For marketing to be able to contribute to the growth of the business making smarter decisions comes from a robust selection of KPIs that drives better measurement. Selecting the right KPIs is challenging and in many cases KPIs are poorly defined which trickles to the wider business creating silos is the worst possible scenario when it comes to KPI management and measurement. When KPI’s are tracked they either track too few or too many KPIs. The win comes in striking the balance between the long and short term goals.
Understanding the business model, the maturity stage of the business, the short, medium and long term goals will help navigate the KPI selection process. For example, working with an uber competitor at the start-up stage the focus was first time bookings as the north star KPI. The first time booking came with a discount at the time, the booking value nor margin was important. As the business matures the north star KPIs will evolve but the core KPIs will stay the same providing the ability to track changes in the KPIs over time.
Having a framework that talks the language of business and marketing is more likely to get an approval from key stakeholders is critical to be able to execute against those KPIs. It creates a domino impact which is pivotal to driving success:
- Developing the measurement strategy
- Management and reporting of the KPIs in the marketing data warehouse
Developing the KPI framework
When it comes to developing the measurement framework and selecting KPIs it needs the right balance which is split into 4 different buckets that covers the full spectrum from business to marketing and planning. When mapping out the KPIs it should be looked at what are the effectiveness and efficiency KPI to help provide better insights to look at today, tomorrow and the future.
- Business – KPIs that are important to the board
- Brand + Direct Response – KPIs that are important to the marketing team
- Campaign – KPIs that help the marketing team with planning
Minimum 3 to maximum 5 performance led KPIs in each bucket is the right amount to understand what is going on, diagnose and action.
Having this clear distinction of top level KPIs is critical for success as it ensures that the right KPIs are being tracked. Tracking of the KPIs is the first step but being able to link the KPIs to performance and marketing campaigns is where the value comes from but also being able to plan and forecast against the KPIs.
There is still a role for digital platform led KPI’s which can help optimise campaigns and provide insights into platform performance. Mapping out platform KPIs in a framework will ensure there is a consistency in the data that is being collected and analysed. The strategic decisions will not be based on digital platform KPIs.
Leading and Lagging indicators
The challenge comes when selecting marketing KPIs it’s heavily focused around lagging indicators which tells you what has happened. For marketing and paid media teams the focus is based on revenue, which is a lagging indicator. When it comes to forecasting last year’s revenue does not help predict next year’s revenue. This is where leading indicators helps drive future revenue which could be a mix of NPS + branded searches which should drive repeat and new revenue.
Having indicators that look at the long term and short term view is critical.
Leading indicators are looking at the long term view and future outcomes where lagging indicators is looking at the now the short term view what has happened. Leading indicators are not perfect and will not always be accurate to predict the future, it does require selecting the right leading indicators and understand how those indicators are impacted.
The biggest drawback of lagging indicators is that it’s backwards looking, it provides insights too late to really impact i.e. customers are churning. In most cases the lagging indicator will not provide the insights into what is happening and how to stop it.
If the right approach was taken to mapping out the KPIs when it comes to identifying the leading and lagging indicators it should be straightforward process.
Metric Tree
The challenge for most data teams it gets stuck in doing the mundane data reports and analysis with most questions siloed without really wanting to dig deeper i.e., “how did this campaign perform?” By having the right data infrastructure most of these questions can be answered through self-serve analytics. Which allows the data teams to focus on:
- What are the growth levers
- What are the root causes of problems
This is where a metric tree comes into play understanding what the key drivers are to delivering the north star KPI. It shows the value the data team are providing and they are working towards answering the questions before the questions get asked.
(Metric tree created for an e-com subscription brand)
The metric tree framework is a simple concept to understand + communicate, it creates alignment across the business helping with decision making and problem solving. It visualises how different metrics connect to the north star KPI. The metric tree should get senior stakeholders interested in the data and have access to the relevant dashboards.
Marketing Data Warehouse
Mapping out the KPI framework becomes critical as it leads to what data is needed and how it can be collected to provide the right level of insights which will be in the form of a marketing data warehouse. The marketing data warehouse becomes the closest to the single source of truth and in turn leads to better measurement.