Measuring Marketing plays a role beyond making organizations more accountable. Effective Marketing measurement initiatives enable organizations to use Marketing metrics to guide scenario modeling, planning, and investments. An integral part of such an initiative is establishing key performance indicators (KPIS). KPIS should indicate a change in performance and provide you with insight in how to influence success. All your Marketing metrics should help you assess Marketing’s performance, but it is the KPIs you deploy that provide the leading insight into the future impact of Marketing efforts on the business outcomes.

Key Performance Indicator (KPI) has become one of the most bandied-about measurement terms. What really is a KPI? Just because a metric can be “glammed up” doesn’t make it a KPI. A metric refers to a direct numerical measure that represents a piece of business data in the relationship of one or more dimensions and serves as a standard of performance.  A possible metric might be the percentage of inquiries that convert to quotes. A KPI is a metric that is tied to a target and that reflects the factors that contribute to success. It is a metric that you are willing to invest in to change. 

Usually, a metric represents how performance is above or below a pre-determined target. KPI’s are usually shown as a ratio of actual to target and should provide some indication of whether you are on or off the target and by how much. When you think about KPIs, keep each of these words in mind: Key, Performance, Indicator.

• Key: Focus on the most important or most relevant metrics. In marketing, we may be able to develop, measure, and monitor a gargantuan number of metrics and performance indicators. Choose those KPIs that are tied to the outcomes that matter most to your business that the organization expects marketing to impact.
• Performance – Select a KPI that measures how marketing executed on an action and how well the organization performed against a target.
• Indicator – For a metric to be a KPI, it must indicate some result and/or a pending result.

Select Key Performance Indicators Relevant to the Business

Select KPIs that will help you understand how Marketing will influence or affect change in the business outcomes. Before you determine your KPIs, you must first know how the organization is going to measure success. This information is the foundation for establishing your organization’s business outcomes. Once you identify the business outcomes, the metrics to measure success, that is, your KPIs, whether that’s category ownership gains, improvements in customer value, etc., will become clear.

Armed with how success will be measured, you can define appropriate KPIs. These KPIs should measure whether Marketing is or will have an impact on the success of the outcome. Select those performance indicators that have the most influence on the outcome.

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What’s The Magic Number of Key Performance Indicators?

We are often asked, “How many KPIs does Marketing need?” The number of KPIs depends on the number and variety of business outcomes and metrics. The key question, rather, is what performance indicators will serve as a signal of future performance. For example, if the share of preference has been determined to be an indicator of future market share, then an increase in preference would be expected to generate an increase in market share, and vice versa, a decline would signal that advances in market share are in jeopardy. Your goal in selecting a KPI is that it should correspond to a change in the outcome.

Once you have the KPIs and begin to monitor them on a regular basis, you can use the data to support predictive and scenario modeling, which are essential for business planning and resource allocation. What are you looking for when you monitor your KPIs? You are looking for changes in your KPIs and the corresponding outcomes in order to develop norms and benchmarks. This information, when tracked over time, serves as a gauge that when numbers are outside the norm, the corresponding outcome will be affected. For example, if you see a change related to customer behavior, it may be signaling a shift in the market, whereby enabling the organization to mobilize in anticipation of the change and adjust accordingly in terms of product, channel, pricing, and segmentation strategies.

Learn more about improving your Marketing Performance Management and Measurement (MPM) with our free white paper Charting a Course for Marketing Effectiveness: Alignment & Accountability. Contact us when you’re ready to select your metrics and KPIs.

FAQ:

• How they prioritize Marketing performance management and measurement
• The performance management processes and capabilities they leverage
• Their ability to demonstrate the link between Marketing initiatives and business outcomes

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