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Choosing the Right Metrics to Maximize Profitability and Shareholder Value

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  • Petersen, J. Andrew
  • McAlister, Leigh
  • Reibstein, David J.
  • Winer, Russell S.
  • Kumar, V.
  • Atkinson, Geoff

Abstract

There is an ever-present need for managers to justify marketing expenditures to the firm. This can only be done when we can establish a direct link between marketing metrics and future customer value and firm performance. In this article, we assess the marketing literature with regard to marketing metrics. Subsequently, we develop a framework that identifies key metrics that firms should focus on that can give a firm a better picture of how they got to where they are now and insights towards how they can continue to grow into the future. We then identify several organizational challenges that need to be addressed in order for firms to build the capabilities of collecting the right data, measuring the right metrics, and linking those metrics to customer value and firm performance. Finally, we offer guidelines for future research with regard to marketing metrics to help firms establish successful marketing strategies, measure marketing effectiveness, and justify marketing expenditures to top management.

Suggested Citation

  • Petersen, J. Andrew & McAlister, Leigh & Reibstein, David J. & Winer, Russell S. & Kumar, V. & Atkinson, Geoff, 2009. "Choosing the Right Metrics to Maximize Profitability and Shareholder Value," Journal of Retailing, Elsevier, vol. 85(1), pages 95-111.
    • Handle: RePEc:eee:jouret:v:85:y:2009:i:1:p:95-111
    DOI: 10.1016/j.jretai.2008.11.004
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    References listed on IDEAS

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    1. Kumar, V., 2008. "Customer Lifetime Value — The Path to Profitability," Foundations and Trends(R) in Marketing, now publishers, vol. 2(1), pages 1-96, August.
    2. Sunil Gupta & Valarie Zeithaml, 2006. "Customer Metrics and Their Impact on Financial Performance," Marketing Science, INFORMS, vol. 25(6), pages 718-739, 11-12.
    3. Ralf Elsner & Manfred Krafft & Arnd Huchzermeier, 2004. "The 2003 ISMS Practice Prize Winner: Optimizing Rhenania's Direct Marketing Business Through Dynamic Multilevel Modeling (DMLM) in a Multicatalog-Brand Environment," Marketing Science, INFORMS, vol. 23(2), pages 192-206, June.
    4. David Godes & Dina Mayzlin, 2004. "Using Online Conversations to Study Word-of-Mouth Communication," Marketing Science, INFORMS, vol. 23(4), pages 545-560, June.
    5. Kumar, V. & George, Morris & Pancras, Joseph, 2008. "Cross-buying in retailing: Drivers and consequences," Journal of Retailing, Elsevier, vol. 84(1), pages 15-27.
    6. Carol J. Simon & Mary W. Sullivan, 1993. "The Measurement and Determinants of Brand Equity: A Financial Approach," Marketing Science, INFORMS, vol. 12(1), pages 28-52.
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