A number of years ago, the New England Direct Marketing Association invited me to speak about marketing metrics and which ones were important to track. Back then, consumers were just starting to research and buy products online. Large amounts of available data was starting to inundate marketers and since I worked at a business intelligence company, they wanted to hear my thoughts. They asked me to talk about how marketers should think about measuring their activities and business performance management in general. I remember my key message was simple – focus on the metrics and indicators that will help you improve your customer experience and block out the rest. Easy to say but hard to do! That challenge has become even harder as time goes on and there is more information available and more data being collected every second.
The difference between a metric and a KPI and why you should care
The primary difference between a KPI (key performance indicator) and a metric is that a KPI explains what is being measured, while a metric is the numeric value of the measure itself. According to the American Society for Quality, KPIs help organizations check progress toward a goal by using quantifiable measures that are important to the business. For example 90 new customers in June is a metric, whereas 90% of the goal of 100 new customers in June is a KPI. The KPI tells you whether you are achieving your business objective of 100 new customers. The reason this matters is because you want to make sure you don’t just measure absolute numbers but you also monitor how this compares to your goals and to trends over time.
Best practices for picking the right metrics
- Align with your business objectives – As organizations get larger, it is common for individual teams to have specialized metrics that may not necessarily be what the business is focused on. The last company I was at, the email marketing team focused on optimizing click through rate, but what the company really cared about was bringing in new customers. Needless to say since new customers was not a metric the team monitored, even though the click rate improved over time, the number of new customers brought in by that team did not.
- Pick a handful of metrics – One of the mid sized companies that I worked at had over 200 metrics they used to measure their business. They had a team of analysts that spent weeks pulling together data and preparing for the quarterly business meetings. It caused more confusion than answered the questions that were important to learn how the business was performing. No matter how small or large your company is, you shouldn’t need more than 10 metrics to understand how your business is doing.
- Pick metrics that are actionable and simple – Although there are many tools that can help you calculate, report on and distribute, pick metrics that are not only simple to calculate but also simple to understand. If metrics are easy to understand, people will be able to see the impact they are having on these metrics, and the more likely they are to take actions to improve the metrics.
- Incentivize team members to achieve these metrics – Simply reporting on metrics is not adequate. There must be plans in place and processes in place to take action on the insights from the metrics. Make sure the right people have incentives to deliver on and improve your chosen metrics.
- Optimize data quality – Your metrics will only be as good as the underlying data. The first step is getting the data. It must come from a trusted source and that people accept as accurate. The next step is the calculation. This must happen in a system or by an accepted ‘owner’ of that metric. This will ensure standardization and help adoption of the metric. Lastly there must be a data governance process in place where changes to the data and the metric are monitored, documented and communicated.
Which indicators really make a difference?
There are best practices around what you should measure as an organization. Marketers typically choose measures that follow the buyer’s journey. This starts from top of the funnel metrics such as visits and content views. Next comes middle of the funnel metrics include ones such as downloads and clicks on emails. Lastly there are bottom of the funnel metrics such as conversion and number of new customers. In addition, the ultimate metric for marketers is ROI and being able to attribute a dollar amount to their marketing campaigns. Forbes has also published a list of metrics for what marketing organizations should measure.
While the above metrics are important to measure, what tends to happen is that companies are so focused on maximizing those metrics that they lose sight of the real aim of the company – optimizing the experience for customers. The more we delight customers and keep them engaged with our product or services, the more they will buy from us and work with us. There are three key metrics that every company should be focused on:
- Engagement – Engagement is the measure of the number of interactions a person has with a company, product or brand. The more involved a customer or prospect is the more likely they will successfully use the products or services the company offers and will become advocates.
- NPS or CSAT – Net Promoter Score (NPS) and Customer Satisfaction (CSAT) are measures of how happy customers are. Every person in the organization should be accountable for these measures – from the marketers creating content, to sales reps to support teams ensuring that customers are successful and delighted
- LTV – Lifetime Value or LTV is how much money the customer spends with the company over the span of their relationship with the company. If NPS, CSAT and Engagement are high, the customer will look to have an ongoing relationship with the company and repeatedly buy from the company. Isn’t this the goal of every company? To bring in new customers and keep as many of their existing customers as they can?
In conclusion, select the metrics that help your organization achieve its objectives, but don’t forget to include those that measure the customer experience as will be critical to the ongoing success of your company.
I would love to hear your thoughts on how many metrics you have for your team and which one of those you have seen to make a difference. Provide your comments below!