Many companies embroiled in the sea of business metrics often lose sight of where they are going, lose money, and ultimately lock-up shop. Why? They focused on numbers that didn't move the needle. Your company might be doing the same. This is especially prudent when considering your email marketing KPIs.
When businesses are flooded with metrics, knowing which numbers to focus on and which to discard—or simply treat with levity—is a core business skill many business owners struggle with. Many aren’t sure what their KPIs are, which are what moves your business forward. And too much data hasn't helped either. As the saying goes, too many cooks spoil the broth.
But with business metrics and KPIs, the problem is a mix of too much data, misunderstanding of these concepts, and a lack of defined goals and an unified business vision.
WHAT ARE METRICS AND KPIs?
First, it is imperative to know the difference between your business metrics and your KPIs.
Business metrics:
A business metric is a quantifiable measure used to track and assess a specific business process's status.
KPIs - Key Performance Indicators
KPIs are defined as “a type of measure used to evaluate an organization's performance against its strategic objectives”. KPIs are metrics that target critical areas of performance. As the name implies, they are "key" indicators. However, there are similarities between business metrics and KPI, so they are sometimes used interchangeably. Before we dismantle their differences, here are two similarities between KPIs and Business Metrics.
SIMILARITIES BETWEEN Email marketing KPIs and BUSINESS METRICS
- Both deal with measurements: KPIs and business metrics help you measure different processes in your business. They are both quantifiable, and therefore are useful in evaluating the business.
- Both can be compared to other variables or past results: for example, business metrics are interpreted as how competitors are doing. Also, for example, email marketing KPIs can be compared to your past results.
KPIs and business metrics aren't the same, though. Business metrics can be KPIs, but KPIs aren't business metrics. Let me break it down.
You can have a business metric that serves as KPI but not a KPI that serves as a business metric.
Businesses need adequate data to make informed decisions. These data, gathered through various analytics software, are essential in determining whether a business is moving in the right direction.
For example, a business can have millions of page views, may rank on page one on Google, and may even get high click-through rates (CTRs). But these are merely numbers. They don't necessarily show anything, or lead the business forward.
In digital marketing, vanity metrics are a type of business metrics. Vanity metrics are numbers that don't do anything for the business to move the needle forward. They could be the number of people a Facebook post reaches, the number of likes it gets, or the total number of views.
Although these metrics might look good, they don’t do much for the business. Or do they?
We can't know whether they do much for the business because we haven't defined what we are looking for. We have to establish where we are going and what counts as success in our journey to reach that point.
DIFFERENCES BETWEEN KPIs AND METRICS
KPIs don’t exist in a vacuum. KPIs need direction and regular monitoring to be successful. The following differentiates KPIs from business metrics.
1. Business Objectives and Goals: To understand KPIs, we need to have a business objective.
An objective is a set of goals a business seeks to achieve. And these goals are milestones a business – whether a department or the entire entity – wants to hit.
One example of an objective could be reducing the churn rate or increasing email open rates. What goals need to be monitored and achieved in order to hit those proposed objectives of reducing churn rate or email open rates?
By contrast, there is no direction for business metrics; no specific direction a business is headed towards.
The specificity of objectives differentiates KPIs from business metrics.
2. Defined milestones:
For example, an objective for a marketing team might be to have 400 leads in three months. The team will then define milestones to help them measure their progress or failure toward reaching that objective.
The team's milestones could be to reach 1,000 people each month, improve their page rank, and use PPIs to gain more leads.
In the above example, the team has defined what they want, what success will look like for them, and the time required to reach that objective.
Henceforth, the metrics they'll be gathering will be used to measure whether they are headed in the right direction.
For this team, reaching one million people on Facebook with no leads means nothing. While on the business metrics level, the number of people reached sounds excellent, when you measure the reach against the KPIs, the reach is useless. It doesn’t help achieve their objective as a team.
3. Regular reporting:
Regular reporting is essential with KPIs. The marketing team above could define how often they want to give a progress report. The team might decide to meet every two weeks to provide progress reports. These reports will inform their decisions, whether to stop or continue or tweak a few things. If, after the first month, the leads generated were only 40, it means there is a problem with the tactics.
With business metrics, however, reporting isn't as regular. Because there is no defined goal, there is no need to continue gathering data.
