defined as the planned and scientific inclusion and measurement of alternative
marketing elements in a campaign, in order to improve systematically, future campaign
performance and profitability. (Forshaw, IDM Guide, 1998: 2.3-3)
No main campaign or promotion should be conducted without prior testing. Testing is
another key activity in marketing management, along with measurement.
Tapp (1998: 314) uses the definition “testing is the small-scale measurement of the
performance of individual campaign elements in order to maximise returns on rolled-out full
marketing campaigns”

© IMM Graduate School Study Guide (AMM401P) Page 134 of 220

Testing is the marketers’ word for what scientists call experiments. A test is basically a run
against a control campaign, for example in a mailing. The control is the standard package that
is posted and has proved to be the best format so far. The elements will be the same for the
test and the control, except for the one element under investigation. For instance, you could
be sending a mailing to your client base and want to see if the offer of a different free gift can
attract more responses, but you are not sure which free gift offer will pull the most responses.
You keep the letter copy and the complete pack the same, but your test group has the new
free gift offer, and the rest of the control group has the normal free gift offer. If the new test
offer outpulls the normal control offer, you know to try the new offer in future.
This is the key point to remember, there should only be one element changed, for if you differ
with two or more elements, you cannot be sure which is the one that has caused a difference
in the response or sales.
Simply put, testing shows what happens, whereas research investigates why it happens.
Testing differs from research as it is:
• Low cost and so small companies can test any variety of options
• Simple and easy to design and implement, such as testing two different headlines in
an advert, or letter
• Real results in that it measures what customers actually do, not just say they will do.
It measures in a realistic current environment, something that has actually happened,
not an imagined “what if” scenario that may or may not happen in the future

The value of testing

There are many benefits to testing and some of the main ones are:
• Testing minimises financial risk. Small samples can be used, as long as the sample is
representative and results analysed to decide whether to roll out to the whole target
group
• By testing only a small sample of the customer base, you limit your risk. You may want
to change a process in your company that means customers have to deal with you in
a different way. If the reaction is negative, you have the chance to reverse the decision
without having to re-contact your complete customer base
• Future response rates are calculated from testing. The initial sample is analysed and
roll-outs are based on these initial test results so as to maximise responses and plan
for capacity handling.
• With experience from testing, when you use a database for the first time, as long as
the selection criteria for the data is correct, you are able to predict the quality and
response and so remove uncertainty

But – despite the fact that testing is an important pre-requisite for any marketing exercise,
there are still costs that must be taken into consideration. Lower quantities for testing can
mean higher production costs and loss of discounts for volumes.

© IMM Graduate School Study Guide (AMM401P) Page 135 of 220

Fixed costs for creative and origination will remain the same no matter what the size of each
cell test, yet if there are more different cells to test, the costs will be higher. Therefore, an
advice for testing is only test the things which can improve the bottom line.

Variables to test
You can test as many choices as you can think of. However, you should not try and get too
complicated. The main variables that marketers use for testing generally hinge around the
key marketing decision variables, and these variables can be matched to your Interactive
Marketing Model stage 2, which are:
• Product, or service. Wet testing occurs when there is an established product already
in existence.
• Target audience, its potential size, its profile, and source data, or via the media (e.g.
adverts in different publications or inserts)
• The media you use to reach the target audience, such as mail, newspapers, magazines,
or broadcast.
• The offer, or propositions you make which can relate to price, incentives to respond,
or terms of payment, in order to see which will produce the best return. The way you
express an offer can also affect the response. The creative experts will tell you that the
same thing said differently can increase your response. “buy one – get one free”
generally outpulls “50% off”.
• Timing, which is affected by seasonality, frequency of purchase, and product
replacement cycle. You can also use a time deadline for response by using the fear of
loss, or state there is limited stock and you must reply now. Make sure your tests are
conducted at the same time, otherwise the results may be compromised.
• Format, which offers a multitude of options. All creative elements can be tested, such
as letter length, headlines, coupon design, or use of illustrations. The format of the
package can be changed, by adding a brochure, or a flyer. The response method can
vary, such as via a mailed coupon, or by phone. You can add on premiums or
incentives. These are linked to the offer, but they also affect the creative design and
format, and each is a testable item.

However, with so many alternatives, as the marketing doyen Bob Stone says “only test the
big things, and don’t get distracted by minor issues”.

Basic steps in a testing programme

A testing programme has to have a designed systematic approach. The basic steps to follow
are:
i. Firstly, set the objectives and understand what is actually required. Make sure the test
elements are the “big things”, and the results will be useful for future plans.

© IMM Graduate School Study Guide (AMM401P) Page 136 of 220

 ii. Establish a control, from the current best performing package or advert. This is the
one you are using, or going to use, and the one against which you target to try and
improve results with the test pack.

iii. Decide on the test strategy outlining why you are trying to test, what variables to test,
and which methods you intend using. Also choose the level of accuracy required. It is
important to remember not to allow more than one variable to affect the results of
any test.

iv. Ensure the sample size is representative. It is no use taking a sample that does not
reflect the greater selection of the base to be contacted. There are various selections
of sampling. Basic methods are simple random samples through the database using
computer tables where each has an equal chance of being selected, or a systematic
cluster sampling by taking groups of say 50 or 100 names at regular intervals
throughout the base.

v. The “1 in N” selection is one of the most common and reliable methods where the
total base is divided by the sample required, so that every Nth name will be selected
throughout the database file. For instance, to select 10,000 names from a list of
100,000, every 10th name would be selected. This is a safer way of sampling as it
selects evenly throughout the base. If you choose blocks, the situation can occur
where the customer records are stored in a sequence of age, or profitability, or length
of customers’ time with the company. The block selection could end up picking only a
sample of the best prospects from the beginning of the base file, or possibly ones with
the least potential from the end of the base. This would skew the results and distort
the rollout decision.

vi. Construct the test matrix. This is basically a block design that sets out the different lists
against the different offers. Each block is called a test cell, which is a quantity of names
from a specific list that is made a specific offer, in a specific way. Each cell can only
have one offer variable, and so each cell must have a unique code for identification,
which is matched back to the responses. It is important to make sure that each
communication piece, especially the response element, is correctly coded in order to
ensure accurate measurement of the test.

© IMM Graduate School Study Guide (AMM401P) Page 137 of 220

vii. Conduct the test and gather the data. The test can also be accomplished with print
advertising. Inserts can be put in different publications and these results can be
measured. Different inserts can be used with different offers and creative approaches.
Publications use what is termed A/B splits, where a choice of two different adverts are
in each alternate copy of the publication run.

viii. Record and analyse the results. No exercise is worth the effort unless the results are
monitored. Each response needs to be recorded against individual names on the
database, and within each cell. From this a response history against each promotion
can be built up. In evaluating the response, there will be two steps, firstly against the
actual responses, and then against actual conversions to sale. Each test cell should be
measured against the other test cells, and against the original key objectives set. From
the results recommendations for roll out can be made. Finally, it is important to keep
a library of all test results for future reference whenever further tests are being
planned.

Testing first order analysis

You also have to go further in your analysis than just considering the response rate. If you
were testing different lists and one pulled a far higher percentage response than the other, it
does not necessarily mean it is a better list. For instance, the response could be leads, and
these may be unqualified. You need to work the leads and convert them into sales. So, you
could have a situation where a high lead response converts to a low level of sales and a lower
response rate has a good conversion rate into sales. But it doesn’t end there either. The sales
have to be assessed for average order value. A lower number of sales could have a high
average order value giving a high total return on sales, and a higher number of sales could
have a lower average order value that may have a lower total return on sales. These follow-
through measurements are essential to decide if the test list is profitable or not. The key point
is, the first level of measurement, i.e. the response, is not the final factor for making a
decision. The bottom line decision is the project must meet required profitability levels before
conducting a roll-out.

G. Study Unit 7 – Revision Exercises

Revision Discussion Questions
Briefly discuss why advertising metrics are important for any marketer to know.
Explain if you think advertising is an investment or an expense.
Which variables could you consider for testing before conducting your main
campaign?

© IMM Graduate School Study Guide (AMM401P) Page 138 of 220

Multiple Choice Questions
If a marketer wants to know how well the company’s marketing media plan is working
in order to make it more effective, which metric or metrics will the marketer look at:
A. Reach
B. Frequency
C. Gross Rating Points
D. All of the above

Which metric gives the number of times an advertisement is viewed by the user:
A. GRPs
B. Impressions
C. Share of voice
D. None of above

Which metric is a measure of the number of consumers exposed to an advert.

A. Frequency
B. Impressions
C. Net Reach
D. None of above

Which is not an “atom” of media planning?

A. Impressions
B. Exposures
C. Response rate
D. Opportunity to see (OTS)

Which variables would you not test?

A. Target audience
B. A new product
C. A selected offer
D. A back end cost

The best representative sample is?

A. Random selection
B. ‘I in N’ selection

© IMM Graduate School Study Guide (AMM401P) Page 139 of 220

 C. A top block of customer records
D. The best average selection

G. Study Unit 7 - Revision Exercises Solutions

Briefly discuss why advertising metrics are important for any marketer to know.
• Advertising is expensive and difficult to evaluate.
• Need to know if advertising budgets are spent efficiently.
• Different metrics will provide insight to the impact of advertising.
• Different media selection will provide differing metrics.
• Reaching customers and opportunities to see does not mean an actual sale and a
return.
• Need to know responsiveness to advertising.
• Is advertising an expense or a longer-term investment for brand building and future
sales?

Explain if you think advertising is an investment or an expense.

• Advertising drives immediate sales.
• A given % increase in advertising spending will cause increase in sales but generally at
a lower % increase.
• Need to calculate net return on sales revenue to see if additional advertising
expenditure is justified.
• Also need to consider the longer-term effect of building the brand for the value of the
company.
• Consider the carry-over effect of advertising for future sales.
• Initial first sale to a customer can carry over into customer lifetime value.
• Additional return from the opportunities to cross sell and up sell after initial sale is
made.
• Consider if advertising share of voice is being measured in Rand expenditure or Gross
Rating Points compared to competitors.

Which variables could you consider for testing before conducting your main
campaign?
You can test as many choices as you can think of. However, you should not try and get
too complicated. The main variables that marketers use for testing generally hinge
around the key marketing decision variables, and these variables can be matched to
your Interactive Marketing Model, which are:

© IMM Graduate School Study Guide (AMM401P) Page 140 of 220

• Product, or service. Wet testing occurs when there is an established product already
in existence
• Target audience, its potential size, its profile, and source data, or via the media (e.g.
adverts in different publications or inserts)
• The media you use to reach the target audience, such as mail, newspapers, magazines,
or broadcast.
• The offer, or propositions you make which can relate to price, incentives to respond,
or terms of payment, in order to see which will produce the best return. The way you
express an offer can also affect the response. The creative experts will tell you that the
same thing said differently can increase your response. “buy one – get one free”
generally outpulls “50% off”
• Timing, which is affected by seasonality, frequency of purchase, and product
replacement cycle. You can also use a time deadline for response by using the fear of
loss, or state there is limited stock and you must reply now. Make sure your tests are
conducted at the same time, otherwise the results may be compromised.
• Format, which offers a multitude of options. All creative elements can be tested, such
as letter length, headlines, coupon design, or use of illustrations. The format of the
package can be changed, by adding a brochure, or a flyer. The response method can
vary, such as via a mailed coupon, or by phone. You can add on premiums or
incentives. These are linked to the offer, but they also affect the creative design and
format, and each is a testable item.

Multiple Choice Questions

If a marketer wants to know how well the company’s marketing media plan is working
in order to make it more effective, which metric or metrics will the marketer look at:
A. Reach
B. Frequency
C. Gross Rating Points
D. All of the above

Which metric gives the number of times an advertisement is viewed by the user:
A. GRPs
B. Impressions
C. Share of Voice
D. None of above

Which metric is a measure of the number of consumers exposed to an advert.

A. Frequency
B. Impressions

© IMM Graduate School Study Guide (AMM401P) Page 141 of 220

 C. Net Reach
D. None of above

Which is not an “atom” of media planning?

A. Impressions
B. Exposures
C. Response rate
D. Opportunity to see (OTS)

Which variables would you not test?

A. Target audience
B. A new product
C. A selected offer
D. A back end cost

The best representative sample is?

A. Random selection
B. ‘I in N’ selection
C. A top block of customer records
D. The best average selection

H. Study Unit 7 - Progress check

You have come to the end of Study Unit 7.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 142 of 220

 Your Progress Checklist
Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
• How to compare the costs of advertising campaigns within and across
different media.
• How to split out total impressions into the number of people reached,
net reach and the frequency.
• How assumptions about the effect of advertising frequency are used in
media planning.
• How to measure that advertising audiences are being reached with
sufficient frequency.
• How to assess Web site traffic and activity.
• How to measure clickthrough rates as customers’ initial response to
Web sites.
• Know how to calculate the cost-effectiveness of Internet Marketing.
• To use a measure of abandonment rate to understand website user
behaviour.
• Measuring the effectiveness of social media and social networking
presence.
• Know how to identify the variables for testing.
• Design the implementation steps for a testing model.

© IMM Graduate School Study Guide (AMM401P) Page 143 of 220

Are you ready to tackle the questions relevant to Study Unit 7 in Assignment
2?

DO Assignment 2, Q1

© IMM Graduate School Study Guide (AMM401P) Page 144 of 220

 Study Unit 8 - Prospecting to Fulfilment
Week 10 (Chapters 6, 7, 10 Key Marketing Metrics)

“Fulfilment - where promise meets delivery”

- Institute of Direct Marketing UK

The Three Step Marketing Process Loop is the keystone for

interactive customer communication

A. Study Unit 8 - Relevance

So far you have covered units with the supporting textbook chapters all relating to the
metrics formulae for those specific subjects. This unit pulls together a process with the aim of
demonstrating a continuity flow of communication and measurable actions with the end
result of achieving a satisfied customer.
The unit focusses on the concept of the Three-Step Loop process for communicating with
prospects, to gain their interest, encourage a response to close a sale, and handling the
fulfilment to complete the process loop.
Handling the responses and enquiries is a key element of every campaign, but there are many
aspects to each step of these operations that often get overlooked, and if these are not
designed in planning and the results not tracked correctly, a complete sale can be lost.

