THE METRIC REVOLUTION

It might be well known that marketers and sales people are besotted lovers in the brand family, but not many know what holds them together madly in love is the most sacrosanct 'proof of their relationship'- Targets, a cockeyed optimistic number at that. While their romance is all benign in the beginning, this bullish duo often remain callous to the long term sustainability of the brand. Check the following instances for example

• Today is the last working day of the month and you need to close just one more deal to get your hands on that incentive bonus scheme. Luckily for you, a customer rings up and well well, he is interested in your product. The customer however wants to finish the deal on Monday. You panic and offer a 10%, then a 25%, and finally a 50% discount to try and push the closure today itself. The client agrees. You could've doubled your company's income from the sale by waiting, but that would've jeopardized your bonus. You acted counter to your company's benefit yet the company praises you for achieving your 'sales target'. They created the bonus system to boost income, but in this case it has reduced it.

*long example warning*

• You head the marketing department in your company. You strategize a ambitious customer engagement event to exhort competitor customers to buy your tractors and thereby improve your market penetration and customer base. And since you are so confident in your infallible marketing event you set a target for the sales department that each sales person has to give minimum of x deliveries. Now sales department in fear of failing to achieve their targets call on your brand's loyal customers, promise to give them discounts and push them to take the vehicle at the grand event. You later review that the delivery number of this month has sky rocketed like never before. You're on sky high. Yet you have only improved sales and not saleability. The loyal customers who would have anyhow brought your vehicle given a few months had the best deal of their lives thanks to your generous discounts. You've lost sight of your original objective of customer acquisition in favor of the expedient metric- "delivery/ sales"

What these issues have in common is that when a measure becomes a target, it ceases to be a good measure. This is known as Goodhart's law. Setting a naive target encourages behavior that superficially meets the goal rather than the underlying objective.

Most of the metrics measure the effectiveness only in short term: immediate sales, page views etc. They are popular because they are easy to measure. However we ought to provide the right solution, not the expedient solution. Long term impacts like brand equity, brand perception, internal reference price of the customer are hard to measure and therefore often ignored. This pressurizes people to adjust campaigns to meet the short term metric target rather than use the metric later as a tool for analysis of the marketing scheme's effectiveness.

What happens when you routinely discount your brand trying to achieve the will o the wisp- "monthly sales target". If say (and so it happens), more than half of the time your product is under discount it raises the question of which of the two price levels is the normal price for your brand? Do you also measure the effect it has on consumers internal reference price (which is the memory/ expectation of what the price should be for your brand based on past purchases). Or do companies calculate the break even point they need to achieve to generate more profit in the long term because discount prices reduce your contribution margin and therefore you have to sell heavy volumes which would offset this reduced contribution margins.

What a metric does is it converts a complex, messy reality into easy to analyse numbers. This process always involves a loss of representativeness in return for simplicity (Stat numbers always have a 5% alpha error/ level of significance). When this trade-off is forgotten and target metrics are blithely given undue importance, problems arise. This is why in most market research problems, quantitative research is just to legitimize insights got from qualitative research. Rather than blindly revering the metric, there is also a need for individual discretion/judgement and also long term brand tracking.

A balanced approach therefore, would be to give equal importance to both short term metrics and long term brand/business tracking. After all, life's not that binary.