4. A time frame:
The objectives the team wants to meet must have a time frame. Three months is the frame the marketing team has given themselves to get 400 leads. If the organization receives 300 leads within three months, they have failed, no matter the number of social shares they get or the number of engagements on their websites.
However, business metrics have no time-frame. There is no defined destination, therefore no specific time to meet the goals. According to Ted Jackson, founder of ClearPoint Strategy, "KPIs act like a compass, helping your team understand whether you are taking the right path toward your strategic goals."
KPIs aren't always cast-in-stone data. Sometimes, KPIs aren't hard data. They could be soft data. If a business wants to improve its customer service, a KPI could be how much joy their customers leave their stores with. Or how free the customers are with the staff. Or the type of conversations the customers have with the staff. These metrics aren't hard, but they matter because they help measure how well the staff and customer service team is doing.
LEADING AND LAGGING KPIs
Lagging KPIs are metrics used to determine the results of past campaigns and performance - email marketing campaigns in particular. For example, what was the email open rate during your last campaign. These data points are easy to measure because it's hard data and is straight forward.
Leading KPIs are used to influence or predict the direction of an ongoing campaign or performance. SimpleKPI.com says that “these are more difficult to set up as they rely more on external actions to impact outcomes, such as changes in process or investments in infrastructure.”
SMARTER KPIs
Establishing your KPIs could be challenging, especially if you don't know where you are headed. A formula you can use to create KPIs that drives your business forward, and helps you achieve your goals and objectives.
Set SMARTER KPIs.
SMARTER stands for:
- Specific: What are your objectives? How precise are they? Give it a number; else you'll keep chasing shadows. If you want to increase sales, give the growth a number. I want to improve my email newsletter subscription rate by 30%. It is specific and helps you know if you are reaching the goal or not.
- Measurable: You should be able to measure your goal. You are setting milestones – long and short-term goals – that help you attain the desired objectives.
- Attainable: Are the objectives doable? It shouldn't be too high, but it shouldn't be too low. If your goals are too high, it may dissuade you when you don't meet them. If they are too low, you'll reach them fast and be left with nothing else. For example, a new online business setting leads as 400 in the first two months is way too high. That same business setting leads at 2 per month is too low, if they invest heavily on PPC or social media ads.
- Relevant: You don't set goals and objectives just because you feel like setting goals. You set them to help the business move forward, reach its primary objectives, and reiterate its values and beliefs. Your KPIs must tie into the overall business objective.
- Time-Frame: How long do you need to reach the objectives?
- Evaluate: Evaluation reports, regular reports help you know when you are on track and fall off the road.
- Reevaluate: Keep reevaluating your tactics to see if you are moving in the right direction.
HOW TO CONTINUOUSLY WIN WITH KPIs
Well-defined KPIs help translate business objectives into strategies; workable strategies that can be measured. However, business owners and department heads can sometimes be adamant when it comes to their KPIs. Department heads and strategists sometimes find it difficult to change the direction of their strategies. To win with KPIs, aside from setting SMARTER KPIs, you must be open to changing the approach the situation demands. If the plan isn't working as expected – the leading KPIs aren't encouraging – then change direction! You may want to create a checklist for yourself or a plan of attack on how you are going to achieve these new KPI targets.
Evaluation and reevaluation are vital if you want to win.
Also, don’t set the same KPIs as your competitors. Your business goals and objectives are different; your budget and values are different. Having the same KPIs as your competitors will leave you more confused and may wreck your business if you're not careful.
You may choose to be a bit experimental with how you approach your KPI targets. The fact is that there may not be a specific road that leads to your destination - KPI - but you can carve a path out for yourself. Some have even experimented with quizzes and questionnaires to build formidable email campaigns.
Lastly, ensure you regularly share KPIs with your stakeholders – employees, and shareholders. By sharing with key stakeholders, you understand what is attainable and what isn’t. This careful dissemination of KPI's with others can be a great way to reassess what KPI's are actually proving to be impactful on your key objectives.
IN CONCLUSION:
KPIs are metrics that help you reach your business goals. They are time-specific, and although business metrics are good, not all are useful in meeting specific business needs. Learn to separate business metrics from KPIs. Focus on KPIs, and don't get hampered by so much data that you lose sight of your business goals.