Performance Management Blog

Archive for November, 2009

Consumer price index (CPI) – Focus on Australia

Saturday, November 28th, 2009

The consumer price index (CPI) measures the rate at which the prices of consumer goods and services are changing over time. It is a key statistic for purposes of economic and social policy-making, especially monetary policy and social policy, and has substantial and wide-ranging implications for governments, businesses, and workers as well as households. (Consumer price index manual: Theory and Practice, 2004)

Annual and Quarterly CPI Inflation Rates, Australia

Source: The South Australian Centre for Economic Studies, ABS, Statistics.

The consumer price index indicates a price change for a constant market basket of goods and services from one period to the next within the same area (city, region, or nation). The percent change in the CPI is a measure estimating inflation. The CPI can be used to index (i.e., adjust for the effect of inflation on the real value of money: the medium of exchange) wages, salaries, pensions, and regulated or contracted prices. The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics.

It is one of several price indexes calculated by most national and international statistical agencies such as: The International Labour Organization, the International Monetary Fund, the Organisation for Economic and Co-operation and Development, the Statistical Office of the European Communities (Eurostat), the United Nations Economic Commission for Europe and the World Bank.

According to the Bureau of Labor Statistics, U.S. department of labor, the CPI for all urban consumers rose 0.2% in September 2009. “The index has decreased 1.3% over the last 12 moths on a not seasonally adjusted basis”.

The latest issue released by Australia regarding CPI, was in June 2009 and the conclusions accordingly to the report were:

The all group CPI:

Rose 0.5% in the June 2009 quarter, compared with a rise of 0.1% in the March 2009 quarter.
Rose 1.5% through the year to June 2009 quarter, compared to an annual rise of 2.5% to the March 2009 quarter.

Overview of CPI movement:

The most significant price rises this quarter were for automotive fuel (3.6%), hospital and medical services (3.6%), rents (1.4%), furniture (3.7%) and house purchases (0.8%).
The most significant offsetting price falls were for deposit and loan facilities (-4.3%), vegetables (-6.9%), fruits (-7.6%) and overseas holiday travel and accommodation (-3.4%).

For the historical perspective on CPI, consult the Historical Consumer Price Index Data.

References:
International Labour Office (2004), Consumer price index manual: Theory and Practice
http://www.bls.gov/CPI/
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6401.0Mar%202008?OpenDocument

Tags: CPI, Government, KPI example, Metrics, Performance Measures
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Marketing performance: measuring brand equity

Monday, November 23rd, 2009

Continuing the series of blog posts on marketing performance measurement, today’s post is reviewing brand metrics.

As a sub-process of marketing, branding refers to the development and maintenance of a brand. A brand is a „promise”, as it represents all that exists in the consumer’s mind with reference to a particular product. Thus, measuring becomes more difficult in the context of branding, dealing with intangible aspects.

The dimensions that are measured are also abstract, the most common being brand:

Image
Awareness
Recognition
Association
Dominance
Equity

Literature and practice reflect various models of measuring these dimensions.

It is argued that brand measurement can be done from three different perspectives:

Published brand valuation tabulations
Market capitalization, as brands seem to influence the value to shareholders
Internal performance measurement initiatives

From these three different options, the first one seems to be the most comprehensive and relevant, as the share price can be influenced by other factors besides consumer perceptions (macroeconomic trends, for example). The internal measurement, though important for the overall value of the corporate brand, seems to work more as a HR strategic tool.

The metric that covers all brand dimensions is the $ Brand equity.
Brand equity refers to the monetary valuation of the brand. Various models for measuring brand equity have been suggested by both academics and practitioners.

A. One such calculation considers the brand value equal to the goodwill or the amount of money the buyer of a company pays, in addition to the value of its tangible assets. This is a rather simple approach, as it exclusively focuses on the capitalization or the internal perspective of the brand.

B. Interbrand publishes jointly with Business Week the top 100 global brands report. It developed a model for brand valuation that suggests separating tangible product value from intangible brand value. Interbrand uses three dimensions in brand valuation:
the earnings that the brand is expected to generate for the following six years
the % of these earnings that can be attributed to the brand (and not to tangible aspects) and the strength of the brand.
It is argued that whereas the financial data Interbrand uses is collected from reports issues by the companies that are subject to brand valuation, the other data is a matter of subjectivity of the evaluator when choosing the consumer base for the research, for example.

