Lead and Lag Indicator

Lead and Lag Indicator

Lead and Lad Indicator is a concept derived from the Balanced Scorecard by Dr. Kaplan and Dr. Norton. In my previous Lag Indicator articles quoted the following lag indicators as an example for you to evaluate whether there is any difference between a lead and lag indicator.

Are you able to differentiate all these indicators and group them into a lead and lag indicator in accordance to the Balanced Scorecard concept? Can you differentiate a lead and lag indicator when they are all mixed up?

Let’s take a closer look at the group of indicators which I have mixed up the lead and lad indicator as listed below:-

market share

^

Sales revenue

^

new marketing sales

^

brand image

^

advertising and promotion budget

Relationship of a Lead and Lag Indicator

What I have done was I picked the lead and lag indicator from the list published in my previous Lead Indicator post and placed them into one column. The logic I used is to follow the “Cause and Effect“ relationship to identify the lead and lag indicator.

What is that? Let’s use the example lead and lag indicator to determine the cause and effect:-

Logic 1)  For Market Share as the objective which is the effect of the activity;

Logic 2)  What cause the effect is the Sales Revenue since sales revenue determine the percentage of share in terms of sales in the market. Therefore, sales revenue is a lead indicator to “Market Share “ which is the lag indicator for this cause and effective relationship

Logic 3)  Next, look at “new marketing sales”. With this new sales, the sales revenue will increase. Therefore it is a lead indicator

tor to “the sales revenue which is not become the lad indicator. Now you should realized the same indicator “sales revenue” can be a lead or a lag indicator depending on the cause and effect relationship.

Logic 4) It not easy to do new sales in competitive environment. As such a positive brand image must be in placed to attract new sales. Therefore, “brand image” is has become the lead indicator for “new marketing sales” which has become the lad indicator.

Logic 5)  To build a positive brand image, one activity will be “advertising and Promotion”. This intensity of the this activity depends mainly on budget. therefore “advertising and Promotion budget” become the lead indicator for “brand image” which is not become the lad indicator.

Sequence of Lead and Lag Indicator

By rearranging the indicators into a logical sequence, it is not difficult to identify the lead and lag indicator in your marketing plan. If you put enough effort to segregate the lead and lad indicator and put effort to improve the lead indicator all the way to the beginning, you will be able to improve the result and hence your marketing plan.

Remember that the trick is identify the lead and lag indicator relationship.

2 Responses to “Lead and Lag Indicator”

  1. [...] you considered the four perspective of the balanced scorecard concepts? How extensive you use the lead and lag indicator concept when you develop your key performance indicators. 0 Comments Filed in [...]

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