Marketing metrics matter. We have all heard the saying, “if you can’t measure it, you can’t manage it.” This goes double when we’re talking about marketing return on investment (MROI). Marketing metrics help quantify trends and diagnosis causes to anticipate the results of future efforts or projects. Hauser and Katz in their 1998 article “Metrics: You are What You Measure” published in the European Management Journal, said “every metric, whether it is used explicitly to influence behavior, to evaluate future strategies, or simply to take stock will affect actions and decisions.” Marketing leaders must explain how clear marketing metrics are affecting the business of health Exchanges. It impacts buying and your exchange’s profitability. Purchased a Coke, lately? Did marketing have anything to do with it? Remember the last time you saw a Dr. Pepper commercial or that last time you even considering buying one?
It’s no longer effective to conduct detailed surveys, make proclamations leading towards weak executive decisions or use sampling populations that wouldn’t be accepted in an entry level college, statistics course. We see this often with qualified health plan data surveys omitting the impact of Medicaid survey data or the inverse. Unrepresentative sample populations, combined with incomplete market population segmentation data does produce results; none of which I’d run a business on.
Then why, I ask you, do we accept these inaccurate metrics today? Why are marketing teams held to lower standards than operations or technology? The answer is lazy executive leadership. Ask questions, challenge the normal, be bold and support your customers. Everyone at one time said they’d do that, few keep that commitment to challenge and advance. Different thinking, produces different results.
There are eight core areas that affect that health insurance exchanges:
- Customer profitability
- Channel management and Sales Force
- Pricing Strategy
- Promotions
- Advertising Media and Web Metrics
- Marketing and Finance
- Margins and profits
- Product and Portfolio Management
Understanding which metrics to focus on is essential for maximizing the profitability of public and private health insurance exchanges. Let’s take a look together on eight essential metrics. Part 1 of this article will cover the first four.
- Total Addressable market ($)
We have to define the full market. In a state-based exchange this is often regional by state, and in a private exchange this could be national.
The first step is to define the Total Available Market (TAM). The TAM is the total market demand for a product or service. In the case of a health exchange, this would be the population eligible to sign up for a health insurance exchange. This broad number is unlikely to happen so we need to drill into this number a bit more and account for product segmentations and competitors.
The second step is to define the Serviceable Available Market (SAM) which is the segment of the TAM targeted by your health insurance products and services which is within your geographical reach. For a state-based exchange this would be regional (by state) and for private exchanges this could be nationally based on where you could have products or services (legally). The probability of 100% penetration in this market is unlikely so we need to refine this a bit more and account for the target market you’re after and where you have active products or are considering offering new products.
The third step is to define the Serviceable Obtainable Market (SOM) which is the portion of SAM that you can capture. This is the target market share that you could actually reach. For example if a huge competitor had 50% of the market, and the second greater competitor had 20% of the market you might be looking at the 80% of that 30% obtainable market. Understanding these numbers and the assumptions taken into the calculations provides for reliable forecasting not just wild guessing. Segmentation of the market would be the next (e.g. ancillary products etc.) , which I won’t cover here today.
- Relative Market Share (%)
Clear visibility to the trend of your company’s relative market share, provides insight for operations and information technology on the exchange’s brand market share against that of its leading competitor. Are new operational processes working? Are new technology releases getting the mileage they claimed?
Relative Market Share (%) = _____Brand’s Market Share ($, #)
Largest Competitor’s Market Share ($, #)
- Penetration Rate and Share (%)
A major factor of brand is popularity and this is typically measured in brand penetration and market penetration. While market penetration, brand penetration and penetration share are all important, today we’ll focus on brand penetration and market penetration. The market penetration percentage is calculated by taking the customers who have purchased a product in the category and dividing by the total population. The value of marketing penetration is to understanding who is actually buying your product.
Market penetration (%) = _Customers Who Have Purchased a Product in the Category (#)
Total Population (#)
Similarity, brand penetration percentage identifies who has purchased the brand at least once over a set period of time. In case of health exchanges this is likely to be over the course of a year (a full open enrollment period). One example of this would be the number of customers in OE2015 that purchased a bronze plan.
Brand penetration (%) = _Customers Who Have Purchased the Brand
Total Population (#)
- Customer Loyalty (%): Moving Customers to Promoters
While usage (purchase habits, loyalty) is a great measure of behavior, awareness (awareness, knowledge) and attitudes (beliefs and intentions) come first and therefore must be measured first. This information is typically captured in two methods. The first is an overall customer satisfaction index, measured over time (e.g. monthly, quarterly or annually) and second is the willingness to recommend (think Net Promoter Score or NPS for short).
Customer Satisfaction (%) = Customers Who Reported Experiences Exceeding the Satisfaction Interval
Total Customers Surveyed (#)
Typically, the customer satisfaction survey reports on five measures that are weighed evenly that include: very dissatisfied, somewhat dissatisfied, neither satisfied nor dissatisfied, somewhat satisfied and very satisfied. The customer satisfaction percentage is always measured per individual but reported in aggregate. Lastly we have the willingness to recommend that focused on future value. It’s really asking do you feel there is future value here, yes or no.
Willingness to Recommend (%) = Customers Who Indicated They Would Recommend
Total Customers Surveyed (#)
Included below is additional information on Net Promoter Score as I often get questions on how to calculate these for folks building custom surveys.
NPS (%) = % Promoters – % Detractors
Or
NPS (%) = (# Promoters / Total Respondents) – (# Detractors / Total Respondents)
Often we associate willingness to recommend with the company’s Net Promoter Score (NPS). However, the true Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others. It’s a bit different, but also very helpful. Its primary function is to gauge a customer’s overall satisfaction with a company’s product or service and the customer’s loyalty to the brand. Loyalty being directly linked to actual or perceived quality of the product or quality of the service provided.
NPS is calculated by subtracting the percentage of customers who say they are unlikely to make a recommendation from the percentage who say they are extremely likely to do so.
NPS is used because the power of customer loyalty is huge. Fred Reichheld’s, December 2003 Harvard Business Review article “The One Number You Need to Grow” goes a great job of highlighting the value of NPS. Reichheld draws a direct correlation between net-promoter values and a company’s average growth rate, stating that true loyalty clearly affects profitability. He expanded by exploring industries from car rental to the airlines, and in this research not one company had been able to increase growth without improving its ratio of promoters to detractors. When you reflect on this fact, it’s impactful. It makes me want to see this value monthly and ensure the health exchange is trending in the right direction. Again, thinking of anticipated future value.
Although this looks like a marketing tool or stretching a bit even ‘market research’, remember it’s not. It looks like a marketing metric but Reichheld reminds us, it a true operating management tool.
How does your marketing dashboard look? Is it driving operational decisions or just fun to look at?
Stay tuned for Part 2 . . .
References
Cameron Consulting Co. (2014). 35 Digital Marketing Metrics (Online Image) – Cameron Consulting Co. Retrieved August 1, 2015, from http://www.cameronconsultingco.com/2014/09/29/35-digital-marketing-metrics/