Figure 6.1 New Productivity Metrics (PAR and BAR)

executives use to measure financial health, such as return on equity (ROE),
which measures how much profit a company generates with the equity shareholders have invested. ROE helps shareholders keep track of the
“productivity” of their money. Similarly, PAR and BAR allow marketers to measure the productivity of their spending, particularly for generating brand awareness.
It turns out that PAR and BAR are indeed better measurements for return on marketing investment (ROMI). For most industries, the biggest marketing spending goes to raising awareness through advertising. Thus, we can consider brand awareness a proxy for “marketing investment” in the ROMI
equation. The “return,” on the other hand, is twofold. The first is purchase
action which, from a company's perspective, directly translates to sales. The second is advocacy, which indirectly translates to sales growth.

Decomposing PAR and BAR
The value of the metrics does not stop there. When companies manage to measure “conversion rate” from awareness to advocacy, they can answer the overriding question: How do companies make necessary interventions and increase the number of loyal advocates?
Again drawing insight from finance executives, we should break PAR and
BAR into their elements. In a DuPont analysis, ROE is seen as the product of three major parts: profitability (as measured by net profit margin), asset use
efficiency (as measured by asset turnover), and financial leverage (as measured by equity multiplier). When comparing brands, a higher ROE
might result from higher profitability, more efficient asset use, and higher leverage. A better ROE due to the first two causes is clearly a great result.
But a better ROE due to higher leverage requires a more careful examination to determine whether the company is over-leveraged or under-leveraged.
Breaking down PAR and BAR can reveal similarly useful insights. It turns out that PAR may be calculated by dividing market share by brand
awareness. Accordingly, marketers may roughly estimate the potential market share increase of their brands if they increase the awareness of those brands. (See
Figure 6.2
.)

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