Measuring How Well Your Brand Performs: Using the BDI

It is a given that every product or service your organization offers does NOT appeal to everyone. In fact, it is likely that there are specific customer groups that are more interested in particular offerings than others. In today’s Metric Monday, I am going to explain how to do a Brand Development Index which will help you identify strong and weak segments (usually by demographics or geographics) for a particular product/service or type of products/services.

The application of this awareness can help you determine if there are pockets within your customer community that tend to purchase specific things more often than others, or why some pockets are under-purchasing compared to their peers. Ultimately, this will help you to create targeted communication strategies to encourage more usage/buying, or to create a product improvement plan to fill in any value gaps.

A Brand Development Index is a pretty straightforward calculation. Again, it is an measurement of how well a product/service performs within a given market group of customers, relative to its performance in the market as a whole. To begin with, you need to be able to specifically identify a target group. The more homogenous that group is the more likely it is your data can be acted upon with confidence. For example, choosing to select only by women may not give you the same confidence as selecting women who are frequent users and who have children in the home between ages 1-9. (NOTE: Whatever criteria you choose by should be linked to your overall research goal.)

Okay, once you have this group identified add up all the sales for a particular product/service by that target group and divide it by the total number of people in that group (you can also divide by households if you don’t have individual data). Hold on to this number. Now, in a separate calculation divide the total product/service sales by the total persons/households. Take your first number and divide it by this new number.

Your calculation should look something like this:

Because your BDI is a measurement of sales by a particular product/service per person (or per household) within a specific demographic group, compared with the average sales per person/ household in the market as a whole, you’re able to quantitatively see how parts of your customer community are buying what you’re offering.

Bottom line: Measuring the total sales, registrations, etc for a product, service, or event is sufficient if you’re needing only a top line number to work with. But if you are interested in creating specific strategies for groups within your community, you need to understand how they’re using your products and services. And because you’re creating an index number that can be benchmarked, now you can test to see if specific marketing messages or campaigns are making an impact.

-- David Kinard, PCM

What's the Right Price?

How much is the right price to charge for something? Not only have volumes been written on the subject, but doctorates have been earned just by studying one type of metric around price, pricing, price elasticity, and the economic impacts of prices on consumer behaviors. Well, I am not going to try and cover all those issues in today’s Metric Monday, but I thought it would serve us well to cover two basic price metrics – Reservation Price and Percent Good Value.

Reservation Price is the value a customer places on a product or service and subsequently the maximum price that individual is willing to pay. Percent Good Value represents the proportion of customers who believe a product or service is a “good value” at a specific price. When combined these two metrics provide a marketer an evaluation of pricing and customer value.

To calculate your Reservation Price you need to know the maximum price a customer will not go over. This is going to require some research of your target market (i.e. customers, prospects, etc) and is no easy matter to do. Most market researchers will suggest doing a conjoint analysis (a fancy way of relating variables to one another) but I suggest some basic surveying on your part. It won’t be perfect, but you should get some basic information to use – such as a range of maximum prices your target is willing to pay for something. In doing this, you are essentially combining Reservation Price with Percent Good Value.

In your survey you can ask a two-two part question to get to this data.

1. Considering the [product/service], would you attend if the price was set X? (your control question).


2. Considering the [product/service], please indicate the point at which the price goes over what you would be willing to spend.

The first question can be considered your control question and I suggest testing three or four prices using common industry prices, or aggregates of what the competition is charging. By way of testing, you only want to ask their answer to one price, so in essence you’ll have a couple of different survey editions. The second question asks the respondent to provide their maximum price (reservation price). DO NOT ask these questions back-to-back in your survey or you’ll likely get a lowball number or one equal to the control question. Separate them by at least three or four questions.

Now you have two data sets. Take the range of respondents from the second question and associate the number of respondents to each value. For simplicity, you may want to make some minor adjustments in the scale to make the data set more manageable. You also need to know what your variable cost is for the product or service so that you can understand the price as it relates to your organization’s contribution margin (see earlier post for more on this).

When you map out the range of respondents to the second question you’re getting something called a demand schedule. In another column subtract the variable cost from the price you’re charging. This basically shows you how much you lose or make at each price level, and at what point the price becomes high enough that your demand starts to go down.

In the example below I’ve created a sample chart to explain how this looks. Let’s assume that you want to price your conference, workshop, or charitable gala. You want to know what the right price per ticket should be. After doing your survey you get a range of Reservation Prices between $25 and $325. You’ve listed the number of people who said that is the maximum they’d pay, and you’ve also listed your variable costs for that event (I have mine set at $40).


