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Leading tomorrow’s enterprise with yesterday’s KPIs is like using a compass instead of a GPS.
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MIT Sloan Management Review and Google’s new cross-industry survey about key performance indicators (KPIs) asked senior executives to explain how they and their organizations are using KPIs in the digital era. The results shed light on the challenges and emerging opportunities companies face when using KPIs, demonstrate the many ways advanced use of KPIs can benefit organizations, and offer steps executives can take to make the most of KPIs going forward.
Box subscription companies are growing dramatically, using a high level of personalization and artificial intelligence algorithms to keep customers satisfied and eager for more. Their astute use of social media and influence marketing has also contributed to their startling success.
When employees are not fans or supporters of the company’s products on social media, it sends an ambiguous message and could deprive the company of potential supporters. Employers can counter this by encouraging their “digital native” employees to become brand ambassadors for the company.
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.”
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.”
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.
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.
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.
The Spring 2016 issue of MIT Sloan Management features a Special Report on new product development. Articles include “Why Great New Products Fail,” “Finding the Right Role for Social Media in Innovation,” “Developing New Products in Emerging Markets,” “Why Learning is Central to Sustained Innovation,” and a look at the opportunities presented by the Internet of Things, in “Now That Your Products Can Talk, What Will They Tell You?”
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.
Corporate social responsibility initiatives run the risk of being seen as insincere. However, there are ways that companies can thoughtfully — and effectively — engage with the public about social issues. The authors make four suggestions for companies that are hoping to engage in a credible CSR dialogue with stakeholders. They include cultivating a balance between controlling and cocreating the dialogue, and creating platforms that invite stakeholders to influence the implementation of CSR initiatives.
Social media offers businesses the chance to connect with customers in a unique way — by giving their brand a “persona” with attributes that attract the target audience. But companies need a sound social media strategy if they are to create positive associations and avoid negative ones.
The Holy Grail of modern online marketing is video content that “goes viral.” So how does it happen? New research shows that engagement with online video content depends less on what the video shows than how the video shows it. A study of viewer reactions to online videos suggests that the key is to juxtapose content elements in incongruous combinations or to create original or exaggerated content that makes an emotional connection with the viewer — to create emotionally surprising videos.
Companies looking to build a satisfied and loyal customer base need to understand what drives satisfaction for their particular group of customers. Grocer Trader Joe’s, for instance, typically carries only about 4,000 carefully selected items, in contrast the the 50,000 found in many other grocery stores.
New research shows that marketers who want to determine the value of a particular online influencer need to look beyond just the size of a person’s network connections. Zsolt Katona, assistant professor at the Haas School of Business, UC Berkeley, found that the value of an influencer depends on underlying factors in the network structure of that individual with the target set of consumers. Specifically, Katona found that people who provide sole influence over consumers are the most valuable.
The growing number of chief marketing executives reflects the increasing importance companies attach to marketing. Yet the average tenure of a chief marketing officer (CMO) is three and a half years, well below that of the typical CEO. Both the prevalence of the CMO position and its precariousness give rise to the question,“Has marketing realized the vision to which its adherents have long aspired?” This article asks if that question is an important one — and where marketing goes from here.
SAP runs a 10-years old, online community network that has more than a million unique visitors a month. Mark Yolton, senior vice president of SAP Communities & Social Media, tells how his company is using social media for “outside-in” market insight and as a mechanism to immediately tell the world about its new products.
With social media fundamentally changing the ways in which businesses sell to customers — be they consumers or partners — a pivot point is at hand.
Online brand communities can bring customers closer to a brand, generate “buzz” and enhance brand loyalty. Yet, important as online brand communities are to consumer markets, little is known about the role they play in consumer decision-making. Although the popularity of online brand communities as a means of gathering pre- and post-purchase information continues to grow, knowledge about how to effectively manage those conversations remains scant.
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