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What are Key Performance Indicators? (KPIs)

Let’s turn our focus to identifying what factors will drive performance and thus deliver results for our strategy.

As mentioned in the introduction, this exercise is often overlooked in organizations. “Hurry up and get the website redesigned and launched” is what usually drives the digital marketing team. Being busy is not the same as being effective.

Let’s start with an understanding of what a Key Performance Indicator (KPI) is:

From an excellent blog post on Occam’s Razor by Google digital marketing evangelist Avinash Kaushik:

Definition: A key performance indicator (KPI) is a metric that helps you understand how you are doing against your objectives.

Pretty simple right?

We’ll dive into the specifics much more in depth when we get to the Measurement phase and go into web analytics. However, as it relates to strategy, KPI’s are what we plug in for the Measurable part of our SMART acronym, so it’s worth noting briefly here and giving a couple examples before we close out our strategy discussion.

For now, let’s take look at a high-level at our web consulting business. A couple KPIs might be:

• Conversion Rate – Looking at what percentage of visitors “convert” on our website. This might be something like filling out our contact form. Bonus points would be if they selected “custom app development” under the drop-down that says something like: what do you need help with? This would tell us we’re getting closer to attracting the right kind of sales lead in relation to the business objective. *Remember we said Custom App Development is the most profitable part of this business’s offerings.
• Visitor Loyalty – Here is where we would look at how often a visitor is coming back to our website over our specific time frame that we defined at the outset. The rate of which can vary based on industry or marketing pushes. For example, we might be driving traffic from our monthly email newsletter, social media, or organic search. Once we hook them in, the trick is to see if we can continue to get them to engage on an ongoing basis – monthly, quarterly, or even yearly. This is particularly helpful for measuring how we’re doing with the Spectators that we saw from the Social Technographics section. For a consulting business in the B2B realm, this is particularly important as most first-time visitors will not convert and it may take a longer time of repeat visitors to get them to either email or call. Knowing how often they check in is a huge clue on gauging interest and the quality of the experience we’re providing.
• Search – We would track our rankings in the Search Engine Results Pages (SERPs) for various keyword phrases over time, as well as that of our competitors. We could use a tool like Google Trends to see if “custom app development firms” is rising or falling. From ZMOT, we know this is the battleground for starting the conversation with customers. Having a broad scope of keywords around our business objective gives us the best shot of getting that 30% growth and aligns it with where the company is most profitable.

Again, we’ll be going into the specifics of how to plug all these tools into our marketing mix using a web analytics tool like Google Analytics. For now, focus on seeing how the KPIs relate back to our business objective.

Further reading: For great tips around KPIs, analytics, and all other web awesomeness – be sure to check out Occam’s Razor.

Example of an Effective Online Strategy

Up until now we’ve seen a variety of case studies. A simple consumer product that works with Moleskine, a shoe company with a slipping brand strategy, and we looked at an acronym checklist to make sure we set a smart strategy.

Consumer products are fairly straightforward marketing challenges.

Let’s explore setting a strategy for a service based company in the business to business (B2B) space.

Overview: Our company sells web design and custom app services. This company has particular expertise in the visual language and content creation for the legal industry. They need a strategy for the coming year to grow their business through digital marketing.

Here we go…

Specific: After reviewing the sales data we see the company has enjoyed 20% growth for the past three years. Given internal resources, they feel they can handle growth of about 30%. Interestingly, their custom app business is by far the most profitable and basic web design services the least profitable. Hint: Where should we focus our marketing muscle?

Achievable: We need our marketing efforts to drive an increase of roughly 10% more (20% seems to pretty consistent and thus guaranteed) in overall sales and we’d like to do this with the custom web app services. Growth in this profitable area has the potentially to dramatically alter the company’s bottom line. This seems fairly reasonable and we know upfront how much growth the company can support.

Measurable: Let’s say our research shows a lead to conversion rate from website traffic at around the industry standard of 2%. This is the main customer acquisition channel for the company through organic search, AdWords, and a bit of social media. In this case, let’s say site traffic growth and corresponding sales have been fairly close.

