Making confident decisions takes good data. And it’s much easier to understand data if you can visualize it. Hence, the value of a dashboard.  But a dashboard, any dashboard, requires selecting the right data and measures.  Creating performance management dashboards and business scorecards is a core competency of ours.  As a result, we are often asked to help with creating a measurement playbook because many organizations use the terms measures and metrics interchangeably. In these conversations, I’m often asked, “How do you distinguish measures from metrics? “They’re the same, right?”

Well, no, not exactly. While there is an overlap between measures and metrics, what distinguishes them is important. By definition, they are different.

Measure How Fast You Are Driving Right Now

Measure, when used as a noun, refers to a unit. It can be a unit of quantity or quality. Note the word unit, which measures describe one element. They are concrete. Speed, distance, height, weight, page views, content shares, number of qualified opportunities, number of customers, and number of deals closed are examples of measures. Some measures are more valuable than others. Some measures can be changed while others cannot. For example, our height is a measure that we cannot change, much to my personal dismay. Weight, on the other hand, is a measure we can change. Let’s apply this idea to Marketing.  The number of qualified opportunities is a measure we can change. One potentially easy way to change it is by modifying the criteria. If you reduce the “gate,” the number will go up. Deciding whether a measure is appropriate and then whether to invest in changing it depends on the business result you are trying to impact.

Metrics: What is Your Dealer’s Financing Offer?

In a performance-focused environment, organizations use performance metrics to monitor progress against business outcomes and the effectiveness and efficiency of business processes. Metrics are tied to business performance. A metric, when used as a noun, is a mathematical function. A metric is typically derived from a calculation that incorporates two or more measures. For example, momentum is calculated by multiplying the mass of the object (a measure) times its velocity (another measure).

A good metric is used as a standard of measurement. To establish a metric as a standard, you will need some kind of measurement baseline. When a metric serves as a standard, it provides you with a quantifiable way to compare performance, either to previous results or against another entity. In the business world, this could be a competitor or a company you desire to emulate.

Ideally, this comparison enables you to make a decision. For example, blood pressure is a function of your systolic blood pressure and your diastolic blood pressure. The American Heart Association provides guidelines against which you can compare your blood pressure to determine your degree of risk. In business, we may use a metric such as category growth rate. This metric requires at least two measures across a specific time frame: your growth rate and the growth rate of the category. Customer Lifetime Value is another example of a metric that incorporates three measures: frequency of purchase, duration of loyalty, and gross profit.

Purchase Your Assessment

Why Metrics and Measurements Matter

Business decision-makers need measures, metrics, and KPIs (Key Performance Indicators). Measures constitute metrics. KPIs are a type of metric that is considered essential to measuring, monitoring, and improving business performance. KPIs are not a business result. Revenue, for example, is a measure, not a KPI. Revenue is the result of what you do.

KPIs provide both insight and direction for performance. It should help you understand what caused the result and facilitate action. A way to determine whether your metric is merely a metric or it is actually a KPI is how willing you are to make a significant investment to make the metric change, for example, how much, if anything, would you be willing to invest to make the metric double? If you would be willing to make an investment to see a change in the “sum” of the metric, you more than likely have a KPI.

Think of KPIs as your vital signs. If something goes amiss, you will need to examine your metrics and the associated measures to be able to diagnose the problem and make a course correction. And, like vital signs, there are only a handful that truly matter. We often suggest having a limited set of KPIs that are for the entire organization if you’re an SMB or for the entire business unit if you’re in an enterprise-level company.

Looking for a good KPI? CLV serves as an excellent KPI.  KPIs are typically at the commercial or overall organizational level, not at a functional level.  KPIs help improve alignment. Metrics used by the various functions should be related to and positively impact the overall KPIs.

Why Metrics are Especially Important for Marketing Leaders

Metrics and dashboards for Marketing functions are often comprised of activity and operational measures. As a result, Marketing budgets face intense scrutiny. In order to demonstrate the importance of Marketing to the rest of the organization, you need to be able to quantify Marketing’s value to the business. A study by Ernst & Young found that only 13% of the CFOs said that the agendas of Finance and Marketing were completely aligned on the issue of measurement methodologies. An essential part of alignment is working from an agreed set of definitions. A recent conversation with several C-level professionals during the development of a customer’s Marketing dashboard requirements discussion revealed that many marketers need to understand the nuances associated with measurement before crafting a dashboard.  One of the first starting points is to have a shared understanding of the organization’s KPIs and how Marketing is expected to positively impact these.

A shared understanding of terminology, as well, will go a long way towards ensuring productive budgeting and performance-setting conversations, as well as throughout the year when results are reviewed, and plans are revised if necessary. CMOs, when considering Marketing’s measures, metrics, and KPIs, keep the CFO and CEO in mind. CEOs and CFOs are focusing on strategic investments that drive growth. Marketing’s measures, metrics, and KPIs should be in lockstep. CEOs and CFOs, be clear about the business outcomes you expect Marketing to drive. Work with your leadership to define the KPIs that are most relevant so the Marketing team will know what data, measures, and metrics to select.

Decision makers: Reading to use measures, metrics, and key performance indicators to reach your business performance targets? Let’s schedule a complimentary, no obligation conversation.

FAQ:

• Measure (noun): a unit of quantity or quality—one concrete element. Examples include speed, distance, page views, content shares, number of qualified opportunities, number of customers, and number of deals closed. Measures can sometimes be manipulated (e.g., redefining “qualified opportunity”), so their usefulness depends on the business result you are trying to impact.
• Metric (noun): a mathematical function derived from two or more measures and tied to business performance. Metrics enable comparison to a baseline (past performance) or to another entity (e.g., competitors), supporting decisions.

• Momentum is a metric calculated from two measures (mass × velocity).
• Blood pressure is a metric derived from systolic and diastolic measures, interpreted against a standard to assess risk.
• Category growth rate is a metric requiring measures over time (your growth rate vs. category growth rate).
• Customer Lifetime Value (CLV) is a metric that incorporates multiple measures (e.g., purchase frequency, duration of loyalty, gross profit).

Comments are closed.