B. Study Unit 8 - Key Concepts

Let’s recap what the relevant module learning outcomes are for this study unit.
After completing unit 8 of this study guide, you should be able to:
• Discuss the concept of the Prospecting to Fulfilment loop.
• Know how to prepare a 3-step customer interaction process.

© IMM Graduate School Study Guide (AMM401P) Page 145 of 220

• Identify the metrics for outbound communication.
• Identify the requirements for response handling.
• Identify the components of fulfilment and customer satisfaction.

C. Study Unit 8 - Glossary

Fulfilment – the totality of the marketer’s response to the customer.
Roll-out – repeating a promotion once the initial promotion has been analysed for
profitability.
Three-step loop – communication to prospects, handling responses, fulfilment
process to converted customers.
Suppression data – what is filtered out from an existing brief.
Hot spots – the source of information data identified within the Interactive Marketing
Model.
Call to action – the incentive or reason for a prospect to respond for more information
or to order.
Foot traffic – prospective customers entering a store or sales outlet as a result of
responding to a promotion.

D. Study Unit 8 - Learning Path

Week 10 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
• Understand the concept Complete the Sign-up for eLearn Week 10
of prospecting to review Check activities
fulfilment. exercises on eLearn
• Be able to identify the Consult eLibrary
measurable steps
Obtained
throughout the 3-step feedback
loop.
Call Centre
• Identify where the
Prescribed
information data of the
textbook
components of the 3-step
Chapters 6, 7, 10
process is situated.

© IMM Graduate School Study Guide (AMM401P) Page 146 of 220

E. Study Unit 8
Why Roll-out?
Results analysis is more intense in order to evaluate what worked and what didn’t. Successful
approaches can be rolled out for future campaigns, and what didn’t work can be used as
valuable research to identify problems that need to be resolved. In general, all marketing
campaigns should be planned on the basis of conducting future roll-outs to amortise the
original costs and benefit from a lower marginal costing analysis.
The word campaign is generally used in marketing for the overall combination of efforts to
achieve a specified objective. However, in marketing there are a series of events that combine
to contribute to the whole. Each advert that creates a response is an event, so is each sales
call or each telephone conversation by a telemarketer. Each event is fully accountable.
Within a plan, you have to cater for measuring each activity, each event, each response, so
that in the final analysis all events contribute towards the objective. However, for the sake of
continuity the term campaign will be used in the generic sense for this unit.

Before you can make the decision to roll-out, you need to ensure you have completed and
measured all the interactions with the customer to decide if the approach was worthwhile
and profitable. To help you in this evaluation, the 3 Step Interactive Loop is used.
(Process adapted from author S. Bird, Chap 10 ‘Marketing Communications – An Integrated
Approach’ - Ed. L Koekemoer – Publisher, Juta 2014)

3-STEP PROCESS FOR INTERACTIVE MARKETING COMMUNICATION

Prospecting to fulfilment
Although there are many micro steps involved in all promotion campaigns, for simplicity, the
activities can be grouped into a three-step process.

1. Outbound Communication to target markets

2. Handling the responses back from interested prospects

3. Fulfilment process back to converted prospects to conclude the sale

The Three-Step Loop will be underpinned by a range of “hot spots” mentioned in unit 1.
Indeed, this unit will integrate the range of formulae you have covered in earlier units for
advertising and promotion.

© IMM Graduate School Study Guide (AMM401P) Page 147 of 220

But the most overlooked part of the whole process cycle is fulfilment. This used to be
interpreted in the narrow sense as merely fulfilling the order. Now it encompasses a wider
interpretation of a final part of the complete communication cycle. If we build fulfilment into
a loop process, you will find that the main elements of each unit in this programme will fit
into the majority of the process and can be tracked across the Interactive Marketing Model.

Step 1: Outbound communication to target markets

Step 1 Outbound Communication has been covered in the programme so far.
This will involve the first three steps of acquisition in the Interactive model, namely
segmentation of the potential market and identifying the specific target market groups for
the relevant product offer. (refer unit 1 -Introduction)
Next, the integrated communication plan using the relevant media to reach the selected
target market is implemented (refer unit 7 – Advertising and Media)
The product offer must encourage a response, (refer unit 3- Pricing) or call to action, and the
creative execution needs to be designed accordingly for this purpose.

With all the promotion activities for acquisition and retention, you need to promote your
company or product brand up to a certain level, but only to the point where you are receiving
the volume of business with which you can cope. Your aim should be to attract and manage
an optimum flow of business that is profitable. You need to have the resources to deliver the
business promise, balance your inflow volumes of leads or sales against your available
capacity, and balance your expenditure against a measured effective return.
You may find you have limitations of resources, as happens with most companies. There may
be restrictions on production capacity, or you may have limitations on your geographic
coverage, or your distribution system does not handle the required options from the
customers. Another major problem is your advertising can be exciting enough to create an
over-promise, and the staff is not skilled or trained sufficiently to satisfy the expectation of
the customers and to handle the sales opportunities.
Step 1 has created the awareness and interest to buy. However, steps 2 and 3 are just as
important if the sale is to be made and concluded, and customer relations are created and
maintained for future sales. Both these steps need unpacking to identify the metrics involved.

Step 2: Handling the responses back from interested prospects

Based on the media selected, a choice of response options is offered. The three key response
drivers are:
• To achieve a direct sale via a one-step process of interaction, generally self-selected
by the prospect. Today more sales are going through this process with responses
either to contact centres or on-line. (refer Chap 7 Pricing /– Chap 10 on-line)

© IMM Graduate School Study Guide (AMM401P) Page 148 of 220

• To generate leads from interested prospects for the sales force to engage and to
convert to a qualified prospect. (refer Chap 6- Sales)
• To increase foot traffic into sales retail outlets. This is very much dependent upon geo-
location and the handling capacity of stores and outlets.

2a) Response handling Capability and Capacity is to be estimated based on the range of
media used. Generally verbal response calls and digital responses will be centralised through
a contact centre. The issue for consideration is the capacity to handle peak-time flows of
responses, and the onward processing of the responses and leads to their various handlers
for action and conversion to sales.
In order to consider response handling, we must assess our capability in these crucial areas.
• Do we have the resources to cope with any additional work?
• Do we have the budget allocated to cope with the response handling?
• Do we have database facilities to link the response information into our system and
process the action?
• Do we have an integrated administrative support system to process the business?
• Do we have the staff expertise and skill level?
• Do we have the fulfilment facilities to respond to the customer’s request?
Remember if we offer different response media options, we must be aware of the additional
work and resources required that can occur from each of the response channels.
So, the importance of your capacity control is that if you overstate your brand promise and
attract too much new sales which causes a bottleneck in your business, you will under-deliver
on your promise and disillusion your customers. This will cause an increase in your damage
control costs, and you will finally make less profit.

2b) Database capturing is a critical activity, whether to record direct sales, or to build a list of
enquiries of prospects for future follow up and sales. The details of database records are
covered in unit 4, but staff need to know the importance of recording correct information for
the relevant metrics.

2c) Making the sales -the prospect leads captured on the database from responses need to
be qualified and converted into sales. This will involve territory allocation according to area
capacity and sales force structures. Although closing the sale is often seen as the final key
action, it is only a cog, even if it is the most important in the whole process. Without the
complete fulfilment process, the sales could go sour and the customer is lost. (refer Chap 6 –
Sales)
Step 3: Fulfilment process back to converted prospects to conclude the sale

© IMM Graduate School Study Guide (AMM401P) Page 149 of 220

In the purest sense, fulfilment is defined as dealing with an order from receipt to delivery. In
broader relationship terms, it means “where promise meets delivery”. In this context,
fulfilment then takes on a much broader spread of functions.

3a) FULFILMENT
This is where a company can make or break the relationship. Fulfilment is the key deliverable
of following through on response handling. So how do we define fulfilment?
It is the totality of the marketer’s response to the customer. It is what the customer receives
as a result of responding to the company.

Each fulfilment process involves a complicated decision-making process. There are many
trade-offs. One is the standard of customer service you set as your goal. This can be delivered
by the three “P’s” of fulfilment, as fulfilment performance is critical to brand reputation.
• Personalisation
• Promptness
• Performance

What is fulfilment?
The term fulfilment originally referred to “fulfilling the order”, which meant opening the mail,
capturing the information, keeping track of the orders and payments, and finally sending out
the merchandise.
Today this response source could be from the range of response media. It could be a coupon,
an e-mail message, request on a web site, or a phone call, or from mobile.
The information could be detailed answers to a questionnaire. The merchandise could be a
donation, a subscription, a request for further information, a membership application as well
as a range of products or services. In its wider sense fulfilment is more than simply what is
being sold or offered. It is the totality of the marketer’s response. It is what the customer
receives as a result of responding.
The industry uses two different terms for two separate stages of the process:
• Response handling covers the receipt and processing of the orders, requests, and
includes the computer and paperwork (stage 2 in the loop)
• Fulfilment means the dispatch of goods and services which can be either paper
fulfilment or merchandise fulfilment (stage 3 in the loop)

The whole process is often referred to as “back-end marketing” - but to plan properly and
assess your capacity, the calculations should also involve the front end. It can influence the
response rate and average order value.
Together, response handling and fulfilment represent the completion of one interactive
marketing cycle. A successful and profitable marketing business is built on repeat orders. Only

© IMM Graduate School Study Guide (AMM401P) Page 150 of 220

a satisfied customer will order again. There are four reasons why fulfilment should receive
top attention in the marketing programme.
i) Fulfilment is important to make the order stick
Frequently customers order impulsively and if it takes weeks to receive the item, it may no
longer be of interest to them. Furthermore, if it is not received promptly, the customer may
purchase a substitute item at a local retail outlet.
ii) Fulfilment is a key element of customer satisfaction
The customer must receive everything ordered, promptly and properly packed. The invoice
must be clear and accurate. The customer must have the assurance that any problem will be
resolved quickly and fairly. If this does not happen the customer becomes disappointed and
unlikely to order again, which is a loss of lifetime value potential.
iii) Fulfilment plays a vital role in profitability
Fulfilment often involves large numbers of people, powerful technology, large warehouses
and high traffic costs. If these costs are not used effectively and controlled, there can be a big
impact on the bottom line. These functions may not be directly under the control of
marketing, but the overall structures affect the end results for marketers.
iv) Good fulfilment services will alleviate consumer problems
Most complaints are concerned with fulfilment problems, and individual attention is costly to
handle and frequently results in adverse publicity. Handling complaints is a cost, and adverse
publicity affects brand reputation.

3b) Financial control and the transactional process must be handled for settlement of
payment, as no sale can be counted as complete until payment has been concluded. Payment
terms may be incorporated as part of the offer, but the process for collection is important as
bad debt and lengthy payment terms can damage cash flow.
Marketers also need to have access to customer bad debt data, for when a new promotion is
being made to existing customers, you don’t want to make additional offers incurring a
financial commitment to those already owing you money. You need to use bad debt as a
suppression criteria in database extraction (refer unit 4 – Marketing Database Principles)

3c) Processing of response orders is required from the concluded sales, which could involve
distribution and deliveries of products. Often this is outsourced, which means you need to
know the performance levels of the contractors and build these costs into the ROI.

3d) Database updating is required for all customer information to be consolidated and to
identify grading levels of customer value and risk analysis. It is impractical to complete
performance formulae without having the relevant information from the database. (refer unit
4 – Marketing Database Principles)

© IMM Graduate School Study Guide (AMM401P) Page 151 of 220

3e) Customer retention programmes are part of fulfilment and should also include the first
steps of the model where service experience levels are monitored and ‘welcome’
communications are implemented. (refer unit 10 – Customer Profitability)

3f) Results analysis is the final step after the fulfilment functions are completed and
marketers must measure the results from each step, identify if any changes are needed, and
make recommendations for further roll-out.

The information ‘hot spots’ you have covered in the Three-Step Process can all be identified
on the Interactive Marketing Model.
The completion of these stages of fulfilment is critical to the brand image of a company. This
is where the customer forms their impression on how the market promise has been delivered
as a totality.

F. Study Unit 8 - Revision Exercises

Revision Discussion Questions

Handling responses requires a set of capabilities to match capacity requirements.
Identify the key capabilities you need.

Which are the ‘information hot spots’ areas used in the Three-step Process which you
can overlay on the Interactive Marketing Model to identify where you can gather the
information?

Multiple Choice Questions

Which is not one of the 3 ‘P’s of fulfilment?
A. Personalisation
B. Performance
C. Processing
D. Performance

Fulfilment should receive top attention because:

A. It is important to make the order stick.
B. It is a key element of customer satisfaction.
C. It plays a vital role in profitability.

© IMM Graduate School Study Guide (AMM401P) Page 152 of 220

 D. All of the above.

Some of the Step 3 elements of fulfilment do not include:

A. Financial control.
B. Making the product offer.
C. Database updating.
D. Response order processing.

G. Study Unit 8 - Revision Exercises Solutions

Revision Discussion Questions
Handling responses requires a set of capabilities to match capacity requirements.
Identify the key capabilities you need.
• Do we have the resources to cope with any additional work?
• Do we have the budget allocated to cope with the response handling?
• Do we have database facilities to link the response information into our system and
process the action?
• Do we have an integrated administrative support system to process the business?
• Do we have the staff expertise and skill level?
• Do we have the fulfilment facilities to respond to the customer’s request?

Which are the ‘information hot spots’ areas used in the Three-step Process which you
can overlay on the Interactive Marketing Model to identify where you can gather the
information?
Within step 1 for outbound communication, you would review the metrics for acquisition,
which will include:
• Selecting and quantifying the target market potential within the scope of the
communication budget.
• Deciding on the choice of media, considering the cost and the effective return.
• Selecting an offer and calculating the cost to make the offer and the possible
redemption costs.
Within step 2 for handling responses mainly under retention, you would consider:
• Deciding on the response options, and the cost of offering these routes back to the
organisation.
• Response handling bearing in mind existing capacity, or the possible cost of
outsourcing this service if there are expected peak response flow problems.
• Welcome aboard for collecting customer details and data capturing the information.

© IMM Graduate School Study Guide (AMM401P) Page 153 of 220

• Prioritising the potential sales leads and distributing and initiating the sale process to
qualify the lead and conclude the sale – back end costs and internal marketing and
sales.
Within Step 3 for fulfilment you would consider:
• Response processing of orders.
• Database updating for customer information and order details – IT and data source.
• Customer retention activities which can include loyalty and CRM programmes.
• Metrics analysis for analysing the results to decide if there was sufficient ROI and
potential for roll-out.

