1. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Management Metrics “If you can’t measure it, you can’t manage it” Fred Smith, Founder & CEO FedEx

2. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Purposes of Metrics Clarify strategic priorities Specify value proposition Outline specific goals Obtain employee buy-in Receive feedback Modify tactics Link to performance appraisal system Tie individual performance to metrics for the company, the team and the individual. Harmonize individual objectives, departmental goals and companywide strategy. Define Business Model Communicate Strategy Align Objectives Track Performance Increase Accountability Managers can use metrics to evaluate a business’s progress in the following areas:  Examples

3. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Challenges to Specifying Metrics for Online Businesses Companies’ strategies change rapidly. Online measurement is resource intensive. –Development of systems to capture data can require significant capital investment and human resources. –Data mining is often needed to make data usable. –The amount of Information generated can overwhelm managers. Online metrics are still evolving. –There is little agreement on which measures are appropriate. –Some metrics are ambiguous (e.g., amount of time spent at site). –Data capture is subject to manipulation. “Hard” measures are needed for investment community, but “soft” measures are often the best early indicators of site performance. Some reasons why many online businesses do not take a systematic approach to developing and applying metrics:

4. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC “A firm can be profitable, yet strategically bankrupt….” Michael Porter

5. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC The Balanced-Scorecard Strategy In Operational Terms Financial To succeed financially, how should we appear to our shareholders? Internal Business Process To satisfy our shareholders and customers, what businesses must we excel at? Customer To achieve our vision, how should we appear to our customers? Learning and Growth To achieve our vision, how will we sustain our ability to change and improve? Vision and Strategy Source: Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74 (January-February 1996): 76. The “Balanced Scorecard” was developed in response to managers’ tendency to focus too heavily on short-term financial performance.

6. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC The Balanced Scorecard – Typical Measures Internal Business Process Innovation: perceived innovativeness, percent of sales from new products. Operations: order processing, cycle time, delivery time, number of errors. Post-sale service: returns, warranty processing, response time, payment processing. Customer Market share, customer acquisition, customer satisfaction, customer profitability. Learning and Growth Employee: selection, training, retention, satisfaction. Information systems: timeliness, accuracy, data utility. Motivation: personal and company goal alignment. Source: Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74 (January-February 1996): 76. Financial Revenue, revenue growth, gross margins, operating income, net margin, earnings per share, cash flow.

7. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC The Performance Dashboard Financial Metrics Financial Metrics Steps of Strategy Customer Interface Customer Interface Branding and Implementation Branding and Implementation Performance Dashboard Market Opportunity Market Opportunity Business Model Business Model Branding and Implementation Metrics Branding and Implementation Metrics Customer Interface and Outcome Metrics Customer Interface and Outcome Metrics Business Model Metrics Business Model Metrics Opportunity Metrics Opportunity Metrics Evaluation

8. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Introducing the Performance Dashboard Financial Steps of Strategy: Customer Interface Implementation and Branding Performance Dashboard: Areas Addressed: Size of market opportunity Attractiveness of target segments Competitive landscape Customer acquisition Changes in customer behavior Site experience and usability Branding Technology infrastructure Internal organization Relationship with suppliers and partners Fulfillment capability Revenue Profit Cost Balance sheet Market Business Model Implementation and Branding Implementation and Branding Customer Business Model Uniqueness of value proposition Attractiveness of offering Firm capabilities relative to competition Sustainability of competitive position Evaluation

9. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Blueprint to the Performance Dashboard Step One: Articulate Business Strategy Step Two: Translate Strategy Into Desired Outcomes Step Three: Devise Metrics Step Four: Link Metrics to Leading and Lagging Indicators Step Five: Calculate Current and Target Performance Define goals and value proposition Market Opportunity Opportunity size? Competitive environment? Market Opportunity Opportunity size? Competitive environment? Customer How to acquire customers? How will customers change? The customer experience? Customer How to acquire customers? How will customers change? The customer experience? Implementation and Branding How to develop brand? How to go to market? Implementation and Branding How to develop brand? How to go to market? Financial Financial consequences in terms of revenue, profit, cost and balance sheet? Financial Financial consequences in terms of revenue, profit, cost and balance sheet? Market Opportunity Market size and growth Average age and income Competitor concentration Market Opportunity Market size and growth Average age and income Competitor concentration Customer Market share Purchase/year Success rate Service requests/customer Customer Market share Purchase/year Success rate Service requests/customer Implementation Customer brand awareness System uptime percentage Number of IT staff % inaccurate orders Implementation Customer brand awareness System uptime percentage Number of IT staff % inaccurate orders Financial Revenue Profit Earnings per share Debt to equity ratio Financial Revenue Profit Earnings per share Debt to equity ratio For each metric, determine the metrics that it affects and that affect it Map the linked set of metrics, indicating leading and lagging indicators Ensure that there is a balance between leading and lagging indicators For each metric, determine the metrics that it affects and that affect it Map the linked set of metrics, indicating leading and lagging indicators Ensure that there is a balance between leading and lagging indicators Develop resource system required to deliver the strategy For each metric, calculate current level of performance Determine target level required to meet outcomes described in Step 2 Ensure that targets are consistent with each other For each metric, calculate current level of performance Determine target level required to meet outcomes described in Step 2 Ensure that targets are consistent with each other Business Model Unique value proposition? Capabilities vs. competition? Business Model Unique value proposition? Capabilities vs. competition? Business Model Customer perceived benefits Exclusive partnerships $ invested in technology vs. competition Business Model Customer perceived benefits Exclusive partnerships $ invested in technology vs. competition

10. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Charles Schwab -- Customer Acquisition Stage Step 1: Articulate the Business Strategy “Use technology to offer innovative products and superior service at lower prices to investors unwilling to pay for investment advice” Schwab Learning Center Live Events Principles of Investing Understanding Market Cycles “Did You Know” Q&A Schwab Signature Services Schwab AdvisorSource Options Service Global Investing Service Online Chat with Customer Service Representatives Customer Service via Phone Customer Service via E-mail Customer Service at Branch My Watch List Margin Loans Money Transfers Automatic Investing Options Service After Hours Trading Account Protection Bill Payment Overall General Goal Planner Investor Profile Sample Investment Plans Retirement Retirement Planner IRA Analyzer Product Offering Online Investment Process Get Educated About Investing Plan investments Decide on Investment Perform Investment Post Investment Support Perform Research Estate Estate Tax and Probate Calculator Alternatives Comparison College College Planner Tax Tax Strategies IRS Withholding Calculator Overall Quotes and Charts Analyst Center Stocks and Options Stock Analyzer Bonds and Treasuries Schwab BondSource Services CDs and Money Markets SchwabOne Annuities Schwab Select Annuity Life Insurance Insurance Needs Calculator 1. Value Proposition 2. Marketspace Offering High-quality Investment Information High-quality Investment Information Innovative products Low price Technology Leadership Superior service 3. Resource System

11. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Schwab Desired Outcome Summary Martket Opportunity Significant Opportunity Financially Attractive Segment Competitively Attractive Segment Business Model Value Proposition vs. Competition Offer vs. Competition Capabilities vs. Competition Sustainability of Value Proposition Customer Interface and Outcomes Lower Customer Acquisition Costs Transition Customer Base Outperform Competition on Interface Perceptions Customer Satisfaction and Loyalty Implementation and Branding Brand Associations vs. Competition Best-in-Class IT Infrastructure Ability to Deliver Brand Promise Financial Evaluation Revenue Profit Cost Balance Sheet Business Model

12. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC *Source: Nicole Tempest and Warren McFarlan, Charles Schwab Corporation (B). Case no. 9-300-507, Harvard Business School Publishing, September 13, 1999 Charles Schwab -- Customer Acquisition Stage Current and Target Levels for Select Metrics

13. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC POV: Bill Gurley on the Power of Conversion Rates Source: J. William Gurley, “The Most Powerful Metric of All,” CNET News.com, 21 February 2000. A website’s conversion rate is a key metric of performance. Small increases in customer conversion can significantly impact marketing costs per transaction.

14. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Information Sources for Metrics Data collected internally are important, but external data are also useful for benchmarking and performance tracking: Data TypeSample MeasuresSample Sources Market researchSite usability Customer satisfaction Site traffic BizRate.com Jupiter Media Metrix AC Nielsen Analyst reportsIndustry trends Company or site ratings Forrester Aberdeen Group Frost and Sullivan IDC Financial informationCompany profiles Financials Industry and market comparative data Hoover’s Online Edgar Online DLJ Direct SEC filings

15. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC US Top 25 Web and Digital Media Properties Source: Media Metrix press release, 31 March 2000. The number of unique visitors to a site is a key metric for the customer interface.

16. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Market Research Source — BizRate.com BizRate asks consumers to rate the performance of an online store. “Ten dimensions of service”

17. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Analyst Source — Forrester Forrester ratings are based on expert reviews and customer surveys.

18. Last Updated: 01/19/01 Copyright  2002 by Marketspace LLC Financial Information Source — Hoovers Online Hoover’s Online provides industry information and profiles of individual companies.