Setting Better KPIs: Four Simple Rules

Digital
-

On the face of it, KPIs are incredibly simple and yet so many marketers seem to over-complicate matters.  As a result, they either have a mess of conflicting KPIs or, in more extreme cases, they fail to define any at all.  There may be a number of good reasons for this, and often there are deeper business challenges at play, but simplifying matters by taking a strategy-led approach to setting KPIs can lead to more meaningful insights and, therefore, better performance.  And thankfully, given simplicity is key, there are just four elements necessary for success.

1. A Specific Objective

I am a firm believer in ‘singleness of purpose’ as this removes all distractions and ensures that everything is pulling in the same direction.  Although this in itself seems relatively straightforward, ‘singleness of purpose’ possibly requires some additional explanation.

First, and I can’t stress this enough, there needs to be just one marketing objective: additional aims only serve to dilute focus amongst them, diminishing the overall concentration to when there is just one.  Second, I should say that ‘purpose’ does not relate to any lofty ideal but rather to a commercial outcome, which in the vast majority of cases is likely to be a revenue figure.

Nevertheless, having a single objective does not mean that it cannot be broken down into constituent parts.  As an example, if my aim is to bake one cake then I’ll follow a recipe to give me a step-by-step process, the first of which is likely to be along the lines of “measure out 200g of sugar”.  It would be ridiculous to suggest that doing so means I have succeeded in baking a cake, but it would be equally daft to think I could achieve my objective without it.  It is therefore these ‘process goals’ – essentially the secondary objectives required to achieve the end goal – which inform how different tactics ought to be judged.  So in my example, my secondary objective of weighing 200g of sugar is crucial to my primary objective of baking a cake.  I can therefore consider these secondary objectives in isolation and craft specific KPIs for each.

2. A Quantifiable Measure of Success

The purpose of setting KPIs is, as the name suggests, to be able to monitor and report on performance.  Evaluating success cannot be subjective, and therefore our specific objective must be quantifiable so that we can say with certainty whether it has been achieved or otherwise.  Similarly, it’s crucial to agree on a single, reliable source of measurement which will determine success, otherwise performance may be open to interpretation.  Too often, I have seen different teams or channels using different measurement sources and getting different answers as a result.  This renders the KPI effectively meaningless.

It should go without saying (although often doesn’t) that the objective also needs to be realistic.  Ambition is a good thing, but overly aggressive targets can be counterproductive as they invariably lead to perceived underperformance.  Clients will then demand immediate action which deviates from the overall strategy in a bid to “improve” results.  This ‘tactification’ is problematic because it often leads to short-term, reactive “solutions” such as discounts or promotions which eat into margin, and potentially shift customer expectations, making a u-turn increasingly difficult.  It is therefore better to consider market trends and forecasts when compiling targets, taking a “bottom up” approach to ensure that aspiration is tempered by realism and that results are seen as part of a long-term vision.

Image

3. A Fixed Period of Time

Generally speaking, most businesses set targets in line with their financial year and there is therefore a deadline of sorts for meeting the commercial objective.  Where this can fall apart, however, is when considering secondary KPIs and shorter time frames.  This happens for two reasons: either the wrong measure of success is used for the secondary KPIs, or the weekly/monthly target is missed and panic sets in, leading to the same issues of short-termism and ‘tactification’ caused by unrealistic targets.  This is why the fourth rule is vital, as it underpins everything else and prevents this from happening.

4. A Defined and Coherent Strategy

The last, but arguably most important, of these rules is the need for a clear strategy that outlines the various aspects which need to be monitored to ensure performance is going ahead as planned.  However, one of the major challenges in defining the strategy and corresponding tactical plan is that they are so intertwined with objective setting in the first place. 

You can’t set a course without knowing where you’re going, but equally there needs to be some consideration of how you’re going to get there before confirming the final destination.  Objectives and strategy therefore need to be worked on almost concurrently: the single objective should be set at the outset, but the secondary ‘process goals’ must be defined as part of developing the strategy.  The secondary KPIs can then be mapped back to the strategy and the individual tactics within it so that each building block is evaluated appropriately.  These measures then support the overall strategy by maintaining a long-term vision, safeguarding against reactionary measures if others perceive overall performance to be falling short.

Why is this important?

As with so many aspects of digital marketing, setting KPIs is remarkably simple – at least, it should be.  Following these four rules will keep you focused on what really matters, allowing you to ignore the external ‘noise’ which can often cause marketers to lurch between tactics.  In the long run, this leads to better decision-making and, ultimately, better performance.

Author spike.digital