Vital Sales & Marketing Metrics

Today, we have abundant data, better information, fair knowledge and poor insight. Encountering wisdom is a rare occurrence! The data is out there on our spreadsheets, databases and hard disks. Here are 20 simple effective metrics for a Sales /Brand manager. It is not all these metrics, probably an ideal combination of one or two of these metrics for a given business problem can show a direction - The right direction. The wisdom is finding out the combination. I leave the choice to you. Lastly, as some one aptly puts it, A collection of data is not information. A collection of information is not knowledge. A collection of knowledge is not wisdom. A collection of wisdom is not truth. Read me..

Metric  A metric is a system of related measures that facilitates the quantification of some particular characteristic  Remember,  What gets measured, gets done.  If you cannot measure it, You cannot manage it

Few definitions in brief Segment and Category makes a Market  Segment : People with similar needs  Made up of people or organizations sharing one or more characteristics that cause them to demand similar product and/or services  Category : Inter changeable brands or service A category is a group or set of things that have similar characteristics. Similar and competing products (or services) all fall into the same brand category.

Metrics at a glance Target achievement Incremental and Growth CAGR Per capita per month Contribution percent Incremental contribution Contribution Index YTD MAT Simple Moving Average Target achievement Incremental and Growth CAGR Per capita per month Contribution percent Incremental contribution Contribution Index YTD MAT Simple Moving Average Market Share Relative Market share Evolution Index Market capitalization Index Rate of Cannibalization COGS Gross Margin and Profit ROI Performance Spread Performance Span Market Share Relative Market share Evolution Index Market capitalization Index Rate of Cannibalization COGS Gross Margin and Profit ROI Performance Spread Performance Span

1.Target achievement Achievement vs. the Target This can be measured at a specific time interval like Month, Quarter, Half-Yearly, Yearly, YTD (Year to date) etc. Use: To measure sales success Total sales for the period Total Target for the period Target achievement = Back

2.Incremental and Growth Incremental: Absolute incremental in revenue compared to last period ( Month, Qtr., Year etc.) Growth : Incremental as a percent to last period’s revenue is growth. Use: Measure the health of a brand or a organization Vs. Market competition This year sales – Last year sales Last year sales Growth = Back

3.CAGR ( Compounded Annual Growth Rate)  CAGR the year-over-year average growth rate over a specified period of time.  It is best explained if you understand what is not CAGR!  Suppose you have started your sales with Rs.100 in 1 st year and ended up with Rs in 4 th year. You have grown at 70%,50%,30% and 10% respectively in 4 Years. If some one asks you on an average what is the growth per year, it is not the average of divided by 4 = 40%.  This is where CAGR is used. You will find it as ~ %. End Sales Start Sales CAGR = 1 No. Yrs* - 1 * No of years In between Start year and End year Back

4.Per Capita Per Month  This is to measure average sales by each sales man per month  Use: This gives a quantum of sales contribution per salesman. Can be used to compare productivity Average sales per month Number of Salesmen PCPM = Back

5.Contribution Percent  This is to measure the percent of contribution from each entity like salesman / Territory/ Brand to the total sale.  Use: To measure the degree of dependence on a brand / Territory /Salesman to the total sales Total sales of all entities Sale of the identified entity Contribution % = Back

6.Incremental Contribution  This is to measure the percent of contribution from each salesman / Territory/ Brand to the total Incremental sale.  Use: To measure the degree of dependence on a brand / Territory /Salesman to the total Incremental sales / Revenue Total Incremental sales of all entities Incremental Sale of entity Incremental Contribution = Back

7.Contribution Index  Is a number that denotes the number of times the average contribution of each entity like territory / Salesman and Brand sales  Use: To measure the relative contribution of each entity to the average. If it is more than 1, the Contribution is above the average of all, if equal it is on par else it is less than the average of all. Average sales of all entities Sale of the entity Contribution Index = Back

8.YTD  YTD : Year to Date (Similarly QTD and MTD)  Revenue/Sales form the beginning of the year  E.g. On 31 st March 2010 YTD sales means, sales from 1 st Jan 2010 to 31 st Mar 2010  Use : Measure the sales quantum at a specific point of time YTD Apr 2010 = Jan Feb-10 + Mar-10 + Apr-10 (sales) MTD – 4/Jun/2010 = 1-Jun + 2-Jun + 3-Jun + 4-Jun (sales) Back

