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’s 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 received 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 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, it is 1.7, and in scenario 3, it is 8.3.

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

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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 wins 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 serves as an indicator of excellence. Therefore, it is a marketing metric that helps discern whether the distance between you and your competitor is meaningful and replicable or if your win was merely a fluke. For example, merely reporting a 10% lead in market share may not seem like much, but using Margin of Victory could reveal that your upper hand is actually the result of the market. Furthermore, this concept can be applied across a variety of measures. Margin of victory can be applied “one game at a time” as well as “over the long haul.” In fact, research by Deloitte found a strong tie between margin of victory and loyalty.

What does that mean? While it might be useful to monitor your Margin of Victory after every game, so to speak, the best competitors and the eventual champions are those that can sustain and expand their Margin of Victory game throughout the season. Whether you’re the titleholder of basketball like the Chicago Bulls of the 1990s, the victor over Intel in the semiconductor industry, or the champion within your defined marketing niche, it pays to stay ahead in the game. And that is why you employ Margin of Victory. Using Margin of Victory indicates your ability to achieve a sustainable competitive advantage and long-term growth.

There is, however, one caveat associated with using this measurement. We recommend that you apply Margin of Victory as a marketing metric only when you are interested in long-term performance. Margin of Victory doesn’t matter if all that matters is “looking good” right now. If all you’re interested in is winning in the short term, a 1-point win is still a win.

Although every win is technically a win, it’s been shown that companies that take this short-sighted approach are willing to sacrifice long-term initiatives with positive NPV for short term gain.  On the other hand, for an approach that focuses on creating long-term value, Margin of Victory is a powerful measurement.

Measuring your Margin of Victory is a prime example of selecting a marketing metric that provides value to the business. Of course, there are numerous choices from which to select, depending on how you want to convey Marketing’s value to the business. If you aren’t sure what to measure or want to learn more about implementing the Margin of Victory into your analytics, read the white paper Marketing Metrics in Action.

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FAQ:

• Scenario 1 and Scenario 3 can both yield 33% market share for the winner, yet the Margin of Victory differs dramatically because the gap between the winner and runner-up is much larger in Scenario 3.
  The takeaway: market share alone reports “position,” while Margin of Victory clarifies the strength and durability of that position.

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