Multiple Choice Questions

Which is not one of the 3 ‘P’s of fulfilment?
A. Personalisation
B. Performance
C. Processing
D. Performance

Fulfilment should receive top attention because:

A. It is important to make the order stick.
B. It is a key element of customer satisfaction.
C. It plays a vital role in profitability.
D. All of the above.

Some of the Step 3 elements of fulfilment do not include:

A. Financial control.
B. Making the product offer.
C. Database updating.
D. Response order processing.

H. Study Unit 8 - Progress check

You have come to the end of Study Unit 8.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 154 of 220

 Your Progress Checklist
Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
 Discuss the concept of the Prospecting to Fulfilment loop.
 Know how to prepare a 3-step customer interaction process.
 Identify the metrics for outbound communication.
 Identify the requirements for response handling.
 Identify the components of fulfilment and customer satisfaction.

Are you ready to tackle the questions relevant to Study Unit 8 in Assignment
2?

DO Assignment 2, Q 2

© IMM Graduate School Study Guide (AMM401P) Page 155 of 220

Section 4 - Selecting the Formulae to Measure Objectives
WEEK 11 ASSIGNMENT 2

Study Unit 9 - Identifying selected formulae to match

selected metrics
Week 11 (Chapter 8 Key Marketing Metrics)

“Better metrics lead to better decisions, which lead to better outcomes”

- Erv Shames

A. Study Unit 9 - Relevance

So far we have covered promotions mainly for individual prospect customers. This unit
reviews the difficult options of promoting to the trade, and then identifies which data can be
sourced from within the organisation to populate the formulae for analysing the range of
metrics required by marketers for trade promotions.
The trade is an important channel for many companies which do not deal directly with
consumers. Motivating the trade to promote your products can be complex and require high
levels of persuasion, and you do not always have control over the end pricing system.
The unit covers new metrics and formulae beyond the straight forward in-house promotion
and involves input and activities with partners companies.

B. Study Unit 9 - Key Concepts

Let’s recap what the relevant module learning outcomes are for this study unit
• Understand the need to motivate the trade.
• How to select a baseline against which incremental sales and promotional lift can be
assessed.
• Track and evaluate (discount) coupon usage and success.
• How to assess whether manufacturer trade promotions are reaching the consumers
in stores.
• Understanding Price waterfall by assessing where product value is being lost with
discounts.
• Identifying where to access data from within the organisation for populating metrics
formulae for the trade.

© IMM Graduate School Study Guide (AMM401P) Page 156 of 220

• Identifying supplier selection criteria.

C. Study Unit 9 - Glossary

Redemption Rates - Coupons redeemed divided by coupons distributed.
Costs for Coupons and Rebates - Coupon face amount plus redemption charges,
multiplied by the number of coupons redeemed.
Percentage Sales with Coupon - Sales via coupon, divided by total sales.
Percent Sales on Deal – Sales with temporary discounts as a percentage of total sales.
Pass-Through - Promotional discounts provided by the trade to consumers, divided by
discounts provided to the trade by the manufacturer.
Price Waterfall – Actual average price per unit divided by list price per unit.
Loss leader – a temporary price cut in order to attract increased store traffic or first
on-line purchase.
List price – price of a good or service before discounts and allowances are considered.
Net price – actual price paid for a product by customers after all discounts and
allowances have been factored in.
Sales promotion – a blend of marketing activities and materials designed to intensify
the efforts of the sales force, induce intermediaries to stock and sell more of the
products, and persuade consumers to buy the product within a specified limited time
period.

D. Study Unit 9 - Learning Path

Week 11 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
 Review sales promotion Complete the Sign-up for Week 11
and measurement review exercises eLearn
techniques for the trade. Check activities
 How to select a baseline on eLearn
against which Consult eLibrary
incremental sales and
Obtained
promotional lift can be
feedback
assessed.
 Track and evaluate Call Centre
(discount) coupon usage
and success.

© IMM Graduate School Study Guide (AMM401P) Page 157 of 220

  Understanding Price Prescribed
waterfall by assessing textbook
where product value is Chapter 8
being lost
 Understanding the role of
partner vendors and the
need for selection and
control.

E. Study Unit 9
Promotions
In earlier units, the term promotion has related mainly to individual consumers. This unit
widens the scope of promotion to include trade customers, distributors and retailers.
Although promotions of whatever type can influence and increase sales, the additional
activities and various promotional discounts still affect costs. The question remains, is there
still profit after the promotions have finished?
Price promotions can be divided into two types:
Temporary price reductions – these can be linked to short term special offers with deadline
dates e.g. Black Friday specials – “50% off -one day only”.
Permanent features of pricing systems – which become an accepted standard and then
expected by the suppliers and end consumers.
Temporary promotions can use ‘loss leaders’ techniques, where on product is sold at close to,
or even below cost, so the is little or no profit, but the purpose is to attract customers to an
outlet and then cross-sell other products to achieve an overall profit return from that
customers interaction.
To evaluate temporary price promotions is to partition into two categories - Baseline Sales
and Incremental Sales.

Baseline sales
To determine the extent to which current sales are independent of specific marketing efforts.
Baseline sales establish a benchmark for isolating additional sales generated by a promotion.
Ideally the sales would be established via ‘control groups’ but this can be time consuming and
expensive, so generally marketers use historical figures adjusted for seasonal influences.
So baseline sales are the expected sales results, excluding the marketing programmes under
evaluation. They are basically estimated from historical data that would have expected to be
achieved if there was no promotion.
Baseline sales = Total sales - Incremental sales from marketing efforts
Marketing efforts could include advertising / trade promotions / consumer promotions

© IMM Graduate School Study Guide (AMM401P) Page 158 of 220

(Farris et el. 2017)

Metric Construct Consideration Purpose

Baseline Sales Intercept in Marketing activities To determine the
regression of sales as also contribute to extent to which
function of baseline. current sales are
marketing variables. independent of
Baseline Sales Total specific marketing
Sales, less efforts.
incremental sales
generated by a
marketing program
or programs.

Total Sales Baseline Sales (R, #) + Incremental Sales from Marketing (R, #)

Incremental sales or Promotional Lift

This is the lift resulting from a price promotion and is meant to determine the short-term
effects of a marketing effort. These metrics need to be isolated from existing activities, hence
first establishing the benchmark figure.
Incremental sales will relate to:
• Advertising (R, #)
• Trade Promotion (R, #)
• Consumer Promotion (R, #)
• Other (R, #)
Generally fixed costs (e.g. marketing staff / sales force) are not included so the promotion
expenditure only can be attributed to the costs and results.
Incremental sales = Total sales - Baseline sales

Metric Construct Consideration Purpose

Incremental Sales, Total sales, less Need to consider To determine short-
or Promotional Lift baseline sales. competitive actions. term effects of
Regression marketing effort
coefficient to
marketing variables
cited above.

Incremental Incremental Sales from Advertising (R, #)

Sales from Incremental Sales from Trade Promotion (R, #)

© IMM Graduate School Study Guide (AMM401P) Page 159 of 220

 Marketing (R, Incremental Sales from Consumer Promotion (R, #)
#) Incremental Sales from Other (R, #)

Lift (from Incremental Sales (R, #)

Promotion) (%) Baseline Sales (R, #)

Cost of Marketing Spending (R)

Incremental Incremental Sales (R, #)
Sales (R)

Every Rand discount or rebate offered by the company or sales staff comes right off the
company’s bottom line.

Coupons
Coupons are often used to introduce new products. They can be used to offer lower prices to
more price sensitive consumers.
The total cost of coupons for a promotion = distribution cost, printing and redemption costs.
Coupons and rebates are used to:
• introduce new products
• generate trial of existing products by new consumers
• “load” consumers to encourage long-term consumption, i.e. encourage them to over
stock so effectively locking them out from buying competitor’s products.
Rebates and coupons can serve as focus points for retailer promotions to generate traffic.

Costs for Coupons Coupon face amount Does not consider Allows for budgeting
and Rebates plus redemption margins that would of coupon expense.
charges, multiplied have been
by the number of generated by those
coupons redeemed. willing to buy
product without
coupon.

Total Coupon [Cost per Redemption (R)x Coupons Redeemed (#)]

Cost (R) + Coupon Printing and Distribution Cost (R)

© IMM Graduate School Study Guide (AMM401P) Page 160 of 220

 Redemption
Redemption rate is an important metric to measure the effectiveness of the distribution
strategy. It is the rough measure of coupon “lift” after adjusting for sales that would have
been made without coupons.
Redemption rate is the % of distributed coupons that are used by consumers.
Not all coupons are used, and the numbers redeemed helps determine whether coupons are
reaching customers and indicates the take-up of the offer.

Metric Construct Consideration Purpose

Redemption Rates Coupons redeemed Will differ Rough measure of
divided by coupons significantly by mode coupon “lift” after
distributed. of coupon adjusting for sales
distribution. that would have
been made without
coupons.

Coupon Coupons Redeemed (#)

Redemption Coupons Distributed (#)
Rate (%)

Cost per Coupon Face Amount (R) + Redemption Charges (R)

Redemption (R)

Metric Construct Consideration Purpose

Percentage Sales Sales via coupon, Doesn’t factor in A measure of brand
with Coupon divided by total magnitude of dependence on
sales. discount offered by promotional efforts.
specific coupons.

Percentage Sales with Coupon (R)

Sales with Sales (R)
Coupon (%)

Metric Construct Consideration Purpose

Percent Sales on Sales with Does not make A measure of brand
Deal temporary discounts distinction for depth dependence on
as a percentage of of discounts offered. promotional efforts.
total sales.

© IMM Graduate School Study Guide (AMM401P) Page 161 of 220

 Pass -through rate
To measure the extent to which a manufacturer’s promotions generate promotional activity
further along the distribution channel.
Of the promotional value provided by a manufacture to its retailers and distributors, the pass-
through % represents the portion that ultimately reaches the consumer.
Pass-through is the % of value of the promotions paid to distributors and retailers that is
reflected in discounts provided by the trade to their own customers.
But - if each channel adds its own margin, without regard for how others are pricing, the
resulting price can be higher than a marketer would like.

Metric Construct Consideration Purpose

Pass-Through Promotional Can reflect power in To measure the
discounts provided the channel, or extent to which a
by the trade to deliberate manufacturer’s
consumers, divided management or promotions generate
by discounts segmentation. promotional activity
provided to the trade further along the
by the manufacturer. distribution channel.

Pass-Through Value of Temporary Promotional Discounts

(%) Provided to Consumers by the Trade (R)
Value of Temporary Discounts Provided to Trade by Manufacturer (R)

Price Waterfall
Price waterfall indicates the price actually paid for a product, and the sequence of channel
factors affecting that price.
It is a way of describing the progression of prices from published list price to the final price
paid by a customer. Each drop-in price represents a drop in the “water level”.
It is the reduction of the price actually paid by the customer after discounts and allowances
are given at various stages in the sales process.
Marketers can determine where product value is being lost to decide whether the discounts
make sense for the business. Issues for marketers to consider is that they can lose control of
the final pricing to the consumer. The sales channels can lower prices to encourage higher
sales, but this may not necessarily increase profits. Also, the question of branding needs to
be considered, as products positioned as high quality/upmarket may not be suited to a price
waterfall situation.

© IMM Graduate School Study Guide (AMM401P) Page 162 of 220

 Metric Construct Consideration Purpose
Price Waterfall Actual average price Some discounts may To indicate the price
per unit divided by be offered at an actually paid for a
list price per unit. absolute level, not on product, and the
Can also be a per-item basis. sequence of channel
calculated by factors affecting
working backward that price.
from list price, taking
account of potential
discounts, weighted
by the frequency
with which each is
exercised.

Price Net Price per Unit (R)

Waterfall List Price per Unit (R)
effect (%)

Suppliers & stakeholders & value chain

This unit has focussed on the trade and suppliers. In any promotion, an organisation is
dependent upon those suppliers providing a service as well as those vendors distributing the
product. These are issues to consider in selection and management of these stakeholder
partners, as they can be critical to the costing and end profitability of the promotion. This
section is located in the Interactive Marketing Model within the Value Chain and Suppliers. It
is important to be sure that they are operating within the organisations compliance protocols
and with a minimum of risk.
In order to perform at the required levels they should be carefully selected. The following are
a range of options that can be considered for evaluating suppliers, or vendors and partners in
the sales channel.
Key factors to consider when appointing suppliers are:
• Price and value – make sure each vendor has quoted on the same basis. It is not always
the cheapest quote that is the one to take. Identify what other values the vendor can
offer, and can they cope with roll-out quantities?
• Service – does the vendor understand your business and is able to fit in with your way
of doing business?
• Timeliness – can they adapt to rush projects and meet deadlines.
• Suitability and capability – do they have the required equipment and resources, or
will they need to sub contract the work to others.
• Quality – how do they match up to your requirements for each element of activity in your plans, and
if you increase the quantity can they maintain the quality?

© IMM Graduate School Study Guide (AMM401P) Page 163 of 220

• Financial viability - are they financially stable in their business and can pay their sub-
contractors?
• Creativity – are they full of ideas on how to add value to your business, and be able to
see ways of saving you money?
• Flexibility - how booked up are they with other partners, and if you are late from your
side with your promotion, can they still adapt and fit around your deadlines?

• Price • Service

Financial
Quality
Viability

Creativity
Flexibility

• Suitability • Timeliness

Overall, promotions are vital to marketers, as they are one of the key ways to entice
customers to try products or services, and to increase the volume or frequency of customers
purchase. But the level and methods of discounting and the control over the channels is
important to monitor in order to maintain profits over the longer term.

F. Study Unit 9 - Revision Exercises

Revision Discussion Questions
Discuss the value of knowing what the Pass-Through rate is with regards to a
distribution chain.
When reviewing stakeholders in your value chain, explain which key selection criteria
you would consider for rating a new partner.

