Our KPIs are better than yours. I believe that most of the time this statement is true (although there are the occasional times where I run across someone with some really kick-ass KPIs and strategies). I believe that our KPIs are better because this is an emphasis of how we do business for ourselves and for our clients. We take it so seriously we brought in a Customer Success Director to make sure we are tracking toward KPIs that indicate success.
What Are KPIs (In Marketing)?
KPIs, or key performance indicators, are measurable metrics that we use to demonstrate the effectiveness of your marketing campaigns and strategies. From a marketing perspective, we are most often talking about “leading” indicators (traffic or leads) that are ultimately attributed to a “lagging” indicator (sales).
In my role at emfluence, I and my team are responsible for putting together strategies and tactics that will ultimately impact the KPIs we define with clients when we kick off a campaign or project. Optimizations to these campaign cannot be effective if we don’t have an agreed upon set of metrics that are ultimately indicating our success or lack of success with a particular campaign.
So how do we set effective KPIs? It starts with SMART goals!
What Are SMART Goals?
You’ve likely heard this acronym before, but in case you haven’t here’s a quick rundown. SMART goals are:
- Specific: what is the specific thing we want to happen?
- Measurable: how will we identify that this thing has happened?
- Achievable: is this thing really attainable?
- Relevant: does the thing align with your where you want to be?
- Time-Bound: when will this goal be completed?
Understanding that we need SMART goals before we can actually define KPIs is a really big deal. We often start conversations and these goals are not defined. That’s ok, it’s harder than it seems. But we can help…and when we do help we can make sure we are all holding ourselves accountable to the same thing.
How to Define KPIs
Note: a goal is not the same thing as a KPI. Often in marketing circles we may use these things interchangeably, but they should not be thought of as two different ways to say the same thing. To bring this discussion around, the goal is the outcome (the lagging indicator) while KPIs are metrics that we use as indicators to determine whether we are on track to achieve that goal (leading indicators).
For example, let’s say your business made $1 million in revenue in 2018. For 2019, your goal is to increase revenue to $1.2 million in 2019. That math is pretty simple. The goal is to increase revenue by 20% year over year. Is that a SMART goal? Let’s see:
- Specific? Yep, this goal is specific. Achieve 20% YoY revenue growth.
- Measurable? Check. We can easily measure this goal.
- Achievable? We assume yes.
- Relevant? Yes again.
- Time-Bound? Sure. Year over Year.
Great, we have a Smart Goal! Now what KPIs can we use to make sure we are making progress toward that goal? This is where it takes a bit more critical thinking from the marketing team. We have to ask some probing question to get to KPIs that make sense:
- How many leads did we bring into the pipeline?
- How many of those leads were sales qualified?
- How many closed deals did we have last year?
- What was the average value of a closed deal?
There are likely other questions we could ask, but these will get us to some leading indicators that can drive further consideration. Let’s say that for this scenario, we collected 2,000 leads in 2018, 500 of those were sales qualified and you closed 200 of those SQLs into a paying customer. The average value of your service is $5,000 for the first year and $2,500 for each subsequent year. If you assume an 80% renewal rate, this means that you could anticipate 160 renewals in 2019, total $400,000 in revenue. To achieve $1.2 million in 2019 revenue, this means you would need to add $800,000 in new revenue (approximately 160 new clients).
So if we need 160 new clients added, and we believe we will maintain a 40% close rate on SQLs, this means we need to collect 400 SQLs. Working backwards with our math even further, we believe that a 25% conversion rate from lead to SQL is still reasonable. This means we will need to generate 1600 new leads in 2019 to achieve our goal of $1.2 million in revenue for the year.
Through this exercise, we identified several potential KPIs we can monitor to gauge performance on an ongoing basis.
- Leads generated
- Let’s also track lead conversion rate
- SQL conversion (from lead to sales qualified)
- Here, we’ll also track SQL conversion rate
- New contracts (from SQL to closed)
- Again, we’ll also track close rate
These are great KPIs, and something we can use to start drafting a marketing strategy that makes sense. You can ask additional questions from this point to determine which channels are best aligned to help achieve these goals. While this is a very simple example, hopefully it gives a little insight into how to define KPIs. For each goal, you will likely have 3-5 KPIs that will help you make sure you are on pace.
Examples of KPIs in Marketing
There are a lot of different KPIs that you may need to monitor from a marketing perspective depending on the overall goal of your strategy. You may have a heavy emphasis on building brand recognition, or driving leads in a new market, or a number of other goals. Below are a few common KPIs.
In an ideal world, you can track all/most of the below KPIs by channel/source in order to better align marketing strategy and tactics with actual results. This is the wonderful world of attribution…which is a discussion for another time.
Revenue & Profit Growth
These two KPIs are (with few exceptions) always on the list of KPIs for any business. We want to see revenue growth every year; and most likely we would also like to see an incremental profit growth. These are tracked separately, however, because there are plenty of factors that could differently impact these numbers. For example, hiring a new salesperson would likely result in an increase in revenue, however it may not necessarily translate into a growth in profit (at least not immediately).
This is the lagging indicator for a marketing department typically, unless you are working in a business that has direct sales attributed to marketing efforts (i.e., ecommerce). Tracking the number of leads we are able to feed into the sales engine is the biggest indicator that marketing is doing what it needs to do. If there is a good marketing/sales communication line, hopefully you can track sales qualified leads and conversions.
Conversion Rate (Lead/eCommerce)
Conversion rate is an important KPI to monitor as something to potentially work toward impacting your ongoing marketing efforts. If you can implement changes that positively impact the conversion rate, you can further amplify the results that you get.
With leads being a lagging factor for marketing, traffic (by channel) is a key leading indicator. For most of our clients, organic traffic is a top performer in driving qualified traffic that converts (which is why we love SEO so much). Understanding traffic volume (and conversion rate, for that matter) will lead to very specific identification for high value marketing efforts.
Impressions and/or Reach
Many marketing strategies have a layer of awareness and brand building. This is an important marketing strategy, but it can be difficult to measure in a highly data-driven way. Impressions and reach are probably the most common types of KPIs to look at for a campaign like this. You can aggregate these data points across multiple data sources to get a fairly high-level view of overall reach of your messages. For example, grab impressions from Google and Bing Search ads, programmatic display ads, Google and Bing Webmaster Tools, Facebook/Twitter/LinkedIn insights, etc. Pulling this together can give you a holistic view of your brand visibility/reach.
Over the years I have seen this land on a key KPI dashboard more often than I would think. From my perspective, this can be a very distracting KPI for marketing. When looking at bounce rate from a high level, it really doesn’t have much value. If you look at bounce rate more granularly, like potentially in a blog traffic view, it may be more impactful. For a blog, a high bounce rate is fairly typical, but it could be a good KPI to try to bring that number down through more effective cross-linking or something along those lines.
What Are The Right KPIs For You?
Rather than droning on further about KPIs that may or not be applicable to you, let’s wrap this up. Each business is different and therefore the answer to this question is different every single time. The first step is to make sure you have SMART goals. If you have those goals defined, we can go through those goals with you and ask questions that will ultimately help us get to KPIs that make sense for your business.
Once you get to a list of KPIs that are good indicators of success for your business, then we can get down to the business of building out a strategy to accomplish what you need to accomplish. Feel free to get in touch with us if you have questions or would like to set up some time to tal