Results-focused: The trick here is we have to get quality traffic that is interested in custom web app development. So, we would want to be looking at ways to test (sales inquiries) and keyword data from the site analytics to see if we’re hitting the mark on a weekly basis (We’ll cover how to do this in the Measurement section). Our content creation strategy on the blog and social media would focus on this area with tips, best practices, and examples that show how custom web apps perform. We’ll use our POST framework to evaluate initiatives here based on a solid user persona and understanding of our target market’s pain points. (more on this in the next section of Key Performance Indicators).

Timebound: Here is where we break this goal down to specific intervals. We’d be looking at our total results over the course of the whole year but watching carefully in smaller chunks to course correct – say on a weekly basis at a minimum.

Key takeaway: Implicit in all these frameworks is asking the right question. Resist the common temptation to focus on the technology and instead spend time understanding the business problem. What needs to change to move the business forward? From great questions comes great answers. In this example, we discovered custom app development is the most profitable and gives us a much tighter bull’s eye to focus our online marketing efforts around.

Ah. Such a simple title. Such a complex problem. Such huge stakes at play for marketing and the company as a whole.

Now that we’ve seen what can happen when strategy is misaligned, let’s explore how to set a good strategy on the right course from the get go.

Another acronym framework can be useful here for evaluating goals and objectives – using SMART, which stands for:

A S.M.A.R.T. goal is defined as being: Specific, Measurable, Achievable, Results-focused, and Timebound.

This simple little acronym will help you stay on track when you sit down for creative brainstorms and defining goals for a digital marketing campaign or a business itself. Without being specific, you can’t measure anything. If it’s not achievable and results-focused it makes it tough to justify the investment and know if you’re getting anywhere. Finally, not putting a time limit down makes it easy to drag out an initiative.

Let’s say we’re tasked with a vague directive like “marketing needs to increase overall sales for the company”.

We would come back with the following questions for a smart digital strategy:

• Specific: “Are we talking increasing profitability or just overall sales? Internally, we would ask ourselves how we might do this using our POST framework. For example, we might say “We’ll increase sales and profitability by increasing site traffic to our most profitable product through a blend of social media, content creation, and search engine rankings.”
• Measurable: Next, we’d ask “By what percentage points?” We need to know what the mark is and that it can indeed be quantified. Know what you’ll be measuring and how you’ll do it before you commit. You might need to bump up website traffic by 300% over the year to drive 5% in sales. That’s measurable for sure (and tough to do). Something nebulous like “grow brand awareness in our market” is too vague to quantify.
• Achievable: This question is critical: “Is this goal realistic given our brand’s trajectory, resources, and time?” Make sure you review things like sales history, market trends, site traffic and your customer feedback to make sure the goal is possible. If the company has experienced year over year sales growth of 5% and suddenly the goal is 20% with no other change in the product mix or budget, it is likely that marketing is getting setup for a spectacular failure. Building a powerful brand takes time, money, and ingenuity – which eventually leads to better sales and/or margins. Yet, digital marketing for all its speed can’t work miracles.
• Results-focused: Perhaps the most important question: “How will we know we’re making progress?” Here is where you put down the small victories, in relation to the big goal. If the goal is for increasing sales by 5% over the whole year, you might break down site traffic by month and increasing it by X% through the ideas outlined above. Closely following conversions and sales on a weekly basis can be very helpful to tweak the marketing efforts versus waiting til the very end. Small corrections done on a regular basis are much easier than giant shifts.
• Timebound: Last question: “This goal for the fiscal year or calendar year?” Know how much time you have to achieve the objective. Some companies go by a different fiscal calendar versus a traditional calendar, so make sure you know how long you have to deliver the result.

The above framework is really just a simple checklist. But it ensures you have nailed all the key components for getting a successful strategy together.

Next up, let’s explore a B2B example on how to do this.