Multiple Choice Questions

Special incentives that encourage the purchase of a product or service can include:
A. Coupons & rebates,
B. Contests & free samples,
C. Point-of-purchase displays
D. All of the above

© IMM Graduate School Study Guide (AMM401P) Page 164 of 220

 What is not included in the Price Waterfall?
A. List price
B. Dealer discount
C. Required mark-up
D. Cash discount
What is not included in the incremental sales from marketing?
A. Incremental sales from Advertising
B. Incremental sales from Product Rebranding
C. Incremental sales from Trade Promotion
D. Incremental sales from Consumer Promotion

G. Study Unit 9 - Revision Exercises Solutions

Revision Discussion Questions
Discuss the value of knowing what the Pass-Through rate is with regards to a
distribution chain.
• Pass-Through rates relate to the % of the value of manufacturers promotions paid to
distributors and retailers that is reflected in discounts provided by the trade to their
own customers.
• The purpose is to measure whether trade promotions are generating consumer
promotions.
• “middlemen” are involved in the channel structure and these resellers are between
the manufacturers and ultimate consumer.
• Each reseller adds its own margin, and the price could end up higher than the marketer
planned.
• Pass-through is calculated as the value of discounts given by the trade to their
customers, divided by the value of temporary discounts provided by a manufacturer
to the trade.
• Manufacturers offer discounts to the trade to help push their products.

When reviewing stakeholders in your value chain, explain which key selection criteria
you would consider for rating a new partner. You may select some or all of these
options. You are not limited only to these. You can include and justify additional
options.
• Price and value – make sure each vendor has quoted on the same basis. It is not always
the cheapest quote that is the one to take. Identify what other values the vendor can
offer, and can they cope with roll-out quantities?

© IMM Graduate School Study Guide (AMM401P) Page 165 of 220

• Service – does the vendor understand your business and is able to fit in with your way
of doing business?
• Timeliness – can they adapt to rush projects and meet deadlines.
• Suitability and capability – do they have the required equipment and resources, or
will they need to sub contract the work to others.
• Quality – how do they match up to your requirements for each element of activity in
your plans, and if you increase the quantity can they maintain the quality?
• Financial viability - are they financially stable in their business and can pay their sub-
contractors?
• Creativity – are they full of ideas on how to add value to your business, and be able to
see ways of saving you money?
• Flexibility - how booked up are they with other partners, and if you are late from your
side with your project, can they still adapt and fit around your promotion deadlines?

Multiple Choice Questions

Special incentives that encourage the purchase of a product or service can include:
A. Coupons & rebates,
B. Contests & free samples,
C. Point-of-purchase displays
D. All of the above

What is not included in the Price Waterfall?

A. List price
B. Dealer discount
C. Required mark-up
D. Cash discount

What is not included in the incremental sales from marketing?

A. Incremental sales from Advertising
B. Incremental sales from Product Rebranding
C. Incremental sales from Trade Promotion
D. Incremental sales from Consumer Promotion

H. Study Unit 9 - Progress check

You have come to the end of Study Unit 9.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 166 of 220

 Your Progress Checklist
Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
• Understand the need to motivate the trade.
• How to select a baseline against which incremental sales and
promotional lift can be assessed.
• Track and evaluate (discount) coupon usage and success.
• How to assess whether manufacturer trade promotions are reaching the
consumers in stores.
• Understanding Price waterfall by assessing where product value is being
lost with discounts.
• Identifying where to access data from within the organisation for
populating metrics formulae for the trade.
• Identifying supplier selection criteria.

Are you ready to tackle the questions relevant to Study Unit 9 in Assignment
2?

DO Assignment 2

© IMM Graduate School Study Guide (AMM401P) Page 167 of 220

SECTION 5 - Results Analysis of Collected Data
WEEKS 12-15 ASSIGNMENT 2

Study Unit 10 - Customer Profitability Review

Week 12 (Chapters 1,2,5 Key Marketing Metrics)

“The customer experience has increasingly become a focal point for

marketing strategies because it is so closely linked to business strategies.”

Trinadha Kandi

A. Study Unit 10 - Relevance

Merely having a volume of customers does not indicate that a company is profitable.
Customers need to be ranked for value and potential, for regular versus infrequent
purchasers. Acquiring customers can be expensive, yet do you know if it is worthwhile to
invest in trying to gain new customers?
This unit unpacks the rapidly changing dynamics of customer relationships where the
challenge is to not only attract customers but keep them satisfied with levels of service and
build up loyalty. Customer Lifetime Value becomes an important metric in deciding the level
of effort and expenditure to commit to certain customers, although not all.
To keep the more valued customers, loyalty programmes need to be considered by reviewing
the scope of commitment required to implement and maintain these programmes.

B. Study Unit 10 - Key Concepts

Let’s recap what the relevant module learning outcome is for this study unit
After completing unit 10 of this study guide, you should be able to:
• Identify the changing dynamics of customer relationships and satisfaction.
• Differentiate between customer acquisition and retention costs.
• Discuss options for Customer Lifetime Value.
• Identify the scope for implementing Customer Relationship Management throughout
all life stages for long term profitability.

© IMM Graduate School Study Guide (AMM401P) Page 168 of 220

• Review the value of loyalty programmes.

C. Study Unit 10 - Glossary

Customer satisfaction – a function of expectations against delivery.
Loyalty ladder – the steps an individual takes in progressing from a suspect through
to a full partner.
Net promoter score – the percentage of customers willing to recommend to others
less those unwilling to recommend.
Loyalty programme – longer term strategic programme aimed at extending the
lifetime value of each customer.
Customer Lifetime Value (CLV) – the present value of the future cash flows attributed
to the customer relationship.
Recency – how long since a customer last purchased.
Frequency – how often the customer purchases.
Average acquisition cost – average cost to acquire a customer taking all acquisition
spending divided by the number of new customers acquired.
Average retention cost – average cost to retain an existing customer by taking total
retention spending divided by the number of customers retained.

D. Study Unit 10 - Learning Path

Weeks 12 Time allocation: 15 hours
Learning elements Activities Material used / Time / Progress
completed accessed / Week check
assistance
• Understand the difference Know where to Sign-up for Weeks
between the product- locate the eLearn 12
centric and customers- source of costs Check activities
centric approach. for customer on eLearn
• Know the difference metrics within Consult eLibrary
between satisfying and an organisation. Obtained
delighting customers. feedback
• Understand the different
Call Centre
levels on the loyalty
Review
ladder and know how to
prescribed

© IMM Graduate School Study Guide (AMM401P) Page 169 of 220

 move customers to textbook
become advocates for the Chapters 1, 2, 5
company.
• Know how to calculate
the Net Promoter Score
and how to interpret the
results.
• Understand the
requirements of
implementing a customer
loyalty programme.

E. Study Unit 10
The changing dynamics of customer relationships.
Customer experience and Internet
With platforms like social media and the ability to search for information online the power of
brands has started to shift away from companies to customers. Customers are able to
compare prices online, visit a store and still make a final online purchase with a competitor.
They can utilise price comparison websites, purchase from abroad much easier and quicker,
which exposes a local company to international competitors much more than ever before.

There is no doubting the power of social media, customers can now complain about poor
service or product online via Twitter, Facebook, Instagram etc. and that is visible like a digital
billboard to millions as opposed to the old negative “Word-of-Mouth” where they would only
share their experience with a limited number of people. A company’s brand and brand
identity are no longer only in the company’s control. Information and reviews about products
and services are also not solely in the control of the company anymore, these days individuals
post their own product reviews on YouTube, from testing the products to how to utilise it and
can either promote or criticise it.
Social media turns the whole branding scenario around. Control is shared with the crowd, and
real feedback is immediate. A brand is no longer what we tell the consumer it is – it is what
the consumers tell each other it is.
These statistics further indicate that customers expect more from their experience than ever
before.

© IMM Graduate School Study Guide (AMM401P) Page 170 of 220

(Leather 2013)

The world of business has been reshaped by the speed of these new technologies changing
from product-centric to customer-centric. The most pressing question to companies and
marketers is: “How do we stay relevant in this uncertain and changing world?”

Differences between Traditional and 21st Century Businesses

(Kumar 2008)
Refer: 4 Step Digital Marketing – Traditional vs Digital p4

What is clear is that goods and services are no longer enough and the environment in which
the company is doing business is becoming increasingly demanding and competitive.
Companies therefore need to move beyond just products and services to drive meaningful
advantage and sustainable profits.

The progression of Economic Value

© IMM Graduate School Study Guide (AMM401P) Page 171 of 220

(Pine and Gilmore 2011)

Customer-centric approach to business is rapidly addressing a lot of issues that a product-

centric approach does not cater for. This requires Marketers to have a deep understanding of
what consumers actually want, when and how they want it, and what they are willing to give
for it in exchange. There is a greater opportunity for marketers in creating economic value for
the company and gaining competitive advantage in a customer-centric business model,
through designing and staging differentiated and relevant “experiences” with customers at
premium pricing. (Leather 2013) Hence from a Marketing Metric perspective it is about the
share of heart and minds.

© IMM Graduate School Study Guide (AMM401P) Page 172 of 220

Share of hearts, minds and markets

Refer Chapter 2, Key Marketing Metrics

(Farris et el. 207)

Customer Satisfaction
Knowing whether customers are satisfied is important for every aspect of the business,
whether it is for a specific project, marketing campaign or business in general. Customer
Satisfaction is a key metric to know whether the company is keeping customers happy.
Customer Generally measured Subject to response Indicates likelihood
Satisfaction on a 1–5 scale, in bias. Captures views of repurchase.
which customers of current Reports of
declare their customers, not lost dissatisfaction show
satisfaction with customers. aspects that require
brand in general or Satisfaction is a improvement to
specific attributes. function of enhance loyalty.
expectations.

The satisfaction-loyalty curve

© IMM Graduate School Study Guide (AMM401P) Page 173 of 220

(Council on Financial Competition 2004)

The American Customer Satisfaction Index (ACSI) framework

(Fornell, Johnson, Anderson, Cha and Bryant 1996)

The American Customer Satisfaction Index (ACSI) framework is a used to measure customer
satisfaction. The index study consists of standardised questions, consistent for all industries,
and incorporates critical drivers of customer satisfaction and delight for each industry. More
importantly, the questionnaire does not only measure performance, but also expectations.

© IMM Graduate School Study Guide (AMM401P) Page 174 of 220

 Loyalty
Grounded in two decades of service research, conventional wisdom holds that there are clear
relationships between service value, customer satisfaction, loyalty, revenue growth and
profitability. However, most companies have failed to realise the reliable relationships
between service quality, customer satisfaction, loyalty and the economic outcomes predicted
by these frameworks. As stated earlier, executives have been mortified to learn that what at
first seemed to be a relatively linear relationship between customer satisfaction and return
has proved to be more complex.

The customer satisfaction-loyalty graph

(Council on Financial Competition 2004)

Customers are satisfied when a company manages to avoid service problems (i.e. maintaining
a ‘zero defects’ mentality), but to keep customers in the long run, companies must do more.
For many companies, ‘doing more’ suggests the generation of higher levels of emotion than
those associated with mere satisfaction evaluations. The growing belief among many
executives is that customers who are exposed to unexpected, pleasant experiences – those
experiences that are delightful – are far more likely to develop into long-term loyal followers.
This has led to a growing interest among companies in creating customer delight as the basis
for long-term customer profitability (Arnold, Reynolds, Ponder, & Lueg, 2005).

The Loyalty Ladder

The concept of the Loyalty Ladder originated in the 1980’s and has been used and adapted by
many authors. The principles however remain basically the same, even if the number of steps
in the ladder may vary. A fuller version of the ladder is demonstrated by Delgado.

© IMM Graduate School Study Guide (AMM401P) Page 175 of 220

Adapted from (Delgado 2013)

Loyalty metric
Loyalty Measures include share “Loyalty” itself is not a New product entries
of requirements, formal metric, but may alter loyalty levels.
willingness to pay specific metrics Indication of base
premium, willingness to measure aspects of this future revenue stream.
search. dynamic.

The most important rule in succeeding to climb the customer loyalty ladder consists in
exceeding customer expectations. This can be realised by increasing the quality of service, an
action which can increase both customer loyalty as well as employee retention.

In order to be able to do this, businesses need to be able to identify and analyse which
customers are at which stage of the customer loyalty ladder. Likewise, they need to
understand the fact that their best customer is the most recent satisfied one, as well as, the
best word of mouth advertising comes from the most satisfied. The comic by Tom Fishburne,
illustrates this with customer advocates who will be sharing their positive experience and how
marketing has evolved.

© IMM Graduate School Study Guide (AMM401P) Page 176 of 220

Customer Research
Apart from employee performance metrics in service support areas in the organisation like a
call centre, front office, back office etc., sales and customer data the main other source for
monitoring Customer Experience delivered by the company comes from actual interviews
with Customers.
Consumer Beliefs Customers/ Customers/ Perception of brand
consumers view of consumers may hold by attribute.
product, generally beliefs with varying
captured via survey degrees of
responses, often conviction.
through ratings on a
scale.

Willingness to Generally measured Nonlinear in impact. Shows strength of

Recommend via ratings across a loyalty, potential
1–5 scale. impact on others.

Net Promoter Score

Net Promoter Score (NPS) is a more recently developed metric designed to quickly measure
customer loyalty and by asking only one question of customers. Customers are asked, "On a
scale from 0 to 10, how likely is it that you would recommend our company to a friend?
Customers are grouped into three categories based on the responses: Promoters (9 to 10)

© IMM Graduate School Study Guide (AMM401P) Page 177 of 220

passively satisfied (7 to 8) and detractors (0 to 6). The NPS is the percentage of the promoters
less percentage of detractors. A score around 75% indicates superior levels of customer
loyalty. As would be expected, having a high promoter score tends to be associated with a
company's rate of the revenue growth; fiercely loyal customers provide valuable "word-of-
mouth" and make promotional efforts more efficient by being more receptive to new offering
from the company. Conversely, beyond damaging a company's brand through negative
"word-of-mouth", detractors increase service costs and can negatively impact the morale of
front-line employees. (Stanko, M.A. and Fleming M. 2014.)

Metric Construct Consideration Purpose

Net Promoter Percentage of Requires a survey of Some claim it to be
Score customers willing to intentions. the single best
recommend to others metric for
less the percentage marketers.
unwilling to recommend
the product or service.

Customer Profitability

(Farris et el. 2017)

© IMM Graduate School Study Guide (AMM401P) Page 178 of 220

Customer Profit
Not all customers are alike. A small number are very, very profitable. Some customer may be
less so. One can improve the company’s performance by treating different categories of
customers differently and developing relationships accordingly.
A company can measure the profitability of a customer, and other stakeholders in the value
chain, like distributors and agents. By using the Pareto Principle, the company can focus on
the profitability of their customer portfolio, which implies that the top 20% of customer
generate close to 80% of profit, while the bottom 80% of customers generates only 20%.

