Origami Logic’s “Now You Know” blog series answers common questions and “how to’s” for marketing measurement best practices. This series features subject matter experts, guest authors, and Origami Logic team members to provide solutions and insight into marketing must-know topics like agile marketing analytics, campaign performance measurement, video ad campaigns, marketing KPIs, and marketing attribution. Learn how to address these topics and leverage the Origami Logic platform features to master marketing performance measurement and maximize your marketing investments.
In this post, learn how to define the KPIs for your marketing organization and activities.
One of the most common questions I receive at the beginning of a marketing measurement engagement with a customer is, “how do we define the KPIs we should be using?” I will answer that question in this post but let me start with addressing a more fundamental question…
What is a KPI?
A KPI is a key performance indicator that evaluates the success made towards business objectives and is generally nuanced according to the organization’s performance criteria.
A KPI is a quantitative measure over time and particularly in the digital marketing world, where things happen quickly, KPIs are dynamic so they should be continually evaluated to monitor progress within the context of a target goal.
KPIs vs Metrics
Many people use the terms “KPI” and “metric” synonymously but I feel that it is important to distinguish between the two. A metric is a standard of measurement. For anyone marketing channel, there could be hundreds or thousands of metrics. On the other hand, a KPI is a metric chosen because it is an indicator of performance that can be used as a driver of improvement. KPIs should be few in number.
A classic example in display advertising is the difference between clickthrough rate (CTR) and conversion rate. CTR is a metric worth monitoring because it indicates the effectiveness of the content of the ad. However, conversion rate is a KPI because its impact is more significant on the performance of the business and very often can be viewed in light of goal that is clear to everyone. For example, if there is a revenue target, a metric like conversion directly contributes to the revenue goal (hopefully!) and should thus be measured and monitored.
How to define KPIs
Now that we have a baseline understanding of what a KPI is, here are the steps that should be taken to define KPIs for your marketing organization:
Step 1: Articulate clear goals for marketing overall and for specific activities.
Step 2: Develop KPIs for each of the goals. Each KPI should follow the SMART methodology:
Step 3: Implement business processes and infrastructure (people and technology) that support the measurement and analysis of KPIs. The necessary capabilities are:
- A way to capture data at relevant points
- The ability to compare results with defined goals
- A way to investigate the delta from goals
- And, most importantly, the ability to refine efforts to get closer to goal
How should KPIs be presented?
Last, I would like to add an important note about how KPIs should be presented. I often see KPIs presented in static reports that are generated monthly or quarterly. From my perspective, KPIs should not be in static reports, particularly when data can be accessed on a near real-time basis. KPIs should be featured in dashboards that update on a regular basis to indicate performance over time. Also, while it doesn’t hurt to make KPIs look visually appealing, bells and whistles should not be used as a clever way to disguise what’s actually happening, nor substitute for further analysis (speedometer dials, while amusing, do not facilitate understanding).
Defining KPIs is a key step in setting up a marketing measurement framework. In a future post, I will detail some leading and lagging KPIs that are commonly used to measure the performance of marketing activities across different channels.