Here are the results for the year 2009 (Source: Millward Brown Brandz Report 2009:

C. Another well-known method of brand valuation uses the BrandAsset® Valuator (BAV) metric, developed by Young & Rubicam Brands. The method measures four dimensions that reflect consumer attitudes towards the brand:

Perceived differentiation within the market,
Brand’s relevance to consumer lifestyles,
Esteem in which consumers hold the brand and
Consumers’ knowledge of the brand.

D. A more clear brand valuation model, that uses three well-defined metrics aggregated in a calculation formula is the one developed by William T. Moran in 1994. The methodology is the following:

$ Brand equity = % Effective market share x # Relative price x % Durability, where

% Effective market share is calculated by weighting the share of a market segment by the segment’s percentage of brand sales.
$ Relative price is the brand’s price, divided by the average market price.
% Durability is an estimation of how many of the brand’s consumers will purchase in the following year.

Stay tuned as additional brand metrics will be presented in future post.

Further reading
For further reading on branding, follow:
Best Global Brands 2009
www.AllAboutBranding.com
www.brandchannel.com
www.marketingpilgrim.com

Tags: Brand, Indicators, KPI example, Marketing, Measures, Metrics
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It is spring in Australia and smartKPIs.com in bloom

Wednesday, November 18th, 2009

Two more reasons to register on smartKPIs.com, if you haven’t done it yet:

The smartKPIs.com team has been working hard and today we have released a new version of the homepage, along with several enhancements to the website navigation.
The number of performance measures documented on smartKPIs.com has surpassed 650 and more are published or updated each day.

Looking forward to meet you in the smartKPIs.com community:

Tags: Database of KPIs, Indicators, KPI example, Library of KPIs, Metrics, Performance Measures
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Performance in sport: a new era has began

Friday, November 13th, 2009

It is acknowledged that performance activities have been a necessary part of the human life for as long as there have been organizations. Thus performance is a fact of life.

The same is in sport, as performance is the most important goal to be achieved by each and every single “athlete” from this world no matter of the sport activity it is involved in. More than that, performance in sport has a very old history, and can be traced back thousands of years ago when the first official edition of the Ancient Olympic Games took place in Greece in 776 BC. Since then, sport activities evolved tremendously both in form and complexity and nowadays they became an important part of the human beings life.

Along with these developments, performance has increased its importance exponentially, part as a natural consequence of the human society development and civilization, part because of the commercialization of sport in many of its branches. Therefore, performance in sport became today one of the most intensively monitored phenomena.
One important sport activity that has attracted much attention from the perspective of performance monitoring and measuring is football. Considered by many as the king of all sports, mostly because of its popularity but also because of its huge commercial benefits, football became today a veritable industry, whose performance in all of its aspects is an important phenomenon to watch and measure. Therefore, in this sense more applications and programs have already been built.

A good example of such a program is the Castrol Index and Ranking system. The Castrol Rankings is the world’s first rankings based on the actual performance of every football player across Europe’s top five leagues. Castrol’s team of performance analysts use the latest technology to analyze and measure each player’s performance in every of these leagues matches.

The Castrol Index objectively analyses player performance, tracking every move on the field and assessing whether it has a positive or negative impact on a team’s ability to score or concede a goal. At the end of each game, players are given a score out of ten. Some of the most important measures that compose the index are:

Then Castrol Rankings combines the individual Castrol Index players’ performance measures and weights them, so each player can be ranked to find out who the world’s best performer players are.

As the famous german football coach Ottmar Hitzfeld declared: “…data and stats have radically changed football over the past 10 years. Whether it’s at club or international level, managers and their staff use statistics and insights on player performance to help improve the team and deliver the best results“.

For more details about how Castrol Index is calculated visit www.castrolfootball.com .

Tags: Database of KPIs, Football, Indicators, KPI example, Library of KPIs, Metrics, Performance Measures, Sport
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Measuring marketing performance: market metrics

Thursday, November 12th, 2009

When assessing the overall firm performance within the market it operates in, measurement focuses on macro metrics, that capture data regarding the overall market, respectively firm position within this market.