(Deshpande 2012)
Companies need to identify their acquisition and retention costs.
Metric Construct Consideration Purpose
Average Acquisition The ratio of It is often difficult to To track the cost of
Cost acquisition spending isolate acquisition acquiring new
to the number of new spending from total customers and to
customers acquired. marketing spending. compare that cost to
the value of the newly
acquired customers.

Average Acquisition Acquisition Spending (R)

Cost (R) Number of Customers Acquired (#)

By using this analysis, the company will know who the strategic and most profitable customers
are. This will also identify who those customers are that are too expensive to retain and allow

© IMM Graduate School Study Guide (AMM401P) Page 179 of 220

the company to make them profitable or exit them from their customer base. The company
will use the average retention cost to identify who those customers are.
Customer retention assesses how many customers you've retained versus how many you've
lost. It's often a calculated ratio from one defined period of time to another. Other terms used
for loss are defection, attrition or churn. These terminologies are used in different industries
in slightly different ways, but the end result is the same, a loss of customers.

Metric Construct Consideration Purpose

Average Retention The ratio of retention The average retention To monitor retention
Cost spending to the cost number is not spending on a per-
number of customers very useful to help customer basis.
retained. It is often make retention
difficult to isolate budgeting decisions.
retention spending
from total marketing
spending.

Average Retention Retention Spending (R)

Cost (R) Number of Customers Retained (#)

Recency metric calculates how long it has been since a customer has last purchased from the
company and can be used to identify customers who have not purchased in a very long time.
This will allow the company to decide whether to keep them or not.
Frequency metric identifies how often the customer purchases, and identifies regular
vs non-regular customers, which is an indication of the level of loyalty.
Customer Lifetime Value
“Customer lifetime value (CLV) attempts to predict the value of the future profit flows
associated with an individual customer over the length of time the firm can retain a customer.
In certain industries, customer retention, (or it's inverse, customer churn) is closely watched,
and a lifetime of the retained customer and profit flows can be closely estimated based on
customer profiles. Setting goals CLV, is one way to ensure a campaign is attracting quality and
not just quantity.” (Stanko, M.A. and Fleming M. 2014.)

Note that within CLV there are two distinct metrics, each of which can be used to set goals
individually, namely Customer retention rate and Margin per customer.

© IMM Graduate School Study Guide (AMM401P) Page 180 of 220

 Metric Construct Consideration Purpose
Customer Lifetime The present value of Requires a projection Customer relationship
Value the future cash flows of future cash flows management
attributed to the from a customer decisions should be
customer relationship. This will made with the
relationship. be easier to do in a objective of
contractual situation. improving CLV.
Formulations of CLV Acquisition budgeting
differ with respect to should be based on
the treatment of the CLV.
initial margin and
acquisition spending.

Customer Lifetime Retention Rate (%)

Margin (R) x
Value (R) 1 + Discount Rate (%) − Retention Rate (%)

Prospect Lifetime Value

Never under estimate the value of a single customer from cradle to grave. Depending on the
type of industry a company is operating in, they might be able to service a customer
throughout different life stages, which requires a complete customer relationship
management process across a lifetime.
Example: Financial Services Industry. A bank might obtain a customer as a toddler when
grandparents open an account for a grandchild. That toddler could grow up to be the next
CFO of a Multi-National company. This could influence the CFO to consider the same bank for
both personal and corporate banking.
At different stages of life, individuals have different needs. These differences will reflect in
their spending patterns for types of products and volume of spending.

© IMM Graduate School Study Guide (AMM401P) Page 181 of 220

Life Stages Diagram

(Jeffes, 2015)

Prospect lifetime Value is the expected value of prospecting. Only if prospect Lifetime Value
is positive should the firm proceed with planned acquisition spending. CLV is used to inform
prospecting decisions. If the PLV is positive, it is wise to go ahead with acquisition spending,
but if it is negative, acquisition spending should not be made.

Prospect Lifetime Value Acquisition Rate (%) x [Initial Margin (R)] + CLV (R)
(R) − Acquisition Spending (R)

If the metrics look positive for lifetime value, then retention of the customer is important.
This brings into consideration the concept of loyalty programmes.

“Loyalty programmes”
In a sense, a loyalty programme is simply an extension of traditional promotional techniques.
The difference is that promotion is short-term and tactical, but a loyalty programme is long
term and strategic. It aims at extending the lifetime value of each customer, but at some
point it must apply the 80/20 principle – i.e. shift its focus to nurturing the company’s best
customers.
It is the practical application of the concept of the loyalty ladder – i.e. turning suspects into
prospects, prospects into trialists, trialists into customers, customers into advocates. The
initial stages are attained via a mix of general advertising, product and service quality/value,

© IMM Graduate School Study Guide (AMM401P) Page 182 of 220

and the lure of loyalty incentives. However, as a customer moves up the ladder, the
programme itself becomes increasingly important.
To ensure a return on investment, the programme also must be capable of “weeding out”
unprofitable customers – i.e. those who generate more cost to the business (in terms of
administrative and marketing expense) than profit.

Objectives
There are a number of possible objectives for any loyalty programme. It is essential to set
specific, clearly defined objectives that can be used to determine appropriate marketing
activities and against which results can be measured. These can be distinct, overlapping, or
essentially the same objectives viewed from different perspectives. The range of objectives
include:
• To increase customer loyalty
• To generate incremental revenue
i.e. increasing total revenue per customer by increasing:
o value per single transaction
o number of transactions over given time period
o lifetime value
• To provide a system for more accurate targeting
• To increase market share
• To reduce attrition
• To ward off competition
• To build and secure long-term market dominance

Factors affecting the appropriateness of a loyalty programme to a business

The following questions are designed to assess the nature of the business in terms of whether
or not a loyalty programme will be effective.
• Are the company’s products purchased frequently? (If so, this makes it easier to
maintain the relationship via regular communication and interaction. Also, it allows
the customer to work steadily towards incentive bonuses)
• Do the products have sufficient profit margin to sustain the programme? (If not, other
sources of revenue must be investigated)
• Does the company have all the necessary resources to establish, launch and sustain
the programme? (This includes finance, manpower and training, infrastructure and
systems – and genuine top management commitment plus a culture of service
excellence)
• Does the company operate in a parity market? (If so, a loyalty programme is a key
strategic weapon that can reduce brand switching and help to retain customers even
through periods of intense competition, price wars, etc. In fact, given the nature of
the modern retail industry, a loyalty programme is almost mandatory)

© IMM Graduate School Study Guide (AMM401P) Page 183 of 220

Total commitment is essential
A loyalty programme must be viewed as a core strategic initiative, not simply an afterthought.
If it is not implemented with total and company-wide commitment, it will not only fail, it could
also cause the whole business to fail. It is highly visible, so if it does not deliver the promises
it makes, it could actively drive customers away.

Key issues for consideration

i) Under-promise and over-deliver
A classic mistake is to focus more on the front-end than the back-end. In most cases this
creates high customer expectations which are not fulfilled. Instead it is preferable to offer
less upfront (or tone down the advertising hype) and then give more once a customer has
joined.
ii) Comprehensive cost analysis
Another common pitfall is inadequate budgeting. Loyalty programmes are expensive,
especially in the set-up stage. All areas of cost must be carefully analysed and accounted for.
These include: the database, incentives/awards, customer acquisition and ongoing
promotion, regular communication, administration, staff (customer service centres,
helplines, etc), market research, in-store support materials, internal marketing, staff training
and development, supplier communications.
iii) Incentives / awards
Incentives that erode the company’s bottom line must be avoided wherever possible. Some
of the most powerful and effective programmes rely heavily on simple recognition of the
customer’s special status by staff.
iv) Point systems
These must be designed to reward the best customer and cull the worst. If both of these
objectives are not implemented simultaneously, incremental revenue generated from good
customers is soon eroded by the increasing costs of retaining unprofitable customers. A
structured re-activation system must be instituted, after which customers who do not
respond are removed from the programme. However, the records of under-performing
customers should be archived, not deleted as they may re-join later.
The rules governing accumulation and usage of points must be carefully considered and
formulated. e.g. Is the accumulation of points open-ended or must points be used within a
given time-frame? Can points be used to purchase from the company’s product range only
or can they be used for third party offers?
v) Database segmentation
For companies with multiple and diverse product lines it is essential to create a database
capable of sophisticated manipulation. This allows for accurate targeting and, as a result,

© IMM Graduate School Study Guide (AMM401P) Page 184 of 220

significantly increased customer loyalty as offers become more relevant to individual
customer needs.
vi) The need for regular communication
Regular communication is the backbone of a successful loyalty programme – especially in
parity markets such as retail. Ideally, communication should occur monthly, even if this is
limited to specific segments of the base. All customers should receive a communication at
least once a quarter. Without regular communication, attrition rates increase significantly.

F. Study Unit 10 - Revision Exercises

Revision Discussion Questions

Explain the difference between a product-centric and customer-centric approach.
Explain the progression of the loyalty ladder

Multiple Choice Questions

If a company wants to know whether they are keeping customers happy they need to
look at:
A. Overall sales volumes
B. Customer satisfaction index
C. Loyalty
D. Lifetime value

Which measure will a marketer use to know that customers are likely to tell friends
and family about their experience:
A. Loyalty metrics
B. Willingness to recommend
C. Net Promoter Score
D. Passively satisfied

You need to know how well your company retains customers. Based on their purchase
habits, which metric will you use:
A. Frequency rate
B. Recency rate

© IMM Graduate School Study Guide (AMM401P) Page 185 of 220

 C. Monetary spend
D. All of the above

You need to assess the monetary value of a current individual customer, which metric
will you use:
A. Customer Lifetime Value
B. Prospect Lifetime Value
C. Average acquisition cost
D. None of the above

G. Study Unit 10 - Revision Exercises Solutions

Explain the difference between a product-centric and customer-centric approach.
• Product centric focus is the philosophy on selling products and a portfolio of products
and focusing on the number of customers that can be sold to.
• The strategy is sales maximization and product turnover to maintain full production.
Targets are usually set on a short-term basis.
• Customer centric focus is on customers rather than just products. The focus is on how
to service and interact with them and how to increase profitability of customers and
focus on maximising and cross selling to each customer based on their needs, not on
sales targets.
• Need to know the customer profiles in order to understand what they want, when and
how.
• Need to manage the customer experience to retain them and build loyalty over a
lifetime.

Explain the progression of the loyalty ladder

The principle is to develop a customer from an initial awareness of the organisation through
to doing business and becoming a full supporter of the organisation and recommends to
others.
The seven steps are:
Suspect – anyone who becomes aware of company promotion.
Prospect – someone who may be persuaded to do business, and so fits within the target
market.
Customer – someone who has done business once with the company.
Client – a person who has done repeat business and has several products yet can still be a
neutral supporter.
Supporter – someone who likes the company, but only supports passively.

© IMM Graduate School Study Guide (AMM401P) Page 186 of 220

Advocate – someone who actively recommends to others and does marketing for you.
Partner – someone who has the relationship of a partner with the company.

If a company wants to know whether they are keeping customers happy they need to
look at:
A. Overall sales volumes
B. Customer satisfaction index
C. Loyalty
D. Lifetime value

Which measure will a marketer use to know that customers are likely to tell friends
and family about their experience:
A. Loyalty metrics
B. Willingness to recommend
C. Net Promoter Score
D. Passively satisfied

You need to know how well your company retains customers. Based on their purchase
habits, which metric will you use:
A. Frequency rate
B. Recency rate
C. Monetary spend
D. All of the above

You need to assess the monetary value of a current individual customer, which metric
will you use:
A. Customer Lifetime Value
B. Prospect Lifetime Value
C. Average acquisition cost
D. None of the above

H. Study Unit 10 - Progress check

You have come to the end of Study Unit 10.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

© IMM Graduate School Study Guide (AMM401P) Page 187 of 220

 Your Progress Checklist
Progress checklist YES / NO?
Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point you should be able to:
 Identify the changing dynamics of customer relationships and
satisfaction.
 Differentiate between customer acquisition and retention costs.
 Discuss options for Customer Lifetime Value.
 Identify the scope for implementing Customer Relationship Management
throughout all life stages for long term profitability.
 Review the value of loyalty programmes.

Are you ready to tackle the questions relevant to Study Unit 10 in Assignment
2?

DO Assignment 2

© IMM Graduate School Study Guide (AMM401P) Page 188 of 220

 Study Unit 11 - Product Profitability Review
Weeks 13 (Chapters 4, 11,12 Key Marketing Metrics)

“There should be no guesswork as to whether your activities have line of

sight to results.”
- Nick Panayi

A. Study Unit 11 - Relevance

This unit concludes the study guide on Applied Marketing Metrics. What is important to note
is that there is no point in measuring something if the information will not be used to make a
decision that will lead to some corrective action, improvement or a positive outcome.
Marketing, some would argue, is more an art than a science, but what the Marketing Metrics
achieves is to go some way towards understanding and measuring what the markets,
competitors and customers are doing. Marketing and marketing spend and ultimately
marketing contribution is not always recognised by other areas in the organisation. Metrics
for Marketing provides very powerful tools in a Marketers toolbox to ensure that not only ROI
is measured, but also ROMI.
This is demonstrated by utilising marketing management dashboards that provides a review
of critical metric data in a summarised fashion.

B. Study Unit 11 - Key Concepts

Let’s recap what the relevant module learning outcomes are for this study unit
After completing Unit 11 of this study guide, you should be able to:
• Identify the required product and brand metrics for continual management
monitoring.
• Decide the key metrics for marketing dashboard reporting.
• Specify who to receive results and how often.
• Identify corrective actions and predictions for future roll-out.

© IMM Graduate School Study Guide (AMM401P) Page 189 of 220

 C. Study Unit 11 - Glossary
Marketing dashboard – a collection of financial and marketing metrics to indicate
health of a business.
Marketing metric X-Rays – shows problems and opportunities within financial
metrics.
Return on Investment (ROI) - Net profits over the investment needed to generate the
profits.
Payback Period - the projected length of time until a marketing initiative pays for itself
Year-on-Year Growth - Percentage change from one year to the next.
Compound Annual Growth Rate (CAGR) - Ending value divided by starting value to
the power of 1/N, in which N is the number of periods.
Cannibalisation Rate - Percentage of new product sales taken from existing product
line.
Fair Share Draw - Assumption that new entrants into a market, capture sales from
established competitors.
Conjoint Utilities - Regression coefficients for attribute levels derived from conjoint
analysis. Indicates the relative values that customers place on product attributes.