The math from here on is pretty simple. You subtract your variable cost from the price you sold a registration for, and multiply it by the number of people buying it at that price. In the example you will see the contribution margin go up, peak, and begin to decline. Thus, from the data you gathered, it appears that $185 is the optimal price.

Now, back to the survey questions and that control price. This is basically our “good value” price. Most of the time it is hard to get data sets for the Reservation Price study. By asking the control question we’re essentially asking our target if our product or service is a “good value” at a particular price. We can map out the most common answers and check our demand curve price against it. This process is also useful to help you know at what price to set your product/service and what discount levels you can offer.

Bottom Line: If your pricing strategy is akin to throwing a dart against a wall or going with what the competition is charging you are creating a lose situation for your organization. You may be leaving critical monies on the table by not charging enough, or you may be diminishing your market impact by overcharging. Using a method like Reservation Pricing and Percentage Good Value allows your organization to understand not only what your customers value, but also what prices contribute and take away from your top line revenue.

For more on pricing strategies, listen to my radio show with Reed Holden, author of Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table.

-- David Kinard, PCM

Become Pertinent to Move Beyond Buzz

Those who know me also know that one of my favorite words is PERTINENCE. My cowboy grandfather taught it to me and I've never forgotten his lesson. To me, pertinence is possibly the most critical element in marketing as it drives the focus away from my-product-my-company to the customer, audience, and consumer. To be pertinent means to be both IMPORTANT and RELEVANT.

Here's a great way of thinking about it. Picture your target audience's perceptive view of the world like that of a submarine's radar screen. Yep, you got it, that green circle with a radial arm going around like a clock identifying the objects within the scanning field. In regular intervals the radar pings the environment for new objects.

Now relating this to RELEVANT and IMPORTANT...relevance determines if your message to that target audience even shows up on the radar screen. It has nothing to do with the amount of noise you make, or the frequency of your message, or even the creative you use. If what you're talking about has nothing to do with the target's circle of concern, then your message simply doesn't get noticed.

IMPORTANCE has to do with how close to the center your message hits. For a submarine, that radar view indicates that the sub is at the very center of the radar screen. Objects close to that center are important to the submarine and they pay more attention to those objects than the ones on the periphery. The closer your message gets to the center of an audience's circle of concern it receives an equal measure more of attention.

In her book Beyond Buzz, author Lois Kelly offers up a poignant message on the importance of straight talk in our communications. In fact, the opening chapter is titled, "Enough with the marketing blah blah blah -- let's talk about something interesting." I couldn't agree more. (If you want to hear more from Lois about her book, tune in to my radio show on Wednesday, January 21 at 9 a.m. PST. You can listen live at http://www.wsradio.com/ and even call in with your own questions. The show, Marketing News Radio, is produced by the American Marketing Association.)

In a recent discussion on Beth Kanter's blog we chatted about ways to measure the effectiveness of our social media efforts (e.g. blogs, facebook, etc). In that discussion I suggest that rather than only looking at ROI (return on investment) metrics such as page views, trackbacks, and comments, maybe we should also add in a new metric: ROR -- return on relevance. I should have said ROP -- return on pertinence.

I think the greatest challenge facing non profit marketers in 2009 is not going to be how to find new revenue sources, how to get more from their efforts, or even how to participate in the digital marketplace. I think those will flow from a deeper and clearer insights into their audiences, understanding what is pertinent -- relevant and important. By getting to this rich and deep level of understanding, the choice of marketing tactics becomes much clearer if not obvious and the focus of raising needed resources becomes more of asking for partnership than donations.

-- David Kinard, PCM

Study Shows Effective and Efficient Outgrows Competition

Since 2005 the Lenskold Group has run an annual research study to evaluate the effectiveness and efficiency of marketing and marketers. The most recent study has just been completed – it’s officially called the 2008 Lenskold Group / Kneebone Marketing ROI and Measurements Study – and I had a chance to talk with Jim Lenskold about the study on my radio show today.

Aside from the startling finding that nearly 91% of marketers do not think they’re really doing an effective and efficient job at measuring marketing ROI, what struck me the most is that 45% of those who said they were highly effective and efficient also noted they were GREATLY OUTGROWING their competitors. This should be a wake up call to any lazy marketers and their lazy companies to get with the program!



The show dives into the success factors of those who are leading the way, but there are plenty of obvious ones that won't surprise you including better access to marketing data and systems that support real-time marketing analysis. Clearly, after listening to this show, any marketer that doesn't realize the benefits of what it means to be a highly effective and highly efficient marketer deserves to get left behind by the competition. Every other major business function has already paved the way and done their work to become lean and data-driven; it's about time marketing did the same.

-- David Kinard, PCM