How To Avoid Ugly KPIs (And Pick Better Ones)
Do you know who the inventor of the baby carrot is?
Well, I’m going to tell you anyway. The inventor is called Mike Yurosek and he is famous for developing smooth baby carrots that you see in supermarkets today.
His story dates back to 1986, when the carrot business in the USA was particularly wasteful. The long growing season produced too many carrots. And half of them were too misshapen for supermarkets.
Where farmers thought that ditching the misshapen carrots was the answer, Mike saw an opportunity. Using a potato peeler and a green bean slicer, Mike shaped his ugly carrots into smooth ones. And the rest is history.
Yet when we choose marketing metrics or Key Performance Indicators (KPIs as they are known), we have to be careful
We have to watch out and pick the right KPIs and avoid the sea of ugly ones. Many businesses get lured to measuring too many KPIs. From ‘likes’, comments or shares, to views, impressions, influence scores, engagement rates...the list goes on. It can become impossible to spot a useful KPI in a sea of ugly ones, i.e. one that will help you, instead of confusing you.
All these KPIs can leave us feeling overwhelmed
We end up populating vast spreadsheets with numbers to make ourselves feel like we are achieving something. They all look so clever. But beware, it's a trap!
Our brains come under immense strain from all these figures, and suffer something similar to a power outage. We find ourselves in the dark, not knowing what is really driving sales.
Keep it simple
What’s needed instead is a simpler, yet more effective approach. An approach that allows us to measure the right things (rather than everything that’s available).
The good news is that there’s an easy way to spot the useful KPIs from the ugly ones. There are three types of KPIs that we need to look at:
1) Soft KPIs
2) Hard KPIs
3) Business KPIs
So what exactly do I mean by soft, hard and business KPIs? Let’s read on...
Soft KPIs are to your final sales figures what Pluto is to the sun: far, far away.
Soft KPIs tend to be things like: Facebook likes or comments, video views or subscribers on YouTube, or ‘views' of your posts on LinkedIn. Or they can be general awareness of your business via advertising, or press coverage, for example.
They tell us how popular our marketing is
They make us feel good. But that’s about it. Some people refer to them as 'vanity metrics’ because all they do is make us look good. Vanity metrics are wonderful if popularity and a pat on the back is all that you are after.
But if you are after sales, you need to be more picky
The best soft KPIs are a loose indicator that people like your business, and so might be more likely to buy from you. Which is good news.
Yet it's certainly possible that sales figures can still go down while Facebook likes go up! Why? Because soft KPIs and business results aren’t strongly linked. Just because people like you, doesn't mean that they'll buy from you. Soft KPIs and sales are light years apart, like Pluto and the sun.
Not that soft KPIs are bad
But what they are is a temptation for business owners to rub their hands with glee. A business owner might think that all they need to do is to get more likes or YouTube subscribers, and the sales will come flooding in.
What makes matters worse is that many analytics providers bombard you with clever-sounding KPIs. They seem to be able to measure almost everything, yet leave you wondering, ‘what’s valuable to me?’
Instead, they dazzle you with lots of ugly KPIs
They are ugly because they don’t help you build a clear sales story about how your marketing is actually doing. Instead, they give you the tools to measure all types of engagements, but fail to tell you which few are the most valuable to your business and why.
I can't tell you how many big brands fall into this trap
I have been to countless meetings where clients focus on ‘likes’ and engagement rates, rather than what is actually driving sales.
And the secret is, many people don't really know. Even the big businesses struggle to trace the value of a ‘like’, click or share through to the bottom line.
The money that I see wasted is shocking
And often that comes from lack of clarity about which soft KPIs can be linked to a company’s sales (yes, that's me blowing the whistle there).
Instead, we need something more
We need something that brings us closer to the revenue, to money in the bank. Not just soft metrics. Which leads us onto why we need to capture hard metrics.
Hard metrics are stronger evidence that customers will buy from you
Where soft metrics on their own can feel a bit fluffy, hard metrics are quite the opposite. They are important because they record people’s behaviour of checking out your store, products, or sales pages.
Hard metrics don’t need a PHD to work out either. They are clear indicators that anyone can spot. Like visits to your website, click-through rates, downloads, store visits, product enquiries, sales-qualified leads, for example.
They are behaviours that show a customer's interest in what you sell. They indicate that a customer is closer to buying what you sell. Nice eh?
So should we forget soft KPIs and just focus on hard KPIs?
The answer is that you need both soft and hard KPIs. You see, soft KPIs should (in theory) lead to better hard metrics. In simple terms, the more aware that somebody is of your business, the more likely it is that they will visit your website, in theory at least.
So if you see that your soft KPIs are improving, but your site visits aren’t, then you need to pause and ask 'why?'. Is it because Facebook is the wrong channel for your business? Is your content boring? You’ll start to get clues about what’s working and what isn’t.
And for businesses who are looking to get funding, showing soft and hard KPIs builds a convincing investment story.
Yet they are still not enough
Soft and hard KPIs are all signs of popularity and commercial potential. But they still aren’t enough to show that a business is making money. This is why we need the final type of KPIs: business metrics.
I remember watching an episode of Dragon’s Den
(If you don’t know what Dragon’s Den is, it's a TV programme here in the UK. Wannabe entrepreneurs pitch their ideas to a panel of wealthy investors to try to get investment from them).
Peter Jones (one of the Den’s seasoned investors) made a comment to one sweaty-browed entrepreneur: “What you have is a good idea, but not a good business idea”. His comment has stuck with me ever since.
And hands up how many of us have had ideas that are good ones, but aren’t business ideas? This is why we need business KPIs: to show that our business is commercially viable.
Business KPIs don’t need a lot of explaining
They are things like: revenue (turnover), net profit, return on investment, volume sales or value sales. I'm sure you're more than aware of them, but these are key figures that every business needs to be on top of.
These KPIs show what money there is in your bank and therefore whether your marketing is paying off (or not).
For example, if you have a fitness business with lots of likes, yet little site traffic and few sales, then your business isn’t financially healthy. Despite its popularity, it is more of social success than a commercial one.
If, on the other hand, you have a bit of press coverage, lots of web visitors, high sales and a healthy profit margin, then you have a strong business.
While big businesses are struggling to prove their success, small businesses can win
Small businesses are at an advantage. They tend to use fewer media channels, and do less marketing. So there's less to analyse and one can see more easily what’s working and what isn’t.
And this means that you can have Superman’s supersonic hearing
Like Superman’s ability to drown out noises around him and focus on the sounds of police radio signals and people in need, you now know which KPIs you need to pay attention to (and which ones to drown out).
Focus on peeling away the ugly KPIs that confuse you
If you are struggling to work out which are the ugly KPIs, just think of Mike and his peeler back in 1986. He peeled away the excessive, ugly parts of carrots to reveal neat looking baby ones. So you too can focus on the few KPIs that matter and create a neat sales story.
If you still need a bit of guidance on making this happen, email me right now and I’ll point you in the right direction.
PPS. Have you heard that I am offering an email consultancy service for £10 a month? You can email me for as much marketing advice as you need. Usually I charge around £400 per day for one-to-one consultancy, but for £10 per month you can get as much advice as I can give, by email. I only have 3 places left, so drop me a note to reserve your place.