D. Study Unit 11 - Learning Path

Week 13 Time allocation: 15 hours
Learning elements Activities Material used / Time / Week Progress
completed accessed / check
assistance
• How marketing metrics Know where Sign-up for eLearn Week 13
can complement to source Check activities
traditional financial costs within on eLearn
metrics to assess a an Consult eLibrary
company and a brands organisation Obtained
performance.
feedback
• How to compare Complete the Call Centre
marketing metrics review Review
year-on-year to exercises prescribed
identify trends.
textbook Chaps
• The value of Marketing
4,11,12
dashboards in

© IMM Graduate School Study Guide (AMM401P) Page 190 of 220

 presenting complex
data.
• Be familiar with useful
systems to model a
company’s
performance.
• Identify key metrics
you will use to
measure the success of
your final marketing
operational report.

E. Study Unit 11
Measurement can help managers save time, money and human resource efforts. This unit
will review further product metrics and lead towards what is required by marketers for regular
monitoring and tracking.
Product and portfolio management

© IMM Graduate School Study Guide (AMM401P) Page 191 of 220

 Product versus Service-based Businesses
Whether your business is product or service-based you can still measure core performance
drivers. Product-based businesses due to the physical nature of the product makes metrics
easier, however there is also valuable service-based business metrics it just takes more effort
to collect the data for those service-based business. Product-based businesses are often
referred to as Fast Moving Consumer Goods (FMCG) and are typically retail type of businesses
while the service-based businesses are typically financial services, medical services and
telecommunication services.
• Product-based: a product-based business monitors the movement of the product
through the value chain. Consider the different steps of turning raw material into a
final product as it moves through the value chain. Defining a metric for every step
through the value chain will assist the organisation to identify critical measures.

One best practice in goal setting is the use of multiple levels of targets. A company could use
three levels of targets for marketing performance.
• External Target: the most conservative target that which may be revealed.
• Internal Target: the middle target or actual target
• Stretch Target: the most ambiguous providing an aspirational goal to employees
(Stanko, M.A. and Fleming M. 2014.)
The setting of specific and challenging goals as long been shown to be associated with
superior performance when compared to setting less ambitious goals or no goals at all. When
setting goals, managers should give ample thought to whether the metrics chosen to reflect
true outcome that the company is aiming for. (Stanko, M.A. and Fleming M. 2014.)

Product metrics analysis

Selecting the correct measurement and reporting tool
When deciding what measurement tool to use, consider the five measurement principles
reviewed in unit 1.
There are five measurements principles according to Figliuolo (2017) to consider when
deciding on key success indicators for company and marketing activities:
• What is the purpose of the measurement? Know what the significance of a metric will
be and how management will change in the business due to the outcome of the
results.
• What data source will be used to calculate the measurement? Different sources of data
can contribute into different results.
• How will the measurement be calculated? What formula will be used. Sometimes it
will be necessary to adapt a measurement to what the organisation requires which
can complicate a measure.

© IMM Graduate School Study Guide (AMM401P) Page 192 of 220

• How frequently will the measurement be done? Be efficient in only measuring what
the organisation needs. Analysis paralysis can be very expensive and take up
unnecessary resources.
• Who will review the measurement? Who will be using the reports. This is usually
stakeholders from different areas within the business. Knowing who the audience is
will determine the amount of detail to be included in the repots. (Figliuolo 2017)

Examples of key metrics to review for marketing performances.

Marketing mix Performance indicators Comments / Cautions
dimension
Advertising R Cost per thousand Allocating advertising budget
# Gross rating points Analysing campaign results &
# Frequency of exposure separating them other marketing
mix elements
Online and direct # Page views The ease of monitoring in all stages
marketing # Visits (prospecting purchase, re-purchase)
% Conversion rate
Public relations R Cost per event PR techniques differ from
# Exposure per event advertising, but objectives are
# Positive media exposures similar
Loyalty programs % Participation rate Differentiate based on client
categories
CRM and # Customer engagement Synergy between people and
customer service % Customer satisfaction level technology
Sales promotion R Cost per promotion Difficulty to create loyalty and long-
% Coupon conversion term relations
# Samples
New product % Revenue from new products Difficulty to evaluate innovation
development from a quantitative perspective
(Ambler 2003)

Growth
Growth is a measure of change from one time period to another. Growth indicates direction
(positive or negative – i.e. growing or shrinking) which in itself, has major implications.
Consider the difference between a growing business and a shrinking business
Year-on-year percentage growth uses the prior year as a base for expressing the percentage
change from one year to the next.

© IMM Graduate School Study Guide (AMM401P) Page 193 of 220

Over longer periods of time, Compound Annual Growth Rate (CAGR) is a generally accepted
metric for average growth rates.
But note:
• Make sure to keep the same measures – e.g. stores, sales personnel to identify real
growth results.
• CAGR evens the flow results for analysis over a period of years.

Metric Construct Consideration Purpose

Year-on-Year Percentage change Distinguish unit and Plan production and
Growth from one year to the dollar growth rates. budgeting.
next.

Year-on-Year Value (R, #, %)t − Value (R, #, %)t − 1

Growth (%) Value (R, #, %)t − 1

Metric Construct Consideration Purpose

Compound Annual Ending value divided May not reflect Useful for averaging
Growth Rate (CAGR) by starting value to individual year on- growth rates over
the power of 1/N, in year growth rates. long periods.
which N is the
number of periods.

Cannibalisation rates
Cannibalisation is a market phenomenon in which sales of one product are achieved at the
expense of some of a firm’s other products. It is the reduction in sales of the existing products
due to the introduction of the new product.
The question to ask is how do the features, pricing, promotion and distribution of the new
product compare to the existing product? For the greater the similarity of their respective
marketing strategies, the higher the cannibalisation rate is likely to be.
But note…. sales taken from the products of competitors are not ‘cannibalised’ sales.

Metric Construct Consideration Purpose

Cannibalisation Rate Percentage of new Market expansion Useful to account
product sales taken effects should also for the fact that new
from existing be considered. products often
product line. reduce the sales of
existing products.

© IMM Graduate School Study Guide (AMM401P) Page 194 of 220

 Cannibalisation Sales Lost from Existing Products (#, R)
Rate (%) Sales of New Product (#, R)

When the introduction of a new product might affect the sales of existing products within the
marketplace, it is called……
Fair Share Draw – this is the assumption that a new product will
capture sales (in Rands or units) from existing products in direct
proportion to the market shares held by those existing products.

Metric Construct Consideration Purpose

Fair Share Draw Assumption that new May not be a Useful to generate
entrants in a market reasonable an estimate of sales
capture sales from assumption if there and shares after
established competitors are significant entry of new
in proportion to differences among competitor.
established market competing brands.
shares.

Brand Equity metrics

A range of measures have been developed from within the advertising and research
industries, but there is no universally accepted way. Different options include:
• Brand Equity Ten
• BrandAsset
• Brand Equity Index
• Brand Finance
• BrandZ
• Brand Valuation Model
Each of these methods have a different approach, based on the context of the designers.
(Refer Chap 4 p136-144 for details on each method)

The value of a brand, from a consumer’s perspective, is the amount a consumer is willing to
pay for merchandise with the brand’s name over and above the price they would pay for an
identical unbranded good. Brand equity can include consumers trust, goodwill, intellectual
property, uniqueness, relevance to the consumer, attractiveness, credibility and esteem.

© IMM Graduate School Study Guide (AMM401P) Page 195 of 220

 Metric Construct Consideration Purpose
Brand Equity Numerous measures, Metrics tracking essence Monitor health of a
Metrics for example, Conjoint of brand may not track brand. Diagnose
utility attributed to health and value. weaknesses, as
brand. needed.

Conjoint Analysis
A method of estimating customers by assessing the overall preferences customers assign to
alternative choices and based on how customers weight the attributes on which a choice is
made. Conjoint analysis can be useful in determining what customers really want – and what
they’ll pay for it.
• Conjoint utilities measure consumer preference for an attribute level, and by
combining the valuations of multiple attributes – measure the preference for an
overall choice.
• Conjoint analysis is used to determine customers’ preferences on the basis of the
attribute weightings.

Metric Construct Consideration Purpose

Conjoint Utilities Regression May be function of Indicates the relative
coefficients for number, level, and values that
attribute levels type of attributes in customers place on
derived from study. attributes of which
conjoint analysis. product offerings are
composed.

Cluster analysis groups customers into segments of like-minded

individuals based on their utility scores resulting from their conjoint
analysis of the product attributes.

Dashboard
Throughout this programme, you have encountered a wide choice of metrics to measure the
performance of a business. A range of formulae is all very well, but how you use them and
track performances on an ongoing basis is the key output for marketing metrics. Each firm
needs to identify its primary performance measures, and these can be added to a marketing
dashboard, which is basically an ongoing record of results. The question to ask, is what
information should you select for the dashboard? There is no absolute answer to this, it purely
depends on what a company needs to know on an ongoing basis and to react upon.

© IMM Graduate School Study Guide (AMM401P) Page 196 of 220

The following questions can give you an idea of what to consider.
• Decide what information is needed on a regular basis from the dashboard. What
examples can be identified within your company?
• Where will the information be sourced within the company? Here you can review the
Interactive Marketing Model based on activities from earlier units, where the
information required for specific reports from selected results areas can be located
within the organisation.
• What are the benefits from having this information and can you action any activities
with the results? This requires a deeper analysis to sift the ‘nice to have’ out from the
‘need to have’ and prevent information overload.
• Review business objectives and identify the key measurables. These must be on the
dashboard if they are required to monitor the KPIs on a regular basis.
• General marketing and sales results. These will probably form the backbone of the
results, but specify what is important and why – is it leads / conversions/ sales /
volumes?
• Regional results. Define the scope of the breakdowns required. Is it different outlet
results / channel results?
• Product categories differentiation. Product lines /
promotional campaign results / media response results
against expenditure.
• Results against set targets are generally required on a regular
basis, with a variance analysis explanation leading to
recovery action plans if behind target.
• Who is needing to see them? Different people will need to see results only relating to
their portfolios, not necessarily the complete spectrum.
• How often must they see them? Identify the frequency and why.
• How does it help towards decision making? Make sure the results are reliable and
accurate for future forecasting.
• Identify upcoming problems? Keeping a regular tracking of results will show trends
which could indicate future problems over a period of time, not just a one-off situation
which might create an over reaction response.
What actions need to be taken? Will this be individual decisions,
or more likely a team decision?

You have analysed an Interactive Marketing model and reviewed integrated communications.
Resulting from this you should now realise that marketing metrics are totally entwined within
all the functions of marketing and are a critical component of all decisions and activities.

© IMM Graduate School Study Guide (AMM401P) Page 197 of 220

 F. Study Unit 11 - Revision Exercises

Revision Discussion Questions

Discuss briefly what is meant by Cannibalisation rate and why it is important for
marketers to be aware of this metric
Explain how conjoint analysis can be used to understand customer’s needs and wants
better.
Multiple Choice Questions
Companies with a formal and comprehensive marketing performance management
system outperform companies who don't on which of the following:
A. Sales growth
B. Market share
C. Profitability
D. All of the above
A marketing executive dashboard should include which of the following metrics
categories
A. Search engine optimization results, website metrics, new business metrics
B. Competitive metrics, customer value metrics, website metrics
C. A collection of financial and marketing metrics performance measures
D. New business metrics, competitive metrics, customer value metrics, product
innovation metrics
The added value a brand name gives to a product beyond the functional benefits
provided:
A. Brand reputation
B. Brand equity
C. Brand loyalty
D. None of the above

G. Study Unit 11 - Revision Exercises Solutions

Discuss briefly what is meant by Cannibalisation rate and why it is important for
marketers to be aware of this metric
• It is a market phenomenon in which sales of one product are achieved at the expense
of some of a Firm’s other products.
• It is the % of sales of a new product that comes from a specific set of existing products.

© IMM Graduate School Study Guide (AMM401P) Page 198 of 220

• An existing product line could be reduced due to the introduction of a new product.
The level of cannibalisation needs to be estimated beforehand as it may affect the
overall profits of an existing product range.
• If a new product has a margin lower than existing products that it cannibalises, and if
the rate of cannibalisation is high, it could happen that the company earnings will
decrease with each unit sold of the new product.

Explain how conjoint analysis can be used to understand customer’s needs and wants
better.
• Conjoint measures consumers preferences for various attributes of a product, service
or provider.
• It includes brand and price as two of the attributes to give insight into customer‘s value
of a brand – their willingness to pay a premium for it.
• The analysis weights the attributes on which the choice is made. It identifies their
overall preferences from a set of choices and helps to improve product design
/advertising copy / pricing acceptance for testing / segmentation.
• It is a method of estimating customers by assessing the overall preferences customers
assign to alternative choices.

Multiple Choice Questions

Companies with a formal and comprehensive marketing performance management
system outperform companies who don't on which of the following:
A. Sales growth
B. Market share
C. Profitability
D. All of the above

A marketing executive dashboard should include which of the following metrics

categories
A. Search engine optimization results, website metrics, new business metrics
B. Competitive metrics, customer value metrics, website metrics
C. A collection of financial and marketing metrics performance measures
D. New business metrics, competitive metrics, customer value metrics, product
innovation metrics

The added value a brand name gives to a product beyond the functional benefits
provided:
A. Brand reputation
B. Brand equity

© IMM Graduate School Study Guide (AMM401P) Page 199 of 220

 C. Brand loyalty
D. None of the above

H. Study Unit 11 - Progress check

You have come to the end of Study Unit 11.
Time to do a progress check to determine whether you have gone through all the required
content, completed all the exercises.

Your Progress Checklist

Progress checklist YES / NO?

Did you read through each study unit outcome?
Did you go through all learning material
Did you complete all the relevant revision exercises and check your answers
against the answers provided?
At this point, you should be able to:
 Identify the required product and brand metrics for continual
management monitoring.
 Decide the key metrics for marketing dashboard reporting.
 Specify who to receive results and how often.

© IMM Graduate School Study Guide (AMM401P) Page 200 of 220

 Identify corrective actions and predictions for future roll-out.

