How to Apply the Margin of Victory to Measuring Marketing

By Laura Patterson

From market share to product adoption rate, win rate to share of wallet, brand preference to category growth rate – almost every niche is affected by marketing touching their respective key performance indicators. Naturally, the more Marketing influences KPIs, which serve as metrics to help Marketing and business leaders ascertain Marketing’s effectiveness, the more noteworthy Marketing becomes to the business leaders. However, while each additional marketing metric is valuable and provides guidance, it doesn’t necessarily provide insight into how well we are performing against the competition. This value is instead measured through the calculation of the Margin of Victory.

For many, the Margin of Victory may seem like a more familiar term in the sports arena rather than the boardroom. But that doesn’t mean it delivers any less crucial insight when applied to Marketing. Of course, simply stated the Margin of Victory is a statistic used to quickly determine how significant the victory is between a winner and the loser. But we all know that “winner” and “loser” can easily be translated into “competitive advantage” and “middle of the pack” for the business world.

So how do you calculate your Margin of Victory? Easily. Simply subtract the score of the loser from the winner score and divide it by the total score:

(winner’s score – loser’s score)/total possible score

A good way to show the impact of applying a Margin of Victory rather than overall market share to see your standing within the ranks of the competition is to look at voting.

Imagine there are a total of 3 million possible eligible registered voters. In scenario one, the winner received 1,000,000 votes and the next closest winner 950,000. In scenario two, the winner received 1,250,000 votes and the next closest winner 750,000 votes. In scenario 3, the winner received 1,000,000 votes and the next closest winner 750,000 votes.

Now we exercise a bit of math. When we calculate the market share for scenario one, the winner’s holds 33%. In scenario two it is 41%, and in scenario 3 it is 33%. However, if we apply the concept of Margin of Victory to scenario 1, the margin is 1.7 (1,000,000 – 950,000) / 3,000,000). In scenario 2 is it 1.7, and in scenario 3 it is 8.3.

What is significant here is that while scenario 1 and 3 result in the same market share, there is a vast difference in the margin of victory.

Reviewing the Results of Your Margin of Victory

The resulting coefficient of your Margin of Victory provides insight into the magnitude of your win. In this example, the magnitude or margin in the second scenario is almost twice that of the first scenario. We know it seems rather obvious that the greater difference in win in the second scenario would produce a larger margin by which to claim victory. But the point here is that we are applying an accepted statistic as a way to understand the value of this magnitude.

Why does it matter? Margin of Victory is a marketing metric that Go to the full article.

Source:: Business2Community

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