Measuring Marketing plays a role that goes beyond accountability. Effective marketing measurement initiatives enable organizations to use marketing metrics to guide scenario modeling, planning, and investments. A key part of this initiative is the establishment of key performance indicators (KPIs).
KPIs are a specific type of metric. While all marketing metrics are meant to help marketers evaluate their performance, KPIs provide a leading insight into future marketing impact on business outcomes and provide insights on how to improve performance.
What should you look for in a KPI? You should select and define a KPI to help you understand market factors that can influence or change the business outcomes you want to achieve.
These four steps can help you find the best marketing KPIs.
1. Determine how your organization will measure its success. This information is crucial for determining the business outcomes of your organization and is the basis for choosing a KPI.
2. After identifying the business outcomes you want to achieve, define the metrics that will be used to measure your success. For example, for marketers, these metrics are usually related to market share gains, customer value improvements, etc.
3. List the KPIs marketing could use to assess whether an investment would have a positive effect on desired business outcomes.
4. What should you look for when monitoring your KPIs? If you want to establish benchmarks and norms, look at the changes in your KPIs. When tracked over time, this information can be used as a gauge.
How many marketing KPIs are needed? Marketers often ask this question. The variety and number of business metrics and outcomes determine the number of KPIs. The real question is: “What performance metrics will be used as a sign of future performance?”
Does your analysis, for example, support using share of preference to determine sales and market share? In this case, marketing investments that increase preference are expected to increase market share. The opposite is also important. A decline in preference could signal that market share gains (or stability) are at risk.
The data from KPIs can be used to create predictive and scenario models, which are crucial for resource allocation and business planning. If you notice a change in customer behavior, it may signal a shift in the market. This allows the organization to prepare for the change by adjusting product, pricing, channel, and segmentation strategies.