Are you ready to tackle the questions relevant to Study Unit 11 in Assignment
2?

DO Assignment 2, Q 3

© IMM Graduate School Study Guide (AMM401P) Page 201 of 220

Reference List

Bendle, N. T., Farris, P. W., Pfeifer, P. E., Reibstein, D. J. (2017) Key Marketing Metrics – The
50+ metrics every manager needs to know. 2nd ed. Harlow: Pearson Education Limited.
Ambler, T., 2003. Marketing and the bottom line: the marketing metrics to pump up cash
flow. London: Pearson Education.

Arnold, M., Reynolds, K. E., Ponder, N. & Lueg, E. J., (2005) Customer delight in a retail context:
investigating delightful and terrible shopping experiences. Journal of Business Research,
58(1), pp. 1132-1145.
ASA, 2018. ASASA. [Online]
Available at: [Link]
[Accessed 2 March 2018].

Bendle, N., Farris, P., Pfeifer, P. & Reibstein, D., (2010) Marketing Metrics: The Manager's
Guide To Measuring Marketing Performance. 2nd ed. New Jersey: Pearson.

Best, R., (2009) Market-Based Management: Strategies for Growing Customer Value and
Profitability. 5th ed. s.l.:Prentice Hall, Inc.
Consumer Protection Act, 2009. Government Gazette. [Online]
Available at: [Link]
[Accessed 26 February 2018].

Council on Financial Competition, (2003) ‘Climbing the Service Curve: Deriving Real Returns
from Rising Customer Expectations’, s.l.: Council on Financial Competition.

Council on Financial Competition, (2004) ‘The New Service Imperative: Unlocking the
Potential of Customer (Versus Product) Strategies’. Washington, D.C. Annual Executive
Retreat 23-24 June, Council on Financial Competition.

Curata , (2018) The Comprehensive Guide to Content Marketing Analytics and Metrics.
[Online]
Available at: [Link]
analytics-metrics/
[Accessed 6 March 2018].

Delgado, J., (2018) ‘Do your company have balanced The Customer Loyalty Ladder?’. [Online]

© IMM Graduate School Study Guide (AMM401P) Page 202 of 220

Available at: [Link]
balanced-the-the-customer-loyalty-ladder/
[Accessed 10 March 2018].

Deshpande, B., (2012) [Link]. [Online]

Available at: [Link]
to-Increase-Customer-Profitability
[Accessed 10 March 2018].

Elrick, M., (2008) ‘The Truth About B2B Marketing ROI’. 1st ed. s.l.:International Association
of Business Communicators.
Farris, P., (2009) Advertising Metrics, Charlottesville: Management by the Numbers, Inc.

Farris, P., (2011) Profit Dynamics, Charlottesville: Management by the Numbers, Inc.

Farris, P., (2014) ‘Advertising Metrics This module covers the concepts of impressions, gross
rating points, CPM, reach, frequency, and share of voice’, Charlottesville: Management by the
Numbers, Inc.

Farris, P., (2014) ‘Promotion Profitability’, Charlottesville: Management by the Numbers, Inc.

Farris, P. & James, S., (2011) “Calculating Margins This module covers the concepts of margins
(currency and percentages), markups, the relationship between selling prices and margins’,
Charlottesville: Management by the Numbers, Inc.

Farris, P. & James, S., (2015) ‘Marketing Return on Investment (MROI)’, Charlottesville:
Management by the Numbers, Inc.

Farris, P. & James, S., (2017) ‘Sales Force Management I’, Charlottesville: Management by the
Numbers, Inc.

Farris, P. & Pfeifer, P., (2010) ‘Customer Lifetime Value (CLV)’, Charlottesville: Management
by the Numbers, Inc.

Figliuolo, M., (2018) [Link]. [Online]

Available at: [Link]
measure-your-business-well/
[Accessed 14 March 2018].

© IMM Graduate School Study Guide (AMM401P) Page 203 of 220

Fraser, D., (2018) ‘Quora’. [Online]
Available at: [Link]
why-What-company-are-you-with-that-uses-this
[Accessed 8 March 2018].
Fraser, D., (2018) ‘Quora’. [Online]
Available at: [Link]
marketing-plan-and-a-business-plan
[Accessed 16 March 2018].

Gabriel, E., (2006) ‘Value Chain for Service A new dimension of - Porter's Value Chain’. IMS
International Journal, pp. 1-30.

Heskett, J. L. et al., (1994) ‘Putting the Service-Profit’. HBR, Volume March/April, p. 120.

Insight Venture Partner, (2018) Hubspot. [Online]

Available at: [Link]
[Link]
[Accessed 6 March 2018].

Jeffes, S., (2015) Stevenjeffes:Blog. [Online]

Available at: [Link]
stages-and-events-can-super-charge-your-marketing-effectiveness/
[Accessed 3 February 2018].

Kothari, S., (2018) ‘Get the price right book’. [Online]

Available at: [Link]
[Accessed 3 March 2018].

Kumar, V., (2008) ‘Managing Customers for Profit: strategies to increase profits and build
loyalty First’. s.l.:Wharton School of Publishing.
Leather, D., (2013) ‘The Customer-Centric Blueprint, Building and leading the 21st Century
Organisation’. s.l.:Reap Publishing.

Luk, S. & Layton, R., (2002) ‘Perception Gaps in customer expectations: Managers versus
service providers and customers’. The Service Industries Journal, 22 April(2), pp. 109-128.

© IMM Graduate School Study Guide (AMM401P) Page 204 of 220

Pine, J. &. G. J., (2011) ‘The experience Economy’. Updated ed. s.l.:Harvard Business Review
Press.

Porter, M., (1985) In: The Competitive Advantage: Creating and Sustaining Superior
Performance. New York: Free Press.

Protection of Personal Information Act, (2013) Government Gazette. [Online]

Available at: [Link]
[Accessed 27 February 2018].

Proudly South African, (2018) Proudly SA. [Online]

Available at: [Link]
[Accessed 18 March 2018].

Rust, R. et al., 2004. ‘Measuring Marketing Productivity: Current Knowledge and Future
Directions’. Journal of Marketing, 68(4), pp. 76-89.
SABS, 2018. SABS. [Online]
Available at: [Link]
[Accessed 28 March 2018].

SAMRA, (2018) SAMRA. [Online]

Available at: [Link]
[Accessed 5 March 2018].

Stanko, M. & Fleming, M., (2014) Marketing Metrics: Notes for Marketing Managers. s.l.:Ivey
Publishing.

Tanghe, J., (2012) ‘The rebirth of the SERVQUAL gaps model in service design’. s.l., Third
Nordic Conference on Service Design and Service Innovation.

The Competition Commission South Africa, 2018. The Competition Commission South Africa.
[Online]
Available at: [Link]
[Accessed 28 March 2018].

Varner, M., 2017. Work Front. [Online]

© IMM Graduate School Study Guide (AMM401P) Page 205 of 220

Available at: [Link]
blocks-of-an-effective-brand-promise
[Accessed 21 March 2018].

Addendum A: IMM Harvard Referencing Guidelines

Read the guidelines here.

Addendum B: Action Verbs

Read the Action Verb document here.

© IMM Graduate School Study Guide (AMM401P) Page 206 of 220

Addendum C: Glossary - Formulas

Metric Formula
Unit Market Unit Sales (#)
Share (%) Total Market Unit Sales (#)

Revenue Sales Revenue (R)

Market Share Total Market Revenue (R)
(%)
Relative Brand’s Market Share (R, #)
Market Share Largest Competitor’s Market Share (R, #)
(I) (%)
Brand [Brand Sales to Group (#)/Households (#) in the Group]
Development [Total Brand Sales (#)/Total Household (#)]
Index (I)
Category [Category Sales to Group (#)/Households in Group (#)]
Development [Total Category Sales (#)/Total Household (#)]
Index (I)
Market Customers Who Have Purchased a Product in the Category (#)
Penetration Total Population (#)
(%)
Brand Customers Who Have Purchased the Brand (#)
Penetration Total Population (#)
(%)
Penetration Brand Penetration (%)
Share (%) Market Penetration (%)

Penetration Customers Who Have Purchased the Brand (#)

Share (%) Customers Who Have Purchased a Product in the Category (#)

Unit Share of Brand Purchases (#)

Requirements Total Category Purchases by Brand Buyers (#)
(%)
Revenue Brand Purchases (R)
Share of Total Category Purchases by Brand Buyers (R)
Requirements
(%)
Heavy Usage Average Total Purchases in Category by Brand Customers (#, R)
Index (I) Average Total Purchases in Category by All Customers for That Category (#, R)

© IMM Graduate School Study Guide (AMM401P) Page 207 of 220

 or
Market Share (%)
[Penetration Share (%) ∗ Share of Requirements (%)]
Net Promoter Percentage of Promoters (%)– Percentage of Detractors (%)
Score (I)
Willingness to Percentage of Customers Willing to Delay Purchases, Change Stores,
Search (%) or Reduce Purchase Quantities to Avoid Switching Brands

Unit Margin Selling Price per Unit (R) − Cost per Unit (R)
(R)
Margin (%) Unit Margin (R)
Selling Price per Unit (R)
Supplier Customer Selling Price (R) − Customer Margin (R)
Selling Price
(R)
Customer Supplier Selling Price (R)
Selling Price [1 − Customer Margin (%)]
(R)
Average Price Revenue (R)
per Unit (R) Units Sold (#)
Or
[Price of SKU 1 (R)
∗ SKU 1 Percentage of Sales (%)] [Price of SKU 2 (R)
∗ SKU 2 Percentage of Sales (%)]
Price per Total Price of a Bundle of SKUs Comprising a Statistical Unit (R)
Statistical Unit
(R)
Unit Price per Price per Statistical Unit (R)
Statistical Unit Total Units in the Bundle of SKUs Comprising that Statistical Unit (#)
(R)
Total Costs (R) Fixed Costs (R) + Total Variable Costs (R)

Total Variable Unit Volume (#) ∗ Variable Cost per Unit (R)
Costs (R)

Total Selling Total Fixed Selling Costs (R) + Total Variable Selling Costs (R)
(Marketing)
Costs (R)

© IMM Graduate School Study Guide (AMM401P) Page 208 of 220

Total Variable Revenue (R) ∗ Variable Selling Cost (%)
Selling Costs
(R)
Contribution Selling Price per Unit (R) − Variable Cost per Unit(R)4
per Unit (R)
Contribution Contribution per Unit (R)
Margin (%) Selling Price per Unit (R)

Break-Even Fixed Costs (R)

Volume (#) Contribution per Unit (R)

Break-Even Break − Even Volume (Units) (#) ∗ Price per Unit (R)
Revenue (R) Or
Fixed Costs (R)
Contribution Margin (%)
Target Volume [Fixed Costs (R) Target Profits (R)]
(#) Contribution per Unit (R)

Target Target Volume (#) ∗ Selling Price per Unit (R)

Revenue (R) Or
[Fixed Costs (R) Target Profits (R)]
Contribution Margin (%)
Trail Rate % First − time in Period t (#)
Total Population (#)
First-time 𝑇𝑜𝑡𝑎𝑙 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 (#) ∗ 𝑇𝑟𝑎𝑖𝑙 𝑅𝑎𝑡𝑒(%)
Tiers in Period
t (#)
Penetration t [Penetration in 𝑡 − 1 (#) ∗ Repeat Rate Period 𝑡 (%)] +
(#) First − time Triers in Period 𝑡 (#)
Projection of Penetration 𝑡 (#) ∗ Average Frequency of Pruchase (#)
Sales t (#) ∗ Average Units per Purchase (#)

Year-on-Year Value (R, #, %)t − Value (R, #, %)t − 1

Growth (%) Value (R, #, %)t − 1
Compound R, #, % 1
Annual {[Ending Value Value (R, #, %)] [ of Years (#)]}
Starting Number
Growth Rate, − 1
or CAGR (%)
Cannibalizatio Sales Lost from Existing Products (#, R)
n Rate (%) Sales of New Product (#, R)

© IMM Graduate School Study Guide (AMM401P) Page 209 of 220

Brand Equity Effective Market Share (%) ∗ Relative Price (I) ∗ Durability (%)
Index (I)
[Moran]
Conjoint [Partworth of Attribute1 to Individual (I) * Attribute Level (1)] [Partworth of
Preference Attribute2 to Individual (I) * Attribute Level (2)] [Partworth of Attribute3 to
Linear Form (I) Individual (I) * Attribute Level (3)] etc.
Customer These are the number of customers of a firm for a specified time period.
Counts
Recency This refers to the length of time since a customer’s last purchase.
A six month customer is someone who purchased from the firm at
least once within the last six months.
Retention This is the ratio of the number of retained customers to the number at risk.
Rate
Customer the profit the firm makes from serving a customer
profit (CP) or customer group over a specified period of time
Customer Retention Rate (%)
Margin (R) ∗
Lifetime Value Discount Rate (%) − Retention Rate (%)
(R)
Average Acquisition Spending (R)
Acquisition Number of Customers Acquired (#)
Cost (R)
Average Retention Spending (R)
Retention Cost Number of Customers Retained (#)
(R)
Workload (#) [Current Accounts (#)
∗ Average Time to Service an Active Account (#)] [Prospects (#)
∗ Time Spent Trying to Convert a Prospect into an Active Account (#)]
Sales Potential Number of Possible Accounts (#) ∗ Buying Power (R)
(R)
Sales Goal (R) Salesperson’s Share of Prior − Year Sales in District (%)
∗ Forecasted Sales for District (R)
Sales Goal (R) Salesperson’s Prior
− Year Sales (R) [Forecasted Sales Increase for District (R)
∗ Territory’s Share of Sales Potential in District (%)]