Amidst the clang of cheap plastic at the company party, we are a bit queasy and it’s not because of the microwave artichoke dip.

How would you handle this based on what we’ve learned to date about our shoe company?

If you whispered, “go back to the research” – you’re right.

We start by asking:

• Why is the customer no longer purchasing with such frequency?
• Do we have a sudden consumer shift in the marketplace? Did design miss the boat?
• Who is eating our lunch as a competitor?
• Are we failing to deliver a remarkable customer service experience?
• Is there a deeper reason customers are not recommend us to their friends and family?

Next, we get out of the building or at least on the phone. We seek answers by speaking with our best customers that are showing fatigue. We don’t argue with the feedback when speaking with customers. We simply approach it as an impartial scientist conducting a lab experiment.

Bear in mind, there could be a million variables on why this brand is grinding to halt. But for simplicity’s sake to better explain strategy, let’s say we uncover a couple alarming trends by researching and testing a significant sample pool.

Perhaps we find:

1. Competitors have come up with innovative ways to deliver value. They use online tools to preview shoes and make it easy to share this on social networks. And they are offering free shipping both ways with an optional video chat with a trained shoe stylist 24/7. Okay, that’s all technology enabled experiences and we might be able to match it, if our research shows the consumer finds value in these offerings.
2. Our ongoing digital marketing campaigns show lack of engagement. In short, it looks like our content has lost its zest and is perceived as a bit boring and irrelevant. Hey, the truth hurts sometimes right?
3. This year’s designs were edgy and fell flat. Further investigation by segmenting sales figures out by these styles reveals we are down almost 50% compared to our traditional lines. Uh oh.

We gather up all our data and call a meeting with management and the company founders because we need to course-correct our strategy. And fast.

Using our POST framework, we already started with People now on to OST.

Objectives: We must change the existing business reality and seek to do the following:

1. Somehow get back to customers recommending us to 2 or 3 of their friends again and keep our acquisition costs under control. The next six months we must continue to research and understand how to get word of mouth moving again in this direction. Do we have problems with customer service? What is awry in the entire customer experience? We’ll formulate a plan and set about collecting a decent sample set.
2. The digital marketing experience must be more valuable and worthy of customers’ time. We would like to see an increase in social sharing of 20% across Facebook, Twitter, Pinterest, and Tumblr.
3. Our designs must resonate better with customers. Building buzz and hype is one thing but getting closer to the customer and delivering product that they want will help us drop our purchase time again to 10 weeks and increase the Customer’s Lifetime Value (CLV).

Strategy: How can we change our relationship with our customers to achieve the above objectives? Remember, we are still just trying to get back to where we were before we started to drift, so it can be helpful at this stage to reexamine the vision on where the brand should go as well. Are we looking to become the shoe company? Or are we content with gearing up for a buy-out? Or do we want to become a legacy brand?

Technology: We hinted at it in #2 but here is where we define specifically what technology we will be using and also what tools embedded in them will let us measure engagement. For example, we can use Facebook Insights and compare how often different types of content gets shared. We might look at “tell a friend” tools for email marketing to help us achieve objective #1 and explore different incentives. Finally, we can set up a wiki to help us get closer to understanding what our customers want in our designs. We tap their expertise and feedback to make sure the next season’s look hits the mark.

Let’s dive into a real example and see how this all applies by looking at what happens when things go wrong and strategy is misaligned.

Back to our online shoe company…

Case study background:
Let’s say, we are carefully tracking results and we see that across all our ideal customers:

• They are no longer purchasing shoes every ten weeks or so after two years. Our data shows this drifting closer to 12 – 14 weeks.
• This means consumers are taking an additional 20% – 40% longer to make another purchase.
• Referrals have dipped a bit and we are able to roughly determine we are only getting one new customer from word of mouth recommendations, where we used to average between two and three.

But are sales show strong growth – the brand is growing and the total revenue generated is showing a nice linear trend up and to the right over time.

