Every business should have a set of KPI’s, Key Performing Indicators. KPI’s differ from metrics in that they demonstrate how a company is achieving key business objectives. The most obvious KPI is revenue. Increasing revenue is one of the top KPI’s for most companies. KPI’s are critical to the success of a company. But do your KPI’s Tell The Whole Story?
As a quick reminder, KPI’s are statistics of metrics, but not all metrics are KPI’s. KPI’s have many benefits. They inform a company on its progress and influence business decisions. KPI’s become company objectives, fostering teamwork and comradery. Working towards objectives can lead to personal and corporate growth. And KPI’s can be used to measure many facets of a business, not just advertising.
To be of value a KPI must be an objective that can be worked towards. Increasing revenue can be influenced by people in customer service as well as in sales. Great delivery service from a retailer will positively influence reviews, which will inspire more store visits. A good KPI is critical to defining success and can focus an organization on the correct priorities.
A useful KPI should be simple in nature. It is easy to communicate and almost intuitive. They must provide actionable information and be a reliable measure of success criteria. Sometimes, finding a balance between “simple” and “actionable” can be a challenge. Whether being developed internally or with an advertising agency, metrics must bridge that gap. Still, they must be reviewed for underlying influences.
Not Telling The Story
As an example, we work with an auto dealership who started to experience a decline is store visits. At the same time, the manufacturer had introduced updated versions of its most popular models. On the surface, this indicated a failure in advertising. However, the manufacturer was no longer supporting leases on these new models, they were now $50-$75 a month more expensive than comparable competitors. How did we learn that this was an issue? Long-time customers told us they were defecting due to the huge increase in lease cost. We changed our marketing messages to focus on sales, and the dealership re-focused their staff to sell cars, not lease them. This helped, but some people just prefer to lease. After a year the manufacturer went back to supporting leases, pricing with our competitors leveled out and traffic returned stronger than ever. In other words, the KPI “store traffic” did not tell the whole story.
In another instance a business introduced a product that they described as “innovative”, thinking their engineering sophistication was a key selling point. Even though there are mountains of social media data to mine, reviewing the social sentiment proved enlightening. After sifting through over a thousand comments on the product there was not a single reference to the “innovation” of the product. Instead, dozens of consumers talked about the “fun” and “excitement” of the product. No statistic was going to provide that information.
How To Use KPI’s
As valuable as KPI’s are there is still a need to dig for deeper insights. Therein lies the dichotomy of KPI’s, they are supposed to be simple and tell a story. It doesn’t always happen. That does not mean your business should not have KPI’s. If you are working with an advertising agency, consult with them on your metrics, so that your objectives are measured, and everyone is in agreement. Compile the data points that most clearly define the road to success. And then examine those data points for surface meaning and underlying factors that influence them. With that process, KPI’s can tell the whole story.