Market Share

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Are You Using the Return on Investment Metric Correctly?

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The biggest challenge with ROI isn’t a technical deficiency but confusion over how it is used. “To calculate ROI accurately, you need to be able to estimate the fraction of profits attributable to the investment,” write Neil T. Bendle and Charan K. Bagga. “In order to calculate ROI, there must be a return (a profit associated with the investment) and an investment. Unless you have both, you cannot calculate ROI.”

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How Should You Calculate Customer Lifetime Value?

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Should marketers subtract the cost of acquiring a customer before assessing that customer’s lifetime value (CLV)? Most of the time, no. “CLV is easier to understand, and in our view more useful, if marketers don’t subtract the acquisition cost from their calculation of CLV before reporting it,” write Neil T. Bendle and Charan K. Bagga. “Imagine that a company is selling an old machine. In this scenario, the company’s managers would expect to receive the machine’s current value, not the current value less what the company paid to buy the machine when new.”

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Should You Use the Value of a “Like” as a Metric?

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Social media strategy shouldn’t be seen as the driver of value difference between a company’s fans and nonfans. Fans are often more favorable toward a brand to start with than nonfans are — indeed, this is probably what motivated them to affiliate in the first place. As well, social media spending should not be justified by an observed difference in customer value that may not have been caused by social media spending. Instead, to understand social media marketing’s impact, companies should run randomized experiments.

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Should You Use Net Promoter Score as a Metric?

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The net promoter score (NPS) has become one of the most widely used marketing metrics. Consumers answer a simple question (How likely is it that you would recommend X?) on a scale from 0 to 10. Customers who answer 9 or 10 are considered promoters; those who answer 6 or less are rated as detractors. The score is the percentage of promoters minus the percentage of detractors. One of the strongest selling points of NPS is its simplicity. But the value of NPS may depend upon whether a manager sees it as a metric or as a system.

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Should You Use Market Share as a Metric?

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Market share is a hugely popular metric. But is it really useful? Companies with superior products tend to have high market share and high profitability because product superiority causes both. This means that the two metrics are correlated — but it does not necessarily mean that increasing market share will increase profits. Using market share as a metric of success simply because other companies do can be counterproductive.

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The Metrics That Marketers Muddle

Well-defined metrics are critical to effective marketing. However, despite their widely acknowledged importance, five of the best-known marketing metrics — market share, net promoter score, the value of a “like,” customer lifetime value, and ROI — are regularly misunderstood and misused. This confusion undermines the marketing discipline’s reputation for delivering results. The authors present Do’s and Don’ts for using these metrics and flow charts with detailed advice for developing each metric.

Image courtesy of Flickr user Sjors Provoost

How to Win a Price War

There are usually no winners in price wars. But under the right circumstances, it’s possible to win a price war by leveraging a specific set of strategic capabilities. These include the ability to read how things are changing, the skills to analyze data to identify trends and opportunities and the wherewithal to implement organizational changes both internally and across the value chain. Albert Heijn, a Dutch grocer, started and won a price war through its strategic capabilities and skills.

Image courtesy of Flickr user Electrolux Design Lab.

Should You Have a Global Strategy?

Senior executives weighing strategies appropriate for today’s global economy will hear contradictory advice. Some say you need to move quickly, before competitors, to establish a worldwide presence; others cite data showing that this approach is often less profitable. The reality is that neither approach is appropriate for every circumstance. Therefore, executives need to understand when to pursue one route and when to pursue the other.

Courtesy of Under Armour

Which Strategy When?

Markets are changing, competition is shifting and businesses are suffering or perhaps thriving. Whatever the immediate circumstances, corporate managers ask the same questions: Where do we go from here, and which strategy will get us there? To figure out when it makes sense to pursue strategies of position, leverage or opportunity, managers must understand their company’s immediate circumstances, take stock of their current resources and determine the relationships among the various resources.

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Corporate Spheres of Influence

The design of a corporate portfolio should be based primarily on its strategic intent and desired competitive impact, that is, on how a select set of market positions builds a platform for growth while influencing the behavior of rivals and the structure of the industry.

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Strategies for Competing in a Changed China

A decade ago, multinational companies seemed poised to dominate in China. Today that picture has changed. Whereas IBM, HP and Compaq had quickly won more than 50% of the personal computer market, for example, Chinese company Legend Group Ltd. is now the number one supplier. Research in 10 industries over the last 10 years reveals a pitched battle of competencies between multinational and local players and points to five strategies that can help multinationals regain the edge.

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Confronting Low-End Competition

Every company lives in fear of competitors that offer seemingly similar products for much lower prices. Dealing with such discounters is no simple matter, as Hewlett-Packard, May Department Stores, Salomon Brothers and others have discovered. Nevertheless, various strategies — ignoring or blocking the competitor, strengthening your value proposition or even strategic retreat — can help slow or even stop the low-end competitor without destroying the industry’s profit margins.

Showing 1-20 of 27