Focus on the Bottom Line – Rules of Thumb for Establishing Marketing KPIs

December 12, 2018

Marketing metrics can be helpful, but the holy grail of marketing measurement is linkage to the business P&L


As we approach the end of 2018, it’s once again time for New Year’s resolutions and goal setting.  This time of the year, we often hear from our clients on their objectives for the coming months and year and are asked how Analytic Partners can help support their vision.


Defining KPIs for marketing success appears to be one of the most popular topics identified as we head into 2019.  In the last few weeks, I have been approached by multiple clients asking similar questions – “what should our marketing KPIs be moving forward?”  “Which KPIs should we track on an ongoing basis?”  “What are the best-in-class metrics we should be evaluating?”


There are three key rules of thumb to consider when establishing marketing KPIs:


Link marketing spend to your P&L using incremental sales or new customer acquisition metrics


To properly assess the impact of any marketing campaign, we must understand the value it brought to the business above and beyond what would have happened at any rate, without spending those marketing dollars.  Every business has a baseline – just because a consumer was exposed to an ad and ultimately converted, it does not necessarily imply that the investment was worthwhile or was the cause of the conversion.


There is no question that marketing is complex and not every execution is intended to drive an immediate impact.  Different marketing vehicles often serve to play different roles in the mix.  But if the intent is not to drive sales, we need to ask ourselves – when will it, and at what point will this investment be worth it for our bottom line?


Less is more with intermediary KPIs, like Awareness and Intent – identify drivers of KPIs that are most representative of business impact, and track them as leading indicators


A client recently shared with me that their organization was planning to adopt 8-10 metrics as marketing performance KPIs.  With 10 KPIs, at least one is bound to tell whatever story a marketer is looking to tell to justify a decision.  To be accountable for making the right business decisions, organizations must focus on fewer KPIs.


Once a short-list of KPIs are established, the savviest companies strive to understand two things: (1) the impact of marketing investment on such intermediary KPIs; and (2) the linkage of the intermediary KPI with sales, new customer acquisitions, and ultimately profit for the business.  Once both items are established, these intermediary KPIs, which are typically made available relatively quickly, can become leading indicators for business performance.


Avoid using marketing metrics as performance indicators - they make for great sound bites, but can be misleading


For a social media campaign, marketers have access to metrics such as impressions, views, shares, engaged users, click-through rate, video completions, retweets, likes, and many more.  Preliminary findings such as, “Our campaign was a huge success!  We were able to reach 2 million impressions in the last 2 weeks!” often abound. This type of statement, however, can be both confusing and, potentially, misleading.  On one hand, “2 million impressions” is a great sound bite.  But savvy marketers should ask, “What was the actual impact of the 2 million impressions on our business?”  While the campaign might have driven some sales, were those sales truly incremental to the business, or would they have happened despite the execution of the campaign (per rule of thumb #1)?  Further, once costs have been factored in, was this a better investment than if we had used those same dollars elsewhere?


Add these rules of thumb to your list of organizational New Year’s resolutions and set your business up for a prosperous 2019.  Happy holidays and best of luck with your 2019 KPI strategy!


Michael Leichman is a Senior Director at Analytic Partners