Tuesday, May 24, 2016

CSF: The Most Important Metric You've Never Used

Don Sexton

Don Sexton is Professor of Marketing and of Decisions, Risk, and Operations at Columbia University. He’s also a presenter at the Marketing Analytics & Data Science Conference on June 8-10, 2016 in San Francisco, California.

As a preview to his presentation “CSF: The Most Important Metric You’ve Never Used,” Don shares insights on the importance of CSF for business success.

Peggy L. Bieniek, ABC: Why is CSF the most important metric for the success of your business?
Don Sexton: CSF (Customer Surplus Factor) is the ratio of a customer’s willingness to pay to the price being charged. The higher that ratio, the more likely the customer is to make the purchase.

CSF therefore summarizes most other marketing metrics such as awareness, knowledge, preference – even likelihood to recommend – and so is a very efficient approach to understanding a company’s position in the marketplace.

In many cases, we have found that CSF results in highly accurate predictions of financial outcomes such as revenue and contribution.

In addition, CSF is a metric that leads to actions. Willingness to pay can be managed with many marketing tools. CSF can indicate which marketing actions will lead to the most attractive financial results.

PB: What are the key differences between CSF and KPI?
DS: A KPI is a Key Performance Indicator. Managers use KPIs to monitor their ongoing business situation. KPIs should consist of both lagging indicators (which show where you've been) and leading indicators (which show where you're heading). 

CSF is a very powerful leading indicator of what financial outcomes you can expect given your strategy. CSF should most certainly be included among the KPIs that a marketing manager regularly reviews.

PB: How is CSF typically used?
DS: CSF is used to provide insights for strategy in both short-run and long-run competitive situations. Traditional techniques such as marketing mix modeling primarily focus on resource allocation over the next year. 

CSF enables managers to not only plan for the short run, but also for the long run. CSF allows managers to understand the position of their product and service in the customer’s mind and suggests what must be done over time to improve their competitive position.

PB: How should CSF be used for successful business outcomes?
DS: CSF should be monitored frequently – quarterly or semi-annually – to provide managers with steering control, the ability to set clear objectives and to forecast results of marketing actions before they are implemented.

PB: What will people gain from attending your conference presentation?
DS: Managers attending this session will understand an innovative way to analyze their competitive situation, an approach well-grounded in marketing and economics and proven to work by several companies, which clearly links marketing actions to financial outcomes and which is relatively easy to put into practice.

Want to hear more from Don? Join us at the Marketing Analytics & Data Science Conference. Learn, network and share best practices with the most influential leaders in data science and analytics. Stay connected at #MADSCONF.

Brilliance@Work profile originally published on www.starrybluebrilliance.com


Peggy L. Bieniek, ABC is an Accredited Business Communicator specializing in corporate communication best practices. 

Connect with Peggy on LinkedInTwitterGoogle+, and on her website at www.starrybluebrilliance.com. 

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