How To Set Marketing KPIs That Support Your Goals

I am a big fan of marketing KPIs, and regularly insist that any plan without a clear way of measuring its effectiveness is, well, a bit of a waste of time. KPIs are brilliant, possibly essential, to effective marketing. Yet when we work with clients on developing strategies, or training them on a process to develop better activations, we often find creating really good marketing KPIs is a challenge for many. So why are marketing KPIs important, and how do you make sure that the ones you set are high value?

Why are marketing KPIs so important?

I'm going to address this question in two parts (here, and a little later in the article). Why are marketing KPIs important? Well, its all in the name, really. KPI stands for Key Performance Indicator. Marketing KPIs help us understand how we are Performing in Key areas of our business or activity. Without marketing KPIs, how do we know our marketing plan is delivering?

Marketing KPIs are easy to get wrong

And yet, it appears, they are also very dangerous. The?Harvard Business Review even suggested not setting goals , as they can be so dangerous. KPIs are a double-edged sword for sure – they create focus and measurability, but sometimes that focus is misplaced. Like nuclear material they can be extremely powerful, but in the wrong hands, they are extremely hazardous. But this article uses examples of badly created KPIs as an argument against KPIs. That's nonsense. That's like using drunk drivers as an argument against cars. Or my ability with a bat and ball as an argument against tennis for everyone. KPIs, like many tools, can be misused. So where do people go wrong when setting marketing KPIs?

Marketing KPIs - problem one

The first problem is highlighted in the HBR article. KPIs are really powerful. They work because they change people's behavior. That's why the footballer who was penalized for intercepts ended up throwing fewer passes. But surely that wouldn't happen in a sales or marketing team right? When I started my work in a sales team, we had the head of customer service asking us (the supplier) to ask customers to not order products that were out of stock in our warehouse, as we had a KPI to improve our customer service rating (the number of orders fulfilled in full, on time). Were we actually improving customer service? Of course not. But we were improving the customer service rating: the KPI.

Or what about a client who asked for all in-store activities to deliver a large sales uplift, and then found that all the more strategic promotions disappeared and were replaced with displays and discounts. Was the business trying to reduce the number of strategic promotions? Of course not. But that was the unintended consequence of the marketing KPI.

Marketing KPIs - Problem Two

The problem may lie in the name, or rather the acronym which is now used so liberally. KPI stands for Key Performance Indicator. I repeat, with stress on the last word: Indicator. A KPI?indicates?that performance is good. It doesn’t demonstrate it, or prove it, merely indicates it. KPIs are extremely useful when measuring the actual performance is difficult; they indicate that things are going well when it is hard to really know.

This is particularly true in marketing – where goals linked to specific consumption or shopping behavior are often difficult to measure. Our data often covers what is easy to measure, rather than the outcome we’re really interested in. We measure sales into trade, because we have shipment data. We know that visibility is what is important, rather than distribution, but it’s hard to measure, so we settle for a proxy.

Marketing KPIs are not (necessarily) the same as objectives

In this way KPIs are different to objectives. Objectives are the outcome. That is the performance we want. the KPI is an indicator, that's all. Understanding the difference between marketing KPIs and objectives is a major problem when developing marketing KPIs.

The problem occurs when people forget that a KPI is only that – an indicator.?A Facebook pages follower count is simply an indicator of consumers being willing to view our message, that we are forming the type of relationship which could yield future growth.?But those “likes” are merely an indicator. They are not the end result we desire (growth). Yet when I look at some client briefs; I see that apparently hitting 70,000 likes is now an objective.

KPIs remind me of the proverbial drunk searching for his keys under a lamppost. When asked if that was where he dropped them the drunk replies “No – I dropped them over there, but the light is better here”.

The goals we are seeking in marketing, in shopper marketing, are rather simple. We are looking to drive increased levels of brand consumption. Shopper marketers are looking to change shopper behavior to enable and drive future consumption growth. As we move from activity to activity we set goals for those activities, and we create measures.

