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In the 1970s, the Polish government set out to make its furniture industry more competitive in the global economy. To that end, the government rewarded furniture factories based on the total weight of their products manufactured. As a result, the citizens of Poland now have the world's heaviest furniture, according to a March 4, 1999 article in the New York Times.

Of course, Polish officials didn't intend to produce heavy pieces of furniture; they wanted to increase production. Yet, as this example reveals, performance metrics can't produce their intended outcomes if they don't measure what really matters to the business.

As a marketer, you have no shortage of metrics at your disposal—including brand awareness, customer satisfaction, and ad readership, to name just a few. However, your CEO and CFO, as well as your firm's shareholders, care less about these metrics than they do about others—particularly cash flow—and though these metrics are generally not part of the marketing vocabulary, they should be. They enable you to tell the story of how marketing contributes to your firm's performance. Use the wrong metrics to communicate marketing's value, and you risk producing a lot of heavy furniture.

How to select the right metrics? Master the marketing metrics audit process—or Marketing MAP—by applying these seven steps:

Step 1: Identify your firm's cash-flow drivers

Your firm's cash-flow drivers stem from the company's business model, which may be based primarily on high profit margins, rapid turnover of inventory, or leverage (such as Disney's selling of characters to other companies).

Cash-flow drivers also derive from sources of cash—such as customer acquisition and retention, share of wallet within product category, and share of wallet across categories.

Each company's set of cash-flow drivers is unique. What are your firm's drivers?

Step 2: Identify marketing activities that ultimately affect your company's cash-flow drivers

Your marketing department engages in a wide range of activities. But probably only some of these activities ultimately affect your company's cash-flow drivers. List those activities that most influence your company's cash-flow drivers.

Your list will be unique to your department but may include activities such as executing TV ads, designing consumer promotions, creating product Web sites, and participating in trade shows.

Step 3: Define an outcome metric for each marketing activity

For each marketing activity you've listed, define an outcome metric—a measure enabling you to evaluate how well the activity generated the intended results. To illustrate, for executing a specific television commercial, you could define the outcome metric "brand preference." For designing a consumer promotion, the metric might be "coupon redemption."

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ABOUT THE AUTHOR

image of Roy Young
Roy Young is coauthor of Marketing Champions: Practical Strategies for Improving Marketing's Power, Influence and Business Impact.