By Lewis Taffs
Apr 15, 2019, 1:59:00 PM

Marketers are taking a fresh look at how performance indicators can enhance productivity

Performance indicators offer a fantastic way to enhance performance where marketers are willing to take a fresh look. 

The way marketers look at performance metrics is starting to change. Increased access to data and technology along with a need to increase productivity, has encouraged advertisers to ask more of themselves and their agency partners.

That’s because in an increasingly complex business, metrics provide a way for marketers to conduct the orchestra of their brand. They provide an oversight into not just the whole system but also the individual instruments, enabling them to provide the direction and focus that is needed for all parties to play in the right tune.

As former P&G CEO A.G. Lafley writes in his book Playing to Win, performance indicators should be one of the four pillars of any plan. After all, once you have decided on the direction of travel, there must be a way of knowing if you are getting there.

Getting the performance indicators right, however, is the first step to ensuring they are powerful. It’s all too easy to fall into the standard trap, where performance indicators are set as an afterthought or decided on in a hasty fashion.

Since marketers are often tasked with having a broad knowledge of all areas, an in-depth understanding of the process that are taking place provides rigour in helping set the right objectives and measures. They need to to take time and seek clarity from internal and external subject matters experts who can outline the intricacies of the process.

Sadly, it’s rarely possible to create or develop a  single KPI that can be applied across an entirety of the business or event at a campaign level. That means they need to ensure a considered or distinct KPI for each separate objective. Nevertheless, there should be a limited set of KPIs per task so that the delivery is streamlined and the measurement can be insightful.

The aim is to develop a set of KPIs that are integrated, from smaller sub measures such as Cost Per Acquisition (CPA), all the way through to Total Shareholder Return (TSR).  

 

Measure what matters: Inputs vs Output

Like many disciplines, marketing involves a series of inputs, process and outputs. Often advertisers fall into traps where KPIs are set based on the output of a singular entity. For example, a media agency’s ability to buy competitively.

While such KPIs have a role, increasingly advertisers are looking to view the effect on their overall ‘system’. The purpose of media buying is to procure instances where consumers can be effectively reached with a compelling creative message and drive company growth.

Two simple but progressive ways to achieve this are:

  • Effect on Sales: Advertisers who have a single holding company solution for media and creative, are able to integrate the effectiveness of media and creative into a single measurement.
  • Cost and Quality: Where advertisers need to have a standalone measure of media, there are fundamental risks if cost is reviewed in isolation. For TV campaigns, a stronger measure of a media agencies buying would be to review Cost Per Unique Reach Point vs Cost Per GRP. This distinction allows for the measurement of Unique Reach, which the work from Byron Shap at the Ehrenberg-Bass Institute has empirically proven to drive sales.

 

Establish benchmarks based on similarity

Once KPIs are selected, brands can start to collect data, enabling them to track performance over time and compare performance with their competitive set. When benchmarking, it is important to draw from comparable entities. For example, a straight ROI benchmarking of a brand with a large market share to a brand with a small market share is not sensible. This is because market share is the single biggest differential to ROI and a larger brand will always be able to generate higher ROI.

 

What gets measured, gets done

When working with agencies it is typical to remunerate based on a performance system. Part of the fee is subject to delivery and is based on measurements of service and results. However, too often the results part of the measurement is arbitrary or too far away from the agencies core service.

Once you start to measure what matters, however, it filters into a series of actionable improvements. By applying the right measures as part of Payment by Result (PBR) invectives, agency partners are able to do their best work to help you achieve your goals and to be remunerated based on the results. This gives agencies real ‘skin in the game’ allowing them to back the best of the ideas and tools to drive advertisers sales.