These metrics help understanding market trends and dynamics, both those of the firm, and those of competition. We will not focus on brand elements in this context, as we intend to deal with them in a future post dedicated integrally to these.

The most common Key Performance Indicators used in employing performance measurement initiatives at a market level are the following:

1. % Served market refers to the portion of the total market in which the firm operates. From the overall market for a particular product, a firm might might not serve some geographic regions, for example. Therefore, its served market excludes these regions from the total potential market. This is important to assess when desiring to calculate market share; to be relevant, the share will refer only to the portion of the market that is served.

2. % Market share measures the part of a market accounted for by a particular business/entity.

In can be measured either in units sold – % Unit market share, or in sales revenue – % Revenue market share. These two metrics differ in that the first one reflects sales in terms of volume, whereas the second one reflects sales in terms of revenue being influenced, therefore, also by the prices at which products are being sold.

3. ÷ Relative market share measures the firm’s market share relative to the share of the market leader. This metric helps in benchmarking firm position against that of the industry leader.

4. # Market share rank measures the position of the firms in its market by arranging market shares of all players on the market in descending order, on the 1st position being that of the firm with the largest share.

5. % Market concentration measures the portion of the market accounted for by a small number of firms (usually, the largest two or three). This is important to calculate as it can indicate the degree at which a small number of firms can influence market parameters (prices, imposing industry norms etc.).

6. % Market growth measures the increase in demand for a product, by comparing demand from one period to demand from the period before.

Along with % Market share, the % Market growth is used in constructing the BCG (Boston Consulting Group) matrix used for making decisions regarding product strategy.

An important thing that ought to be carefully dealt with when measuring market dimensions is providing a clear definition of the market; this should be not too narrow and not too broad. Managers should define the market by focusing on a specific list of clear parameters: products, competitors, geographic areas and time intervals.

All these performance indicators should be measured and monitored when assessing market trends and dynamics. It is important to clearly define the relevant market from the overall market, to measure how much of this market is accounted for by the business, how great is this share by comparison to competitor shares, especially that of the largest competitor. Also important is the awareness of the market composition, this indicating the degree of free competitiveness. Finally decisions should be made based on market growth predictions.

We have inserted below a figure of how these market KPIs relate to each other in the way they are constructed and cover various market dimensions:

Tags: Brand, Indicators, KPI example, Marketing, Metrics, Performance Measures
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Measuring marketing performance

Monday, November 2nd, 2009

According to a study conducted in 2001 by Accenture, 68% of the marketing executives in U.S and U.K acknowledged the fact that their company was not able to measure the marketing campaign Return on Investment (ROI). Although still a major provocation for most of the companies, data-based marketing has swept recently through the business world.

It is commonly argued that the marketing department performance assessment should be done simply by looking at the sales result, be in sales volume or in the turnover. In this respect it is considered that all marketing efforts, all that getting to know the market, understanding customer needs and habits and analyzing competition should reflect in sales.

One of the main goals of businesses is to sell, but it is sometimes up to the sales department or, in some cases, the sales force, to understand and use the marketing department intelligence to enable sales. So the quality of this intelligence also needs to be monitored to ensure quality sales outcomes.

In fact, measuring marketing activities can be very complex and can focus on various dimensions, such as marketing efficiency (envisages costs to deploy marketing programs), program effectiveness (comparing costs to results), brand attitudes (such as brand awareness, brand recognition, brand loyalty, share-of-hart), customer behavior (customer satisfaction, willingness to recommend, lifetime value of a customer), product and portfolio management (cannibalization rate, repeat volume) and even online or web-based marketing.

The taxonomy of Marketing KPIs and can also include public relations, product and brand management, advertising, promotion & lead generation, customer relationship, business development activities.

In the upcoming weeks, we will begin a series of posts regarding KPIs used in Marketing Performance Measurement.

Further reading:
Paul W. Farris, Neil T. Bendle, Philip E. Pfeifer, David J. Reibstein (2006), Marketing Metrics: 50+ Metrics Every Executive Should Master. Wharton School Publishing

Tags: Brand, Indicators, KPI example, Marketing, Metrics, Performance Measures
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