The Internet of Things will collect and transmit unprecedented amounts of data. This poses a big problem for marketers, who can end up down a rabbit hole of fruitless information. Now, more than ever, marketers need to be measuring the right things. However, too many executives rely on metrics that look good in a report, but in reality don’t affect the organization’s goals.
Metrics, or key performance indicators (KPIs), should be set upfront, so that the marketing team knows what goals they are striving to reach. There are three cardinal rules in choosing the right metrics for measuring marketing success—and they apply to all organizations, regardless of industry, size, or maturity:
- Metrics should be easy to understand and use. The variables you’re measuring need to make sense to the people collecting the data, as well as to those using them to make decisions. If metrics are too complicated or convoluted, they probably won’t be that useful. Similarly, if they vary too much across departments (one team measures net ads, while another measures gross ads, for example), it can even drive inconsistent behavior.
- Metrics should be easily replicated. Marketers should look at data that’s available on a regular basis, so that comparable information can be reviewed from one period to the next. For example, customer purchase behavior is something you’d want to track each month. This sounds simple, but it is often the piece that is hardest to implement, especially in organizations with multiple data sources. In some large companies, point-of-sales data is not fully integrated with CRM and marketing automation systems, or even with customer support databases. So the data can be inconsistent from month to month.
- Metrics should provide useful, actionable information that impacts the business. Seeing that one of your metrics has gone up or down by 2.3 points tells you something has changed. However, what’s more important is seeing how that change is connected to specific actions and behaviors among employees and customers. For example, customers who are more highly engaged in an online forum or community are more likely to not just purchase a product, but also to evangelize it and to continue to engage with the company. This kind of background data on the customer is therefore a useful metric that directly impacts the business.
It’s not that marketers don’t want to measure the right things. With a wide variety of advanced, easy-to-implement analytics, it’s easy to be led off track and fall prey to a few pitfalls. The foremost one is measuring what’s easy to track. Just because a lot of web and social media behavior is trackable doesn’t mean you should track it. Much of this data (e.g., clicks on a web link) is too granular to be used for higher-level decisions. The same principle applies to copying what others are measuring: a competitor measuring X doesn’t necessarily make it a good reason for you to measure X too. For some organizations, a change in the average order size may mean something significant about the health of the business. For others, though, it’s not the size of the purchase but how frequently customers buy that is more meaningful. It all depends on the larger business goals you’re trying to reach.
Marketers also often feel pressure to measure too many things at once, which makes it difficult to determine where to focus. Instead of wasting time gathering “number of” metrics (number of Twitter followers, number of clicks, number of Facebook likes), start looking at the big picture. This means tying marketing campaigns and activities to key organizational goals, like increasing revenue through customer acquisition or growth in wallet share of existing customers. A new follower or like won’t tell you much about people’s purchase behavior, but their downloading a video or requesting a free trial might. These are the metrics you want to be paying more attention to in order to assess whether marketing efforts are moving the business in the right direction.
Understanding which customers are most profitable will also help to focus targeted marketing efforts. The more clearly marketers can identify customer personas and journeys, the easier it will be to track the effectiveness of their targeting. The right metrics, such as calculating the potential lifetime value of various customers, can help you differentiate who is most likely to be profitable over the long term.
Focusing on value-based metrics—those based on the organization’s defining values and purpose—can also help you measure the right things. For example, Commune Hotels & Resorts’ purpose (“We are dedicated to creating transformational experiences that inspire the human spirit.”) drives its marketing and communication efforts. Commune identified ten core values that it measures across interactions with customers, vendors, and real estate partners. The company monitors its progress by looking at different scores, rankings, and reviews to assess how effective they are in communicating these values —and how people respond to them.
While the responsibility for developing effective marketing metrics belongs to the CMO and marketing team, it’s really up to senior management to challenge marketers on answers that don’t make sense, or worse, are tied to the wrong questions. Don’t just ask: How are we doing? Ask: why is it important that we track this? What do we learn from this metric? What else should we be looking at?
Photo courtesy of: Harvard Business Review
Originally published on: Harvard Business Review
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