The single most important marketing metric.

Ironically, marketing creates more reporting ‘noise’ than many other functions

If you’re like most marketers you manage a barrage of metrics, like ROMI, qualified leads, conversion rates, cost-per-lead, and the list goes on. Each is certainly powerful on its own, but the lot of them become a confusing mess when executive teams try to understand marketing impact.

Finance teams hitch their success to profit, taking the reins on reporting it, even though they don’t solely generate it. Sales teams do the same with revenue. Service teams do the same with retention. None of these teams independently produces their dominant metric, but each makes a powerful case for playing a lead role in directly driving the measure. And no one challenges them.

What marketing should really measure

So what’s the equivalent dominant measure for marketing? Competitive advantage. Don’t believe me? Well then, take it from Warren Buffet. The most important thing he looks for in any company is a sustainable competitive advantage, sometimes referred to as its moat, because that is the main driver of future profit. Too many marketers complain about a lack of impact at the executive table, but then resort to reporting a mess of intermediate, activity-based metrics and wonder why they are seen as a cost centre.

‘Ownership’ of the competitive advantage metric is available, so it’s time for marketers to seize it. It’s time for marketing to own the destiny of the company—competitive advantage—it’s ability to generate future profit based on repeated customer choice. Two big questions usually confront this bold challenge. First, can marketing credibly take this stance, and second, how can competitive advantage be captured in a metric?

Competitive advantage unquestionably becomes the purview of marketing when it’s measured directly from the customer perspective. Whereas the full executive team is responsible for making the company the choice of investors, marketing is certainly primarily accountable for making the company the choice of customers.

The most important metric

For clarity, competitive advantage is referred to as competitive EDGE when viewed solely through a customer lens. Competitive EDGE is captured in your buyers’ bottom line judgement on how much better your company is—in terms of value relative to cost—than the next best competitor (NBC). It’s captured in one simple metric—the Net EDGE Score (NES) TM.

How to measure it

The NES is calculated in very similar fashion to the highly successful Net Promoter Score (NPS) developed by Fred Reicheld of Bain Consulting, by netting out responses from potential buyers. The NES is based on the question “On a scale from 0 to 10, to what extent do you feel that ABC Co. provides better value for cost than the next best alternative?” The percentage of respondents answering 0-5 are deducted from the percentage answering 9-10.

NPS has proven to correlate significantly to profitability, producing growth twice the industry average, and it’s a metric you should absolutely use. However, it only tells half the story because it doesn’t provide guidance on how many prospects will likely become customers for reasons other than referral from existing customers. NES provides a total measure of future business from all sources, including existing customers and new customers.

Worried that it’s only marketers that see value in the NES score? No so. General leadership teams face continuous pressure to provide reliable insight into sustainable future profits, and as Warren Buffet indicated, competitive advantage is the most critical factor.

How to manage it

The 5 E’s of Competitive EDGE

Because your competitive EDGE is fully defined by your buyers it’s something you can’t directly control. As a marketer, there are five key drivers—the 5 E’s of Competitive EDGE—that you can manage in an attempt to improve your NES over time. The 5 E’s are:

  • Essential:The customer’s underlying need as they see it.
  • Exceptional:Your way of better meeting their essential needs at the best benefit/price ratio.
  • Evidence:Without proof your claim of exceptional backfires.
  • Experience (Emotion):Your claim to be exceptional and your evidence of that are logical, which means they inspire nothing without supporting emotion.
  • Evolution:How your Competitive EDGE engages and adapts in every market interaction to become even better than competitors.

The four stages of the Competitive EDGE buying cycle

The 5 E’s of Competitive EDGE need to be defined explicitly across the four distinct phases of the buying cycle: problem definition, solution insight, solution selection and solution delivery. At each stage, particular competitors can shine. Some do a great job of helping define the problem but fail to convert to sales. Others are the flip side of this.

It’s hard to find a marketer that isn’t already aware of the USP (unique selling proposition), made famous by Rosser Reeves. The USP is how Competitive EDGE is captured during the solution selection phase of the buying cycle. There are however corresponding characterizations at each of the other three phases. During problem definition, you need to offer a UPD (unique problem definition). During solution insight, you need to deliver a UIP (unique insight proposition), and during solution delivery you need to ensure that you have a decisive UDE (unique delivery experience).

The Competitive EDGE marketing mix

Competitive EDGE is literally defined through individual interactions prospective buyers have with the four components of your marketing mix; your people, your brand, your products/services and external people. These elements form the marketing mix because they are the major ways in which the prospective buyer can interact with and experience your organization. To support competitive EDGE it’s critical to ensure that your 5 E’s come through each time there are interactions between these marketing mix components throughout the buying cycle.

Can this work at your organization?

As with any strategic approach, change is a process to be managed. The power of Competitive EDGE strategy is that it can be executed with simple initial actions that build traction and results toward the bottom line. Surveying customers, prospects and key market influencers in order to calculate their NES is a powerful way to start—giving you data to work with—and easily fitting within voice of customer and market research activities typical of a marketing function.

Learn more

To learn more about calculating your organization’s NES, benchmarking against competitors in your industry or implementing Competitive EDGE Strategy in your organization visit www.NetEDGEScore.com.

 

About Andrew Horton

Andrew Horton is a marketing and strategy executive, serial innovator, author, speaker and trainer. Having generated significant profits for many top brands, he is also the creator of Competitive EDGE Strategy and the Net EDGE Score. Andrew serves as President of the Competitive EDGE Strategy Alliance. Engage with him at www.andrewarthurhorton.com or www.CompetitiveEDGEStrategy.com.

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