“Nice job marketing! Keep up the good work.” (cue  champagne bottles and cheap appetizers at the quarterly meeting)

Should we pat ourselves on the back? Cheerfully grin and say, “No problem boss – we’ll keep it up!”

Nope. Not if we want to have a job in a few months.

What just happened – the company is growing right? Sales are up!

Unfortunately, our brand is starting to show the early signs of grinding to a halt. Our acquisition costs are rising and the CLV (Customer Lifetime Value) is slipping.

Small Shifts If Left Unattended…
This ever so slight gradual shift in buying behaviour could have big implications if ignored and not fully investigated. While not immediately apparent, the company will have problems. The metrics mentioned above are usually monitored by marketing (hopefully) but it is what happens next that makes or breaks marketing’s role and ultimately the brand’s place in the marketplace.

Note: Granted, the company could shift its strategy in relation to investor goals or founders wanting to exit (sell the business off). This usually involves focus on growing through pure acquisition and really ramping up the brand to show impressive sales growth for courting a potential buyer. This is expensive to do but often times the case in preparation for a successful exit. In short, it’s a near-sighted strategy with long-term implications as it can sacrifice the customer experience in exchange for impressive (but misleading) sales figures and the brand usually gets tarnished in the process.

Remember, we like to focus on something measurable like profitability and tying strategy back to a quantifiable metric we can point to.

How To Evaluate Social Media Tools

The constant shifting landscape of digital marketing means that a new shiny object is popping up on the scene every few months. Innovators and Early Adopters in the space tout it as the next Facebook or Twitter and if you believe the marketing press, you simply must be on this new platform to ensure your brand’s success.

Don’t buy it.

A common joke today in cynical marketing circles goes something like this:

Question: How do you spot a social media expert?
Answer: Anybody with an Internet connection and a keyboard.

Instead, question everything. Go back to your user persona and the data you’ve collected in the research exercises:

• Demographics
• Psychographics
• Interviews (current and potential users or customers)
• Social Technographics
• Search trends, results and keywords
• Social media mentions

Using this quantitative and qualitative data cross-reference against this new tool. Does it meet the business objectives? Does it fit it with where your brand and or company is trying to go?

And think a bit about what where this new technology itself is in relation to Rogers’ Technology Adoption Life Cycle. Do you feel this technology is still in the Innovator stage? Is your target market Innovators? How do you know? Does the tiny sliver this represents of the market make it worth the expense of adding this tool to the marketing mix?

Let’s start by examining a simple framework originally put forth by Forrester researchers in the book Groundswell called POST (People, Objectives, Strategy, Tools).

Using POST to evaluate social and digital technology.

From Groundswell (p. 67-69)

• People. What are your customers ready for? The Social Technographics Profile is designed to answer this question. What’s important is to assess how your customers will engage, based on what they’re already doing. Ignoring this and making guesses about your customers might work, but you might also build a whole social networking strategy only to find your customers are more likely to write review than join social networks.
• Objectives. What are your goals? Are you more interested in talking with the groundswell for marketing or in generating sales by energizing your best customers? The clarity of your objectives will make or break your strategy.
• Strategy. How do you want your relationships with your customers to change? Do you want customers to help carry messages to others in your market? Become more engaged with your company? Answering this question you can plan for desired changes up front and also figure out how to measure them once the strategy is under way. You’ll also need to prepare and get buy-in from people within your company who may be threatened by changes in these customer relationships.
• Technology. What applications should you build? After having decided on the first three, you can move on to pick appropriate technologies (blogs, wikis, social networks, etc.).

The POST framework outlined by Forrester syncs perfectly in line with our methodology to date for becoming effective digital marketers.

1. We study our customer like a science experiment, continually asking “why so?”.
2. Next, we work with management or company founders to identify where the business needs to go and how to maintain or increase profitability.
3. The strategy flows out of these discussions and goals – clarity is a must here.
4. Finally, we apply all these filters to the technology tools available and only pick ones that line up and can deliver results.

After all, our careers depend on delivering in this area and correcting the black hole perception of marketing expenses.