You’ve figured out how to monitor and report on financial metrics related to demand generation and revenue, slicing and dicing data by campaign, region, sales rep/territory, channel, media and more.
Now you’re ready to master strategic and non-financial metrics, the critical indicators of a company’s health and value.
What do we mean by non-financial metrics? Non-financial metrics are quantitative measures that cannot be expressed in monetary units. Common financial metrics include earnings, profit margin, average order value, and return on assets. Outcome-based measures such as customer satisfaction, market share, category ownership, and new product adoption rate fall into the non-financial metrics.
Studies by Deloitte Touche Tohmatsu Limited and others have found that the board of members and executives of many companies are indeed interested in non-financial performance measures, despite the fact that their ability to monitor these factors remains inadequate.
Why? Because financial performance measures such as earnings or return on assets are considered trailing measures of performance. By themselves these metrics do no adequately capture a company’s strengths and weaknesses.
Non-Financial Metrics and Leading Indicators
Non-financial performance measures, on the other hand, can serve as leading indicators of future financial performance and can provide insight as to organization’s impact on stakeholders and society. They can provide deeper insights into the inner workings of your business. And the beauty of non-financial metrics is that you can use them to understand why certain financial results occurred and what you need to change to improve your financial metrics.
Non-Financial Metrics Categories that Matter
Include non-financial measures and metrics for measuring Marketing.
There are a number of meaningful non-financial metrics. We believe that four categories have significant impact on corporate performance:
- Company reputation
- Customer influence and value
- Competitiveness
- Innovation
All of these non-financial metrics fall within the purview of your organization. Therefore, business professionals must gain more experience measuring non-financial metrics. The more experience you gain, the greater your opportunity to create a wider range of predictive, forward-looking managerial tools will become.
6 Key Non-Financial Metrics for Every Marketer
Not sure where to start or if you have tapped into the right non-financial metrics? Here are six key non-financial metrics that Marketing should own.
Brand Preference: This measure helps you understand the position of your company and your products and services in relation to competitors. Many marketers talk about awareness, which addresses whether people know you exist, but what truly matters is whether you are among “the chosen.” If you are conducting awareness studies, consider modifying these to learn how your company and its offerings rank in consideration. Your goal is to understand how you stack up relative to the competition.
Take Rate: Ok, you’ve built preference; the next key non-financial metric is your take rate. This is how many customers/prospects act on your call to action, whether this is an offer to download a case study, sign up for a free trial, or schedule an appointment. Calculating take rate is relatively easy. Here’s a quick example. Let’s say you are a cyber security company and you create a campaign that offers a 20% discount on a risk assessment to anyone who signs up within the next 30 days. The campaign costs $10,000 (direct and indirect.) Your email sends the offer to 1000 customers in your database and 100 register for the offer. Divide the number of uptakes (100) by the number of customers you engaged (1000). In this case 10% is your take rate. The acquisition cost is 10,000/100 or $100 per registrant. Is this a good number? We can decide whether the investment is a good return by determining whether the campaign had a good return and whether the people who took the offer bought the security services.
Customer retention and churn: These metrics are different sides of the same coin. While many marketing organizations focus on customer acquisition, adding customers while a significant number of existing customers are exiting out the back door is a sign of trouble. Retention is how many customers continue to buy from you and churn is the number of existing customers who are no longer buying your products or services. Obviously the goal is to increase the retention number and reduce the churn number. The key is to define when a customer is no longer a customer. For example. If your company provides a subscription-based product you might decide defection/churn is 30 days after the renewal date.
Customer experience: Customer experience has direct impact on customer retention and churn. To measure customer experience, you need to take into account all of the major touch points where a customer interacts with your company. Once you have these you will want to establish key criteria for what constitutes a superior vs. subpar experience.
Innovation: Innovation is your ability to bring new products/services to market successfully. Both the number of new products in the pipeline and the adoption rate of these new products reflect your company’s ability to bring value to your customers and the market.
Market share: Each of the prior metrics: preference, customer retention, take rate, customer experience, and innovation impact your company’s market share. Note that a key word in this metric is market. Market share is a primary measure for both the company and marketing’s success. An increase in market share has a number of benefits, including better operating margins, one of those financial metrics company’s often track. To measure your market share you will need to know how many customers and dollars are available in the market and then calculate how many of these customers and dollars are in your portfolio of products and services.
Marketing needs non-financial measures for accountability.
Laura Patterson is president and co-founder of VisionEdge Marketing, Inc., a recognized leader in enabling organizations to leverage data and analytics to facilitate marketing accountability.
Laura’s newest book, Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom: www.racombooks.com ), is a useful primer for improving marketing measurement and performance. Visit: www.visionedgemarketing.com
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