Part 1 of this article explored what Key Performance Indicators, or KPIs, are and how they help marketers measure the success of their programs and prove how they contribute to the success of organizations. In Part 2, we will drill down into the process of creating KPIs based on the marketing program’s objectives and how to effectively use them to achieve those objectives.
So how do you create a KPI? Here’s a checklist:
KPIs must be key to organizational success
Many things are measurable. That does not make them key to the organization’s success. In selecting KPIs, it is critical to limit them to those factors that are essential to the organization reaching its goals. It is also important to keep the number of KPIs small just to keep everyone’s attention focused on achieving the same results.
That is not to say, for instance, that a company will have only three or four KPIs in total. Rather, there will be three or four KPIs for the company, and all the units within it will have three, four or five of their own KPIs that support the overall company goals and can be “rolled up” into them.
What do I do with KPIs?
Once you have good KPIs defined, ones that reflect your organization’s goals, what do you do with them? You can use KPIs as a performance management tool. KPIs give everyone in the organization a clear picture of what is important, of what they need to make happen. You use that to manage performance. You make sure that everything the people in your organization do is focused on meeting or exceeding those KPIs. You also use the KPIs as a carrot. Post the KPIs everywhere—in the lunchroom, on the walls of every conference room and on the company intranet. Show what the target for each KPI is and show the progress toward that target for each of them. People will be motivated to reach those KPI targets.
Marketing and communications KPIs
Marketing and communications departments are always questioned about their budgets, especially by finance departments. This is finance’s way of asking, “Can marketing be trusted to spend the company’s money wisely?” One way to keep those questions from being asked is to have a robust set of KPIs that cover different areas of marketing expenditures.
KPIs can also cover revenue, margin, growth, acquisition, retention, churn, ROI, relationship strength and service time. And they can be assigned to brand measurements that may not be linked to transactions. It’s best to organize KPIs to make them easier to choose and apply.
There are six categories of KPIs that I find valuable for marketing purposes:
Within each category are a number of KPIs that are used for measuring different elements of that category. You will likely be surprised by sheer number of KPIs that can used. No organization measures everything, so marketers need to be judicious in their choice of KPIs and ensure that they are specific to their organization’s needs.
Generally, organizations choose three to four KPIs from any single category. And they limit themselves to three or four categories. This provides for a manageable number KPIs that can be continuously monitored. It is better to choose fewer KPIs and continuously monitor them than to choose a larger number of KPIs and not be able to keep up with their measurement.
One of the most important issues with KPIs is to ensure that you establish the correct measurements for each one. So if an organization is implementing a customer acquisition program, the meaningful KPI’s might include:
Later, the organization might develop a program to increase repeat purchases. KPIs could include:
Fitting the right KPI to the right category
Too often, we see organizations hoping to find KPIs with financial measures for social media categories. Even paid social categories, such as promoted tweets and promoted posts on Facebook, don’t translate into ROI KPIs. At this point there are no real financial KPIs for social media, just like there are few channel promotion KPIs that increase contribution. Average time on a product or web page is an important KPI for measuring channel promotion, but it doesn’t translate into business contribution. It is a mistake to attempt to apply the right KPIs in the wrong way. If the goal is to impress management with marketing’s ability to measure, this is not the way to do it. KPIs need to be carefully aligned to category goals to ensure their success.
Many things that organizations traditionally measure don’t have the rigor nor do they provide the insight of KPIs. These “measurements” now can be moved to the background or even dropped. Management and staff can gain better insight by following the performance of the KPIs. This is the reason that KPIs have gained popularity over the last few years. Properly created and applied, KPIs are an elegant and powerful management tool for every organization.
To learn more on effectively applying KPIs to your marketing communications programs, sign up for J&C’s Techniques to Optimize Your Communications to Drive Action webinar. During this personalized one-on-one session, we will bring the learnings taught throughout this blog series to life within your marketing efforts and take them to the next actionable, measurable level.
Topics: CMO
