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5 Steps to Develop the Right Marketing KPIs

5 Steps to Develop the Right Marketing KPIs

When it comes time to establish annual plans, marketers often struggle with how to choose the most appropriate KPIs.

All too often, they may even default to selecting KPIs derived from available metrics or survey data they already have access to, perhaps underperforming on.

Instead, they should be defining the most appropriate KPIs to effectively measure and track performance to the larger corporate or strategic goal…and then determine the data point to track the KPI.

If a systematic process for setting KPIs does not exist upfront, it’s highly likely you will not only fail to achieve the KPI, but also fail to meaningfully impact (or even align with) the organizational goal.

Selecting the wrong KPIs creates distraction and causes your team to focus on the wrong efforts.

Here are five steps to help you establish the right KPIs, use them well, and ultimately help you drive behaviors and activities to increase your chances of achieving desired results.

  1. Start with the organizational or business goal.

    It may seem counterintuitive but establishing the right KPIs does not start with selecting your KPIs.

    In fact, your starting point should always be to clearly articulate your organizational or business goal your departmental KPIs need to track.

    Optimally it should be a SMART goal. Meaning, it should be Specific (clearly and quantifiably defined, and simple to understand), Measurable (able to find out the progress made toward the goal, at any point throughout the timeline), Attainable (ambitious, but possible to achieve in the allotted time), Relevant (aligned with the strategic direction of the organization), and Time-bound (have a defined deadline).

Example: A retail company wants to increase its online sales by 20% over the next year. Their SMART goal could be to “Increase online sales from $5 million to $6 million by December 31, 2024.”

A man looking at sticky notes on a wall.

  1. Define your capabilities and realities.

    Examine any existing KPIs. Critically evaluate whether they truly measure the performance towards the organizational or business goal.

    Keep the ones that do and replace the ones that don’t. Optimally, they should be replaced with new KPIs that track progress towards the business goal…ones that your department is realistically capable of controlling and achieving.

Example: Using the same retail company that wants to increase their online sales from $5 million to $6 million by December 31, 2024. The marketing department looks into their current KPIs from 2023 and prior years and finds that they have been primarily measuring Website Traffic.

While web traffic is, indeed, an indicator, it does not directly measure sales conversions (which is the ultimate business goal). To address this, they modify their KPI for 2024 to focus on measuring Conversion Rate, which is a more direct indicator of sales performance.

  1. Determine what success looks like.

    Armed with a clearly defined SMART business goal, now is the time to think about the various paths to get there. Some paths will be within the capabilities of your department, some may not (see step 2); focus only on the paths your department can realistically impact.

    Then define the two to three activities your department needs to consistently undertake to deliver the results needed. These are your KPIs.

    If available metrics or survey data doesn’t exist to track these KPIs, Finance or other departments may be able to develop models to help you.

Example: For the retail company to reach their online sales goal of $6 million by the end of 2024, Marketing identifies three main paths: a) optimize website for conversions, b) run targeted ad campaigns, and c) expand their product range to cater to a broader online audience.

The Marketing department then selects KPIs such as Website Conversion Rate, Click-Through Rate for Ads, and Average Order Value, all of which are within the capabilities of their department.

A laptop with a graph on the screen.

  1. Ensure data is consistently available.

    KPIs are established to be measured; consistently measured. As such, data needs to be relatively easy to collect on an ongoing basis, optimally aligned with established milestone check-in points.
    If your KPI data is only available once per year (like with annual brand trackers), you won’t be able to determine if you are moving in the right direction towards achieving the business goal until it is too late to do any course correction.

Example: An automotive company that aims to reduce production deficits by 15% over the course of the year might have a KPI that looks at monthly defect rates. If they only collect this data once a year, they would be blind to fluctuations and patterns throughout the year.

Instead, they ensure that there is a system in place to log and measure defects daily, providing the ability to conduct a monthly review.

  1. Create buy-in and visibility.

    If people feel like they are part of the solution, they are naturally inclined to help achieve the goal.

    While KPI development need not be a decision by committee, team members do need to understand how their individual performance contributes to achieving the established KPI, and they need to be able to consistently see how the department is tracking to the goal.

    This could be achieved by sharing KPI performance during established milestone meetings throughout the year or displaying KPI performance where team contributors can see KPI movement to goal.

    This should both motivate team contributors, and identify any vulnerabilities, so you can take action quickly, and ultimately speed up progress to goal.

Example: A software development company aims to reduce software bugs by 25% before the next product launch.

To create buy-in, they establish a live dashboard and prominently display it in the office, showing the current number of reported bugs as measured against the target.

As team members address and fix these bugs, the numbers decrease, fostering a sense of accomplishment and shared achievement towards the goal.

Peter Drucker is often quoted as saying “You can’t manage what you can’t measure,” which is the fundamental purpose of establishing KPIs that help measure progress towards your organizational or business goal.

It is also important (and hopefully reassuring) to remember, your department does not operate in a silo within the organization, and neither do your KPIs.

Optimally, your departmental KPIs should work synergistically with the KPIs of other departments to create a cascade of progress to deliver the company’s promise to its customers or members.

One final example here, to underscore how various departmental KPIs can work in harmony to help achieve the larger organizational goal, consider a hotel that aims to increase guest satisfaction by 10% over the next year.

The housekeeping department might have a KPI for Room Cleanliness Ratings, while the front desk might have Check-In Experience Ratings as their KPI, and the restaurant team might look at Food Satisfaction Scores. 

A bed in a hotel room with a view of the city.

The KPI for each department contributes to the overall organizational goal of the hotel and is specific to what their department has control over. But the synergy between departments means that if one department underperforms, it could affect the overall guest satisfaction, emphasizing the importance of inter-departmental collaboration.

Importantly, all of these measures (room cleanliness ratings, check-in experience ratings, and food satisfaction scores) need to be available on an ongoing and easy to access basis…not in a survey published to the departments once a year or even semi-annually.

As with most everything within an organization, it’s a team effort. Take comfort in the fact that you (and your department) are not in it alone.

Like what you read? Contact us to see how we may be able to help you meet your marketing goals.

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