Choosing Appropriate Key Performance Indicators Defining How You Measure to Deliver Better

In today’s challenging business climate, any positive results that can be gained are encouraging, but it is often difficult to accurately measure success. Marketers face a bewildering array of potential success metrics, the defi nition of which is not always clear, let alone their impact on overall results. Because of the complexity often involved in assessing the true success of a campaign, marketers tend to look for answers where the looking is good, rather than digging deeper. Most of us have probably been guilty of this at some time. It even has a name, the Streetlight Effect.

An old joke illustrates the root of the name. One night a policeman finds a drunk crawling around on his hands and knees under a streetlight. The drunk tells the officer he’s looking for his wallet. When the officer asks if he’s sure this is where he dropped his wallet, the man replies that he thinks he actually dropped it across the street. “Then why are you looking over here?”, the officer asks. “Because the light’s better here,” explains the drunk.

When we as marketers are trying to evaluate success, we need to make sure we’re looking in the right place, and not acting like the drunk in the joke, only looking where it is easy to see. Whether you’re a direct or a brand advertiser, it’s critical to understand which metrics provide an accurate and balanced measure of performance.

It’s common for many advertisers to solely focus on how much it costs to acquire a customer (CPA) in aggregate and base their optimization decisions on that metric. But there are several shortcomings with aggregate performance reporting and metrics; they don’t identify why you’ve reached the CPA, they don’t properly assess lifetime value, and they don’t determine which publishers, placements and/or lists are performing well and which are not.

It Starts with KPIs

A key performance indicator (KPI) is a measure of performance specially designed to help a business measure success, typically in terms of making progress towards long-term organizational goals. KPIs are frequently used to “value” difficult to measure activities, such as the benefits of leadership development, engagement, service and satisfaction.

KPIs can be specifi ed by answering the question, “What is really important to different stakeholders?” Having determined the right KPIs, they may then be monitored using business intelligence techniques to assess the present state of the business and to assist in prescribing a course of action. The act of monitoring KPIs in real-time is known as business activity monitoring (BAM).

KPIs differ depending on the nature of the organization and the organization’s strategy. They help to evaluate the progress of an organization towards its vision and long-term goals, especially toward diffi cult to quantify knowledge based goals.

Typical Advertiser KPIs and Associated Benefits

• Target Audience Alignment: Understanding how a publisher’s traffic aligns with your preferred customer demographic and psychographic profiles can inform creative and media targeting decisions.
• Target Geo Alignment: Identifying where your best and worst customers are coming from makes it easier to implement appropriate geo targeting controls.
• Contact or Response Rate: Tracking contact or response rates from call centers or CRM programs can help identify media sources that produce low or high quality lead data. A media supplier could drive a great CPA, but if their leads respond at a very low rate, the cost to convert the lead to a sale could be cost prohibitive.
• Charge-Back Rate: You could have a great initial cost per sale, but high consumer or lead buyer charge-back rates can ruin your ROI.
• Lifetime Value: This takes into account all of the revenue realized from a customer over a specified period of time. You may have a media channel that produces a high CPA, but a high lifetime value may offset higher than average CPA. If you’re not looking at lifetime value you may be optimizing away from your most valuable customers.
• Multi-Attribution Conversion Tracking: If you’re only looking at the last click that resulted in a sale or lead, then you may be attributing too much value to media sources like search, coupons or shopping comparison engines.
• Brand Lift: Taking into consideration an ad campaign’s impact on brand awareness, brand favorability, brand association and purchase intent can help brands build equity while achieving sales and revenue goals.  

Any marketer really wishing to make progress on achieving business goals should review which of these diverse KPIs fi t their situation best, then put them into use in order to make smarter decisions. 

Jason Oates is SVP of media services at NetMargin, a Datran Media Company.