9.MAT  MAT : Moving Annual Total  Last 12 months Revenue/sales  E.g.: Feb 2009 to Jan 2010 sales are called MAT Jan 2010 Sales  Use: As it data is for the past 12 months, comparing two points of MAT data evens out the fluctuations MAT Jan-10 = Feb-09 + Mar-09 +……+ Dec-09 + Jan-10 MAT Jun-10 = Jul-09 + Aug-09 +……+ May-10 + Jun-10 Back

10.Simple Moving Average  Also called as rolling/running average, is a series of numbers  Commonly used with time series data to smooth out short-term fluctuations and highlight longer-term trends.  E.g.: Take the sales of the last 20 days, add them and divide the total by 20.  Next day, take last 20 days average, next day again last 20 days average.  The resultant series is a simple 20 day moving average. SMA of sales (20 Days) 1 day to 20 day sales average, 2 day to 21 day sales average, 3 day to 22 day sales average, 4 day to 23 day sales average,……… = Back

11.Market share of a brand  Expressed in percentage  Can be in Units and also in Revenue  Market Refers to ‘defined market’ for the brand Total sales of the brand Total sales of the market Market Share % = Back

12.Relative Market share Index  Expressed as a number  Comparing brand market share with the biggest competitor’s market share  Can be measured for units as well as revenue Brand Market Share Brand leader’s Market share Relative Market Share Index = Back

13.Evolution Index  Evolution Index is a number that denotes the rate of brand growth vs. the market Growth in a given geography  If the resultant index is more than 1,the brand is growing faster than the market. if equal it is on par with the market  Use: To determine the growth of a brand relative to market (Market Growth%) X 100) ((Brand Growth%) X 100) Evolution Index = Back

14.Market Capitalization Index  Market Capitalization Index (MCI) is a number that denotes the degree of market captured by the brand in a given geography  Use: This measure can give indication of opportunity realized and opportunity in waiting in a given geography Market Contribution% of a geography Brand Contribution% of a geography MCI = Back

15.Rate of Cannibalization  Cannibalization is a process where the new introduction (say the line extension of a brand) eats in to sales of the existing brand(say the Mother brand) from the same organization.  Use: To measure to assess the impact of new introduction on the existing brand Sales of new Introduction Sales loss (Actual or Expected ) from Existing brand Rate of Cannibalization = Back

16.COGS – Cost of Goods Sold  The total of direct expenses incurred in producing goods. Includes the actual cost of materials, direct labor costs in making the goods in saleable condition.   COGS does not include indirect expenses such as advertising and promotion, sales force costs, office or administrative, accounting expenses, royalties, rent etc. COGS = Actual Manufacturing Cost + Packing Costs + Transport Costs Inventory Costs are also taken by some organization as a part of COGS Back

17.Gross Margin % ; Gross profit  Gross Margin is the difference between revenue and COGS  Gross profit is the difference between revenue and the COGS, before deducting payroll costs,overhead costs, interest and taxation. Revenue Revenue - COGS Gross Margin % = Gross profit = Net sales – Cost of goods sold (COGS) Back

18.ROI  ROI measures the  Gains / Profits earned for costs involved / investments done.  To be Simple, The Incremental Gains and Incremental Costs need to be taken for computations to measure the ROI of an Activity/ Costs involved or investments done Vs. the Gains achieved because of the activity or investment.  Usually Measured as%, Hence Multiplication by 100 Costs Involved Gains – Costs Involved ROI % = Back X 100

19.Performance Spread  Spread is measure how many entities* have performed on or above the benchmark ? * Ent ities can be salesman, brands, SKUs, territories, areas etc. Spread is often measured at a specific point of time like Month,Qtr., Year etc.  Use: to measure dispersion of Success among entities Spread* = No of entities above benchmark : Total No. of entities * Spread is best expressed as Ratio than a percent for a better understanding. * Spread is at a specific point of time. Hence, showing the point of time is essential.eg.YTD-Jan’12 Back

20.Performance Span  Measure of how often the performance is on or above benchmark in a given time frame is Span.  Measured for a time frame like Jan-Dec,Day1-Day31 etc.  Use: To measure dispersion of success across time frame and also predictability of success and risk. Span* = No of months above bench mark : Total no. of months * Span is best expressed as Ratio than a percent for a better understanding. * Span for a given time interval, hence showing the time interval is essential ( Jan 2010 to Dec 2010) Back