I am a big fan of KPIs, and regularly insist that any plan without a clear way of measuring its effectiveness is, well, a bit of a waste of time. KPIs are brilliant, possibly essential, to effective marketing.
And yet, it appears, they are also very dangerous. The Harvard Business Review even suggests not setting goals, as they can be so dangerous. KPIs are a double edged sword for sure – they create focus and measurability, but sometimes that focus is misplaced. Like nuclear material they can be extremely powerful, but in the wrong hands, they are extremely hazardous.
The problem may lie in the name, or rather the acronym which is now used so liberally. KPI stands for Key Performance Indicator. I repeat, with stress on the last word: Indicator. A KPI indicates that performance is good. It doesn’t demonstrate it, or prove it, merely indicates it. KPIs are extremely useful when measuring the actual performance is difficult; they indicate that things are going well when it is hard to really know.
This is particularly true in marketing – where goals linked to specific consumption or shopping behavior are often difficult to measure. Our data often covers what is easy to measure, rather than the outcome we’re really interested in. We measure sales into trade, because we have shipment data. We know that visibility is what is important, rather than distribution, but it’s hard to measure, so we settle for a proxy.
The problem occurs when people forget that a KPI is only that – an indicator. A Facebook pages follower count is simply an indicator of consumers being willing to view our message, that we are forming the type of relationship which could yield future growth. But those “likes” are merely an indicator. They are not the end result we desire (growth). Yet when I look at some client briefs; I see that apparently hitting 70,000 likes is now an objective.
KPIs remind me of the proverbial drunk searching for his keys under a lamppost. When asked if that was where he dropped them the drunk replies “No – I dropped them over there, but the light is better here”.
The goals we are seeking in marketing, in shopper marketing, are rather simple. We are looking to drive increased levels of brand consumption. Shopper marketers are looking to change shopper behavior to enable and drive future consumption growth. As we move from activity to activity we set goals for those activities, and we create measures.
But managers come to regard what is measured as the goal. For example, promotions are designed to drive brand growth, but are measured on the promotional uplift, and that becomes the goal. Since when is selling lots of product at a discount a good thing? Only if it gets into the right hands: the hands of the shoppers who hold the keys to increased consumption. The value is in WHO buys and what they do next, but given that is hard to measure, we focus on what we can measure. The uplift. The fact that most of the promotional sales went to existing shoppers who merely stocked up but didn’t consume more isn’t factored in. The promotion is deemed a success because it hit the KPI, not the original goal.
Now I know that measuring these behavioral changes all of the time can be time consuming, expensive, and possibly overkill. KPIs help enormously here. KPIs are great. I love them. Just as long as we don’t forget that they are indicators, and nothing more.
So how do we set better marketing KPIs and metrics?
It’s a complex task, and one that, I confess, I find to be one of the hardest (but most rewarding) things we take on for clients. Here are a few steps you could take:
Start with the goal in mind – No matter that the voice in your head is telling you that you don’t have the data to measure it, start with that higher level goal. Look for a link to a long term behavioral change in consumption or shopping
Brainstorm the possible ways to measure it. Again – ignore the nagging voice telling you that you need to focus on the available data – work out the possible ways to measure it, even if at first they seem preposterous or unaffordable.
Consider the value and cost of each measure You may be surprised: new ways of measuring a better proxy for the actual result we’re looking for might not be that expensive – certainly when juxtaposed against the value of getting it right (or the cost of getting it wrong).
Consider the implications of that measure as a KPI. Brainstorm the ways that the KPI could be achieved which are not aligned with the goal or outcome. If there is a possible way it can be subverted, then there is a good chance it will be. A simple example is in sales, where a sales target could easily be achieved by loading the trade with extra inventory.
Where there is a chance of misdirection, create a KPI to balance this. Putting KPIs in dynamic tension is often a great remedy for this. In the example above, setting a ‘balancing’ KPI to keep trade inventory below a certain level would go some way to mitigating this risk.
Review regularly KPIs become outmoded, strategies change, so ensure that KPIs (and metrics) are reviewed on a regular basis to check that they are still fit for purpose. Check that people are still clear of the goal hidden behind the measure. Stop measuring that which is no longer useful (this might help fund that extra tracking you needed). Consider “dipstick” research to support ongoing metric tracking to ensure that underlying (harder to track) behavior is changing in the desired way.
KPIs are an essential tool in measuring performance. Used effectively they can incentivize business performance and help teams come together under common goals. But they need managing. How sure are you that the KPIs in your business are actually driving the results you want, and not just driving the achievement of KPIs? If they were set more than a year ago, then perhaps it’s time to review them to ensure that they are still relevant, and are not being subverted.
