Tape Measures and Marketing Measures (Part II)
By Richard Dannenberg
When my oldest daughter was in the second grade, Beautiful Wife and I were puzzled at the papers she brought home each day. We saw lists of spelling words, yet misspellings of the same words on her papers were never noted or corrected.
We scheduled a conference and met with her young teacher, fresh out of an education program at a local university. She did most of the talking and every second word was an acronym or a term colloquial only to those in the education realm.
After letting her ramble for a few paragraphs, Beautiful Wife stopped the conversation and asked for a translation into English. The poor young teacher stammered and stuttered for a sentence or two, then lapsed back into “eduspeak.” She was unable to translate and we both left scratching our heads.
At the time, it was unclear whether the schoolteacher had a firm grasp on her own jargon. Beautiful Wife contended that she did, but was just unable to communicate in a way that was understandable by others. I wasn’t so sure. Certainly the acronyms and eduspeak sounded as if they had meaning, but I couldn’t detect a pattern in the way she constructed her sentences. There were lots of words, but she never seemed to reach any conclusions or determinations.
When marketers talk about key performance indicators (KPIs), we have to be careful that we don’t fall into the same pattern. There are plenty of acronyms and ratios to consider. It’s not that there is any lack of opportunities for measurement, but rather that the measurements must be meaningful.
Our last post made an analogy between marketing metrics and the most important tool in every carpenter’s kit, the 25-foot tape measure. The point was that while measurement is equally important for carpenters and marketers, the units of measurement aren’t very well established for marketers, and the tools can be more difficult to use that a trusty yellow Stanley tape measure.
Choosing the best measures and executing them can be difficult, especially for small businesses. Because many smaller printing businesses don’t have sophisticated marketing automation or CRM platforms, relating marketing data directly to sales data can be problematic. Frequently, the best we can do is compare trends. Even if we can’t directly correlate the data to desired outcomes, we can frequently make an educated guess as to the relationships.
There’s really nothing wrong with this kind of conjectural measurement as long as we’re honest about the limitations of the results. Today’s post will look deeper into the question of KPIs, and we’ll talk about some possibilities for measurement that can produce meaningful information for even the smallest companies.
Business KPIs and Marketing KPIs
Because it’s easier, let’s approach the problem backward. We’ll look at the outcomes first, because they’re easy to determine. The obvious outcomes that we want to measure are the big goals that every business has in common. We’ll call these business KPIs. For instance:
•increasing profits, and
•new product growth.
As we dig into this, opportunities to define multiple KPIs in all of these areas become obvious. For instance, if we want to look at customer growth, we might choose new accounts/month as a KPI. If we want to get more sophisticated, we might measure net new accounts/month and subtract lost accounts from the new account additions. A broad measure of the gross profit margin for the company is certainly a KPI, but it may also make sense to look at departmental margins or even margins for a specific product line, especially if it is in the introduction phase of the product life cycle. Here are a few more specific ideas for printing and mailing companies:
•revenue/order (average invoice dollars),
•change in value/profitability of repeat orders, and
•new order profitability.
These kinds of business KPIs are useful because they provide a picture of the general direction in which the company is moving. But marketers want to try to understand the causes of the movement. This requires a different set of measurements—we’ll call them marketing KPIs. We’d like to know which marketing efforts are driving growth and which ones are wasting time, effort and money. If we can link marketing KPIs to business KPIs, we can do more of what’s working and less of what’s not. We may also be able to project some results. If Marketing Activity A consistently leads to Business Result B, then doing more A should produce more B, right?
What marketing activities might be worth measuring? Here’s another completely inexhaustive list:
•process through (a defined) sales and marketing pipeline, and
•repeat customer or prospect interaction.
Most businesses have a system in place that can generate the outcome information needed to measure business KPIs. At small printing companies, it might be a POS system like Printsmith or accounting software like Quickbooks. The marketing data can be more difficult to collect. Some data can come directly from the website. For example, goals can be set up in Google Analytics to track the number of landing page conversions and Google will provide some quantitative insight on where the referrals to the page came from (e.g. social channel, email, etc.). E-mail opens and clicks-through can be a data source.
If you can afford a marketing automation platform, it’s easier to obtain this kind of information. Most of these systems also allow the definition of a marketing/sales pipeline and can score leads and interaction at various points in the process. CRMs are more labor intensive because they require input from human beings who track individual interactions with prospects and customers. Adding a lead source field to your CRM is a good idea, and it may also be worthwhile to track checkpoints for information requests, multiple contacts and certainly for first or repeat transactions.
In a small business environment, collection and analysis of some of this data might simply take too much time and effort. It’s important to select at least a couple of marketing KPIs that can be measured and (either directly or conjecturally) correlated with the business KPIs. Again, here are a few possibilities for printing and mailing companies:
•number of leads/lead source,
•landing page conversions/specific product or service revenue,
•lead scores (i.e. stage of pipeline)/new order revenue,
•new leads generated/new customer transactions, and
•repeat interactions (e.g. email opens)/repeat business (or new accounts).
Wrapping It Up (With No Jargon)
A lot of this really boils down to just counting stuff and relating the numbers, and maybe that’s all that’s needed to explain the whole KPI concept in a very simple way. With KPIs, marketers are looking for cause and effect—meaningful relationships that will tell them what’s working. That’s a basic explanation that makes sense, without any jargon or acronyms. What do you think? What’s your company’s approach to KPIs and what specific numbers do you look at each month?