Metrics You are What You Measure - MIT.pdf

Metrics: You Are What You Measure! by John R. Hauser and Gerald M. Katz April 1998 John R. Hauser is the Kirin Professor of Marketing, Massachusetts Institute of Technology, Sloan School of Management, 38 Memorial Drive, E56-314, Cambridge, MA 02142, (617) 253-5056, fax (617) 258-7597, jhauser@. Gerald M. Katz is Vice President of Applied Marketing Science, Inc., 303 Wyman Street, Waltham, MA 02154, (781) 684-1230 x128, fax (781) 684-0075, gkatz@ams- . This research was funded, in part, by the International Center for Research on the Management of Technology (ICRMOT) and by the Center for Innovation in Product Development (CIPD). We wish to thank Robert Klein, Mel Klein, William Lucas, Edward Roberts, and Florian Zettelmeyer for their insights and recommendations on the use of metrics within organizations. Firms use metrics for a variety of laudable purposes. Metrics such as market share, sales increases, margins, and customer satisfaction surveys enable firms to take stock of where they are and to plan for the future. Metrics such as projected revenue, contingent sales forecasts, the net present value of an investment, and the option value of an RD program provide indicators of future performance. Managers use these metrics to allocate assets and select strategies. Metrics such as an RD effectiveness index, reductions in the operating cost of a telephone service center, and reduced absenteeism provide the basis for bonuses and promotions for managers and their employees. Our thesis is that every metric, whether it is used explicitly to influence behavior, to evaluate future strategies, or simply to take stock, will affect actions and decisions. If a brand manager knows that, in his or her company’s culture, a “good brand is a high share brand,” he or she will make decisions t