When Sales and Marketing Goals go wrong

But managers come to regard what is measured as the goal. For example, promotions are designed to drive brand growth, but are measured on the promotional uplift, and that becomes the goal. Since when is selling lots of product at a discount a good thing? Only if it gets into the right hands: the hands of the shoppers who hold the keys to increased consumption. The value is in WHO buys and what they do next, but given that is hard to measure, we focus on what we can measure. The uplift. The fact that most of the promotional sales went to existing shoppers who merely stocked up but didn’t consume more isn’t factored in. The promotion is deemed a success because it hit the KPI, not the original goal.

Now I know that measuring these behavioral changes all of the time can be time consuming, expensive, and possibly overkill. KPIs help enormously here. KPIs are great. I love them. Just as long as we don’t forget that they are indicators, and nothing more.

So how do we set better marketing KPIs and metrics??

When you first look at this approach you might find it daunting. And it can be the first time you do it. But it gets really simple and really fast with a little practice. Which is why we include it in many of our training programs and processes: once you've got it you can apply the same process to lots of areas of your business. Here is a summary of the key steps to overcome the challenges and dangers of setting KPIs and create really powerful marketing KPIs:

Start with the goal in mind?– No matter that the voice in your head is telling you that you don’t have the data to measure it, start with that higher level goal. Look for a link to a long term behavioral change in consumption or shopping.

Brainstorm the possible ways to measure it. Again – ignore the nagging voice telling you that you need to focus on the available data – work out the possible ways to measure it, even if at first they seem preposterous or unaffordable.

Brainstorm proxies for measuring it. Remember we are looking for indicators. Would research for a relatively small sample be an effective proxy? Feedback from staff? Social media likes? What options have we got?

Consider the value and cost of each measure?You may be surprised. There may be a relatively inexpensive way of directly measuring what you want to measure. Or there may be a really useful proxy. Remember we are looking for Indicators or performance. And do bear in mind, that these proxies for the actual result we’re looking for might not be that expensive – certainly when juxtaposed against the value of getting it right (or the cost of getting it wrong).

Consider the unforeseen consequences of that measure as a KPI. Brainstorm the ways that the KPI could be achieved which are not aligned with the goal or outcome. If there is a possible way it can be subverted, then there is a good chance it will be! A simple example is in sales, where a sales target could easily be achieved by loading trade customers with extra inventory.

Where there is a chance of misdirection, create a KPI to balance this.?Putting KPIs in dynamic tension is often a great remedy for this. In the example above, setting a ‘balancing’ KPI to keep trade inventory below a certain level would go some way to mitigating this risk. Great KPIs balance each other.

Balance 'Leading' and 'Lagging' KPIs. Don't fall into the trap of making all of your KPIs about the final outcome (lagging KPIs). These are great, and really important, but we also recommend setting leading KPIs. Leading KPIs indicate that we have created the conditions of success. These help us understand if we are on track (is the plan being implemented). They are also essential in evaluating performance. Leading KPIs give us the 'why' behind the performance. Take the example of a sales promotion, designed to get new people try our brand by sampling in a store. As lagging KPIs we might measure the number of samples given and the sales uplift. But for leading KPIs we might measure how many sampling booths were set up. Or how many product displays were in how many stores. Or how many customers had agreed to the sampling. The last one might indicate that the plan is on track. The number of sampling booths set up is critical to understand the performance of the activity. Imaging if we only measured sales uplift, and the results weren't good. Does that mean it was a bad idea? Or just badly executed? A balance of leading and lagging KPIs help us answer this. Otherwise we might 'kill' a great idea just because it wasn't executed particularly well.

Review marketing KPIs regularly. By this I don't mean review the results. I mean review whether you still have the right marketing KPIs.

KPIs become outmoded, strategies change, so ensure that KPIs (and metrics) are reviewed on a regular basis to check that they are still fit for purpose. Check that people are still clear of the goal hidden behind the measure. Stop measuring that which is no longer useful (this might help fund that extra tracking you needed). Consider “dipstick” research to support ongoing metric tracking to ensure that underlying (harder to track) behavior is changing in the desired way.

KPIs are an essential tool in measuring performance. Used effectively they can incentivize business performance and help teams come together under common goals. But they need managing. Get in touch now to understand how we can help you set better KPIs for your people, your plans and your marketing activities.