One of the most misused corporate management inventions ever, KPIs are hurting businesses in many ways. They paralyze cooperation procedures and plant the seeds of mistrust. They are easy to manipulate and hardly ever represent the real interests of either party in a transaction. More importantly, they are often very arbitrary, hardly ever based on data, and chasing them leads to a colossal waste of resources. Therefore, they should go the way of “balanced scorecard” and end up on the scrapheap of consulting.
It’s easy to see why KPIs were invented
Key Performance Indicators make sense from the point of the manager. On first glance, they offer a simplification, a measure of performance, a “handle on things”. In marketing, however, and in particular in digital marketing, they are complete and utter nonsense. They distract from creating what counts. i.e. engaging, original content and tangible results, and they destroy the flexibility advantage digital media offer.
Let me give you an example. Your marketing team or consulting agency is in charge of social media strategy. Your KPI is “number of inquiries received through our website”. You have had this KPI for years because this is where the sales team gets their leads from. An entire marketing team is now busy trying to move prospects from social media to your website just to satisfy your KPI.
While you were busy chasing a meaningless measure, you missed the transition away from website traffic to social media. You missed the opportunity to put the content on new platforms and engage with leads on those platforms. You missed the opportunity to transfer your salespeople into digital media savvy sales-marketers. All your potential customers are now on social media and expect their questions answered there. Perhaps your website inquiry form is so outdated or cumbersome that people don’t like to use it. Yet hampered by your hallowed KPI, you keep staring at your CRM inbox for those pesky “inquiries” from your website. A website fewer and fewer people visit.
By instituting a meaningless KPI, you have kept Sales from evolving and made Marketing fail. Everyone is unhappy with the outcome.
Even the best KPIs are dubious
Digital marketing experts work with a plethora of KPIs. Some outright fantastical like ROI – return on investment, virtually impossible to quantify in a real-life business setting, or CLV – customer lifetime value, a highly questionable and mostly made-up number.
Others are more tangible, like YOY or year-on-year growth, CR or conversion rate or CAR cart abandonment rate, but while they can be used to make incremental improvements, they should not be used to guide an overall strategic direction for the marketing team. Real insights come from customer interviews, market studies, A/B testing etc., not from the KPI analysis.
KPIs like VSI – visitor satisfaction index or CSI – customer satisfaction index offer great insights but again should not be used to constrain the team’s marketing efforts or evaluate employees. There are simply too many factors outside the control of marketing influencing the KPI values.
KPIs are the surest way to miss emerging trends and opportunities for change
Marketing managers often insist on KPIs like “number of likes or shares after x months”. There’s no extra budget to create engaging content, no flexibility to react to new trends, just a blind focus on the single KPI.
Because of contract terms or internal evaluation procedures, marketers have to meet that KPI, so they invariably find ways to do so. Unscrupulous marketers always will. You will see the contract terms fulfilled. Managers will be happy: KPI met. Check. Contract terms fulfilled. Check. Shame that nobody bought your product.
You see where I am going with this.
The simplification of KPIs means that they can either be manipulated without offering a real benefit to your bottom line, or they become the holy grail that makes you miss the boat altogether. Like the balanced scorecard of yore, they don’t really solve the real problems of motivation and meaning. In almost all situations connected to marketing activities, KPIs are therefore misplaced.
Read also: 6 Fairy Tales About Digital Marketing
So what do we use instead of KPIs?
One way to get rid of KPIs is to replace them with smart benchmarking. I always try to encourage my team to beat a certain competitor or achieve a benchmark of a similar brand in a similar market. Benchmark doesn’t mean a simplistic number, but a whole subset of criteria, from overall brand image to engagements to actual sales numbers perhaps.
Benchmarking yourself against competitors also means you have to watch what they are doing on a day-to-day basis. It allows you to learn about your own and the competition’s offering, sometimes so much that you can give feedback to R&D and tweak the product, making marketing departments even more valuable to the enterprise.
Benchmarking allows you to keep a focus on emerging trends and new developments, which means you are actually learning as you go, and become inspired. It also creates a competitive atmosphere inside the marketing team which prompts managers to come up with more creative concepts than any KPI ever will.
With your eyes on the competition, you learn about what type of content and strategies get the most traction, what gaps you have in your own marketing concepts, where your competitors’ strength and weaknesses lie, and how to spot the opportunities or threats the broader market offers.
Of course, benchmarking is not for everyone and has its drawbacks. Most companies and organizations don’t have direct competitors they can compare themselves to 1:1. I have covered the broader question of how to make better marketing decisions, with a list of possible substitutes for KPIs, in this article:
Read also: How to Make Better Marketing Decisions
Recouping investment as motivation
Removing KPIs from the equation allows for experimentation and supports the creative process. It creates valuable feedback loops For a new client last year we replaced KPIs with a simple measure of trying to sales that allowed them to recoup their investment in marketing within 8 months. That really put a fire under our marketing team. I’ve never seen them more engaged in a project. Of course, agencies will only do this with clients and products they believe in. Which are the best clients to have in the first place.
So the next time you try to motivate your team, try an integrated benchmarking approach or give them a stake in the overall success. Leave the deadbeat KPIs to the losers.