Use Metrics to Grow

By April 30, 2015 May 5th, 2015 Advice for Businesses
BCG Growth Share Matrix

Peter Ducker, is considered as one of the founders of modern management. One of his often quoted insights states:

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

And yet for too many businesses marketing is often the area to face scrutiny when there are costs pressures.  This is largely due to marketing not being correctly understood and perceived to be difficult to measure.

The definition of marketing, as we have said on a number of occasions, needs to be strengthened. Marketing is about creating value and through this you are able to expand your capacity to deliver on your strategic goals.

Last week we explored metrics relating to customer insights, particularly in regard to purchase frequency and recency.

Metrics also exist to measure market share and awareness, both of which can assist in understanding overall positioning.

BCG Growth Share Matrix, Source: Elquens

BCG Growth Share Matrix, Source: Elquens

Relative market share has been popularised through the Boston Consulting Group’s market growth matrix.  This matrix divides products or services into four quadrants based on market share (strength) and market growth (potential):

  • Stars, which have both high market growth and market potential. Stars need ongoing investment to maintain their edge in a competitive market.
  • Cash cows, which have high market share, but low growth potential. Cash cows are stable income generators and should enable investment in other areas.
  • Question Marks, which have high market potential, but a low relative market share. Question Marks may need significant investment before they become immediately profitable.
  • Dogs, which have low market potential and low market share. Dogs may be breaking even in terms of profitability.

Awareness is often the first step that is required for a purchase decision. A potential customer needs to be aware of your existence, before they can even consider a purchase. Awareness can be prompted, where someone is asked whether they have specifically heard about your brand, or unprompted where they are asked to suggest the first name in a brand category.

In both cases, the level of prompted and unprompted awareness is determined through research into your target markets. Both of these metrics are useful in determining your presence in your relevant marketplace.

Metrics validate the role of marketing and its ability to create positive outcomes for your business. Identifying the metrics you should use will enable you to make informed decisions for your business.

Alex Makin

Author Alex Makin

In a career spanning over fifteen years, Alex has been instrumental in transforming, reinvigorating and growing the capacity of businesses and not-for-profit organisations. He is a visionary who understands the big picture. Alex's expertise is a Certified Practising Marketer and as Chair of the Victorian State Council of the Australian Marketing Institute. Alex is also an accomplished speaker, author and mentor and former Mayor and Councillor for the City of Maroondah.

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