One of the first questions we ask new clients is what are you measuring in your marketing? How do these metrics tell you if you are improving your business? Peter Drucker’s second famous quote is “management is doing things right, leadership is doing the right things.” Too often, a leader asks for a series of metrics to track the effectiveness of the marketing organization. Without direct guidance, that marketing leader is going to focus on the things they can control, not necessarily the right activities for the business.
This critical difference can be boiled down to measuring KPIs (Key Performance Indicators) and Vanity Metrics. When it comes to marketing vanity metrics equate to doing things right, but KPI’s measure doing the right things. So how do you ensure that you are measuring the right things?
Start With Business Objectives
Too often marketing metrics are made independent from the business. They need to start with some of the key objectives of your business. Are you trying to grow with your current customers or new customers? Are you looking at new markets and products? Are you a new business with little equity in the market? By understanding these scenarios, you can start to build a framework for your KPI’s.
If you have a solid customer base and don’t need or want to grow lots of new customers, but would like to grow your share of wallet, you don’t need to focus on leads or lead growth. Instead, you want to focus on the types of marketing that encourage deeper engagement and loyalty. Brand awareness is good to monitor over time, but not critical in your scenario.
Conversely, if you are looking to expand your customer base in your existing offerings, you want to determine the most effective way to bring quality opportunities to your business. You will want to understand where potential customers view similar products and services. Too often, people quickly focus on leads and purchase lists that are too broad and have a lot of fluff in them. To better track how effective this lead process is you may want to measure the percentage of leads turned into opportunities and/or percentages turned into deals. Low levels in either case suggest high waste and excess costs to your sales and business development teams.
Vanity Metrics vs. KPI’s
Vanity metrics are valid marketing measurements, but they don’t have a great deal of correlation with your business results. They will often simply show that your vendors or marketing teams are growing or creating positive results. A few examples may help shed some light on this. Lead generation growth is often listed as a KPI. Unless you can show a strong correlation of leads-to-deal or revenue growth, it’s more likely a vanity metric. Even if your marketing department or a vendor says leads grew by 60%, it is not often a solid indicator.
KPI’s are measurements that help to determine if your marketing is leading to positive results in your business. The number one KPI for marketing should always be revenue growth. We can help you understand if other metrics and touchpoints are leading to business by attribution models. For example, if you sell via e-commerce – only looking at visitors is likely eye-candy, but time-on-site is more likely your KPI. Similarly, “opportunities created” is often a more valuable KPI than leads, which can be bought or influenced by contests.
Again, it’s a great start to make sure you are measuring your marketing programs. To be more effective and ensure that you want to invest in marketing, be sure to align your metrics with how they impact your business results. Other valuable marketing KPIs include cost per deal (or customer acquisition cost) and Lifetime Customer Value. These critical KPIs will help you determine your progress and whether you should invest more, reduce spending or try to test new tactics and learn. For more information reach out to us at www.randinc.cc or email email@example.com.