© IMM Graduate School Study Guide (AMM401P) Page 210 of 220

Weighted {Salesperson’s Share of Prior − Year Sales in District (%)
Share of Sales ∗ Assigned Weighting (%)} {Territory’s Share of Sales Potential in District (%)
Allotment (%) ∗ [1 − Assigned Weighting (%)]}
Sales Goal (R) Weighted Share of Sales Allotment (%)
∗ Forecasted Sales for District (R)
Sales Force Sales (R)
Effectiveness Contacts with Clients (Calls) (#)
Ratios or/and
Sales (R)
Potential Accounts (#)
or/and
Sales (R)
Active Accounts (#)
or/and
Sales (R)
Buying Power (R)
or/and
Expenses (R)
Sales (R)
Last one also known as cost of sales
Compensation Salary (R) Bonus 1 (R) Bonus 2 (R)
(R)
Compensation Salary (R) [Sales (R) ∗ Commission (%)]
(R)
Break-Even (Sales (R) ∗ [Margin (%) − Commission (%)])
Number of [Salary (R) Expenses (R) Bonus (R)]
Employees (#)
Numeric Number of Outlets Carrying Brand (#)
Distribution Total Number of Outlets (#)
(%)
All Commodity Total Sales of Outlets Carrying Brand (R)
Volume (ACV) Total Sales of All Outlets (R)
Distribution
(%)
Product Total Category Sales of Outlets Carrying Brand (R)
Category Total Category Sales of All Outlets (R)
Volume (PCV)

© IMM Graduate School Study Guide (AMM401P) Page 211 of 220

Distributio𝐧𝟗 (
%)
Category PCV (%)
Performance ACV (%)
Ratio (%)
Out-of-Stocks Outlets Where Brand or Product Is Listed But Unavailable (#)
(%) Total Outlets Where Brand or Product Is Listed (#)

Service Levels; Promised (#)

Percentage on All Deliveries Initiated in the Period (#)
Time Delivery
(%)
Inventory Product Revenues (R)
Turns (I) Average Inventory (R)

Markdown (%) Reduction in Price of SKU (R)

Initial Price of SKU (R)
Gross Margin Gross Margin on Product Sales in Period (R)
Return on Average Inventory Value at Cost (R)
Inventory
Investment
(%)
Direct Product Gross Margin (R) − Direct Product Costs (R)
Profitability
(R)
Price premium Brand A Price (R) − Benchmark Price (R)
(%) Benchmark Price (R)
Price premium Revenue Market SHare (%)
(%) Unit Market Share (%)
Note: using the average price paid benchmark
Price Elasticity Change in Quantity (%)
of Demand (I) Change in Price (%)

Optimal Price [Maximum Reservation Price (R) Variable Cost (R)]

for a Linear 2
Demand
Function (R)
Gross Margin −1
at Optimal Elasticity (I)
Price (%)

© IMM Graduate School Study Guide (AMM401P) Page 212 of 220

 Note: The gross margin on a product at its optimal price will be the negative
inverse of its price elasticity
Residual Price Own Price Elasticity (I) [Competitor Reaction Elasticity (I)
Elasticity (I) ∗ Cross Elasticity (I)]

Total Sales Baseline Sales (R, #) + Incremental Sales from Marketing (R, #)
Incremental Incremental Sales from Advertising (R, #)
Sales from Incremental Sales from Trade Promotion (R, #)
Marketing Incremental Sales from Consumer Promotion (R, #)
(R,#)
Incremental Sales from Other (R, #)
Lift (from Incremental Sales (R, #)
Promotion) Baseline Sales (R, #)
(%)
Cost of Marketing Spending (R)
Incremental Incremental Sales (R, #)
Sales (R)
Coupon Coupons Redeemed (#)
Redemption Coupons Distributed (#)
Rate (%)
Cost per Coupon Face Amount (R) Redemption Charges (R)
Redemption
(R)
Total Coupon [Cost per Redemption (R)
Cost (R) ∗ Coupons Redeemed (#)] Coupon Printing and Distribution Cost (R)

Percentage Sales with Coupon (R)

Sales with Sales (R)
Coupon (%)
Percentage Sales with any Temporary Discount (R, #)
Sales on Deal Total Sales (R, #)
(%)
Pass-Through Value of Temporary Promotional Discounts Provided to Consumers by the Trade (R)
(%) Value of Temporary Discounts Provided to Trade by Manufacturer (R)

Price Waterfall Net Price per Unit (R)

(%) List Price per Unit (R)

Impressions Reach (#) ∗ Average Frequency (#)

(#)

© IMM Graduate School Study Guide (AMM401P) Page 213 of 220

Average Impressions (#)
Frequency (#) Reach (#)

Reach (#) Impressions (#)

Average Frequency (#)
Gross Rating Reach (%) ∗ Average Frequency (#)
Points (GRPs)
(%)
Gross Rating Impressions (#)
Points (GRPs) Defined Population (#)
(%)
Target Rating Reach (%) ∗ Average Frequency
Points (TRPs)
Target Rating Impressions (#)
Points (TRPs) Targets (#)

Cost per Advertising Cost (R)

Thousand Impressions Generated (# in Thousands)
Impressions
(CPM) (R)
Share of Voice Brand Advertising (R, #)
(%) Total Market Advertising (R, #)

Hits (#) Pageviews (#) ∗ Files on the Page (#)

Pageviews (#) Hits (#)
Files on the Page (#)
Average Rich Total Rich Media Display Time (#)
Media Display Total Rich Media Impressions (#)
Time (#)
Rich Media Total Rich Media Impressions with Interactions (#)
Interaction Total Rich Media Impressions (#)
Rate (%)
Clickthrough Clickthroughs (#)
Rate (%) Impressions (#)

Cost per Advertising Cost (R)

Impression Number of Impressions (#)

Cost per Click Advertising Cost (R)

(R) Number of Clicks (#)

© IMM Graduate School Study Guide (AMM401P) Page 214 of 220

Cost per Order Advertising Cost (R)
(R) Orders (#)

Daily Spend (R) Average Cost per Click (R) ∗ Number of Clicks (#)
Purchases Not Purchases Initiated − PurchasesCompleted
Completed
Abandonment Not Completed
Rate % Customer Initiation

Bounce Rate Visits That Access Only a Single Page (#)

(%) Total Visits (#) to the Web site

Friends (#) Number of friends of the entity registered on a social networking page (#)
Cost per Total Cost to Provide Social Networking Presence (R)
Friend Number of Friends (#)

Downloads (#) Number of times that an application or file is downloaded (#)

Net Profit (R) Sales Revenue (R) − Total Costs (R)
Return on Net Profit (R)
Sales—ROS Sales Revenue (R)
(%)
EBITDA (R) Net Profit (R) + Interest Payments (R) + Taxes (R)
+ Depreciation and Authorization Charges (R)
Return on Net Profit (R)
Investment— Investment (R)
ROI (%)
Economic Net Operating Profit After Tax (NOPAT)(R) − Cost of Capital (R)
Profit (R)
Cost of Capital Capital Employed (R) ∗ WACC (%)
(R)
Payback (#) The number of periods required to “pay back” or “return” the initial investment.
Net Present Net Present Value (NPV) (R)
Value (NPV)
(R)
Internal Rate The discount rate that results in an NPV of zero
of Return (IRR)
(%)
Discounted Cash Flow (R) ∗ 1
Value (R) [(1 Discount Rate (%)) ^ Period (#)]

© IMM Graduate School Study Guide (AMM401P) Page 215 of 220

Return on [Incremental Revenue Attributable to Marketing (R) ∗ Contribution Margin % − Mar
Marketing Marketing Spending (R)
Investment
(ROMI) (%)
Media (Estimated Value of Media Exposures Achieved (R) −
Exposure Cost of Marketing Campaign, Sponsorship, or Promotion (R))
Return on Cost of Marketing Campaign, Sponsorship, or Promotion (R
Marketing
Investment
(MEROMI) (%)
ROA Net Profi Sales
∗
Sales Assets
SALES Number Salespersons ∗ Avg. Sales/Salesperson
Or
Number dealers ACV% ∗ Avg. Sales per dealer ACV%
Or
Our Dollar Share ∗ Total Market Sales
Or
Number customers ∗ Sales per customer
Sales Quantity ∗ Price (ID)
Quantity b ∗ Price + error (EM)
Share of Market Share (%)
Requirements (Penetration Share (dollars or units) ∗
Heavy Usage Index (In Rand or Units)
Forecast Unit Number of Consumer Prospects ∗ Awareness ∗ Availability
Sales ∗ ( Trial Rate ∗ Trial Units + Repeat Rate
∗ Repeat Units)

© IMM Graduate School Study Guide (AMM401P) Page 216 of 220

Addendum D: Glossary – Academic Terms
Average Acquisition - the ratio of acquisition spending to the number of new customers
acquired.
Average Frequency - The average number of times that an individual receives an
advertisement, given that he or she is indeed exposed to the ad.
Average Price per Unit - Can be calculated as total revenue divided by total unit sales.
Baseline Sales - Intercept in regression of sales as function of marketing variables. Baseline
Sales Total Sales, less incremental sales generated by a marketing program or programs.
Brand Equity Metrics - Numerous measures, for example, Conjoint utility attributed to brand.
Break-Even Sales - Level For unit breakeven, divide fixed costs by contribution per unit.
Cannibalization Rate - Percentage of new product sales taken from existing product line.
Channel Margins - Channel profits as percentage of channel selling price. Compound Annual
Growth Rate (CAGR) - Ending value divided by starting value to the power of 1/N, in which N is
the number of periods. Conjoint Utilities - Regression coefficients for attribute levels derived
from conjoint analysis.
Contribution Margin (%) – Contribution per unit divided by unit price.
Contribution per Unit - Unit price less unit variable cost. Ensure that marketing variable costs
have not already been deducted from price.
Cost per Thousand Impressions (CPM) - Cost of advertising divided by impressions generated
(in thousands).
Costs for Coupons and Rebates - Coupon face amount plus redemption charges, multiplied by
the number of coupons redeemed.
Customer Lifetime Value (CLV) - The present value of the future cash flows attributed to the
customer relationship.
Customer retention - assesses how many customers you've retained versus how many you've
lost.
Ethics – refers to moral principles as well as the study of people’s moral obligations in society.
Fair Share Draw - Assumption that new entrants in a market capture sale from established
Gross Rating Points (GRPs) - Impressions divided by the number of people in the audience for
an advertisement. Impressions - An impression is generated each time an advertisement is
viewed.
Incremental Sales, or Promotional Lift - Total sales, less baseline sales. Regression coefficient to
marketing variables cited above interpret their marketing performance against specific targets.
Margin (%) - Unit margin as a percentage of unit price.
Market Share – is a measure of how much of the market the company owns.
Marketing Metrics - A set of measures that help an organisation to quantify, compare, and
interpret their marketing performance against specific targets.

© IMM Graduate School Study Guide (AMM401P) Page 217 of 220

Marketing Metrics - A set of measures that help an organisation to quantify, compare, and
Marketing Metrics - A set of measures that help an organisation to quantify, compare, and
interpret their marketing performance against specific targets.
Marketing Spending – Analyze costs that comprise marketing spending.
Maximum reservation price - is the lowest price at which quantity demand equals zero.
Maximum willing to buy (MWB) -is the quantity customers will “buy” when the price of the
product is zero.
Net Profit - Sales revenue less total costs.
Net Profit - Sales revenue less total costs.
Net Reach - The number of people who receive an advertisement. Equivalent to reach.
Optimal Price – is halfway between the maximum reservation price and the variable cost of the
product in a linear demand function.
Pass-Through - Promotional discounts provided by the trade to consumers, divided by
discounts provided to the trade by the manufacturer.
Payback Period - the projected length of time until a marketing initiative pays for itself
Payback Period - the projected length of time until a marketing initiative pays for itself
Penetration - Users in the previous period, multiplied by repeat rate for the current period,
plus new triers in the current period.
Percent Good Value - The proportion of customers who considers the product to be good
value
Percent Sales on Deal – Sales with temporary discounts as a percentage of total sales.
Percentage Sales with Coupon - Sales via coupon, divided by total sales.
Price Elasticity of Demand - The responsiveness of demand to a small change in price,
expressed as a ratio of percentages.
Price per Statistical Unit - SKU prices weighted by relevant percentage of each SKU in a
statistical unit.
Price Premium - The percentage by which the price of a brand exceeds a benchmark price.
Price Waterfall – Actual average price per unit divided by list price per unit.
Prospect lifetime Value - is the expected value of prospecting.
Qualitative measurement – involves looking for patterns in non-numerical data.
Quantitative measurement – involves statistical analysis on data that has numerical values.
Recency metric - calculates how long it has been since a customer has last purchased.
Redemption Rates - Coupons redeemed divided by coupons distributed.
Repeat Volume - Repeat buyers, multiplied by the number of products they buy in each
purchase, multiplied by the number of times they purchase per period.
Reservation Price- is the value a customer places on a product and how much that individual is
willing to pay for it.
Residual Elasticity - Residual elasticity is “own” elasticity plus the product of competitor
reaction elasticity and cross elasticity.

© IMM Graduate School Study Guide (AMM401P) Page 218 of 220

Return on Investment (ROI) - Net profits over the investment needed to generate the profits.
Return on Investment (ROI) - Net profits over the investment needed to generate the profits.
Return on Sales (ROS) - Net profit as a percentage of sales revenue.
Return on Sales (ROS) - Net profit as a percentage of sales revenue.
Revenue Market Share - Sales revenue as a percentage of market sales revenue. -
Sales Force Effectiveness – Analyses sales in terms of various criteria to measure salespeople’s
efforts.
Sales Potential Forecast - comprises the number of prospects and their buying power.
Share of Voice - Quantifies the advertising “presence” of a brand, campaign, or firm in relation
to total advertising in a market.
Target Revenues - Convert target volume to target revenues by using average prices per unit.
Target Volume - Adjust break-even calculation to include profit target.
Trial - First-time users as a percentage of the target population.
Unit Margin - Unit price less the unit cost.
Unit Market Share - Unit sales as a percentage of market unit sales.
Value Chain Analysis - is a strategy tool used to analyse internal firm activities and can assist in
identifying which activities are the most valuable.
Variable and Fixed - Costs Divide costs into two categories: those that vary with volume
(variable) and those that do not (fixed).
Volume Projections - Combine trial volume and repeat volume.
Workload – the hours required to service clients and prospects.
Year-on-Year Growth - Percentage change from one year to the next.

© IMM Graduate School Study Guide (AMM401P) Page 219 of 220

 Copyright 2018
In terms of the Copyright Act 98 of 1978, no part of this study material may be reproduced,
be stored in retrieval system, be transmitted or used in any form or be published,
redistributed or screened by any means (electronic, mechanical, photocopying, recording or
otherwise) without the written permission of the IMM Graduate School. However,
permission to use any material in this work that was derived from other sources must be
obtained from the original sources.

© IMM Graduate School Study Guide (AMM401P) Page 220 of 220