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KPIs - what do they actually mean?

by Christopher Stobbs on 18 October 2012

Most people theoretically understand what ‘KPIs’ mean. ‘Key Performance Indicators’. The things that determine whether your strategy or campaign succeeds. The things that your bosses love. The things that you spend your working life striving to achieve.

But although most of us seem to know the term, do we really understand what our KPIs are telling us? Let’s take a look at a few examples, starting with something we’re all familiar with: Facebook.

On a daily basis I speak to new clients and prospective clients regarding Facebook engagement rate (ER) and how ‘well’ their pages are doing. I’ll be honest; the first two to three minutes of these conversations normally confuse me.

“Our pages engagement rate is very good at the moment. We have an ER of 35% and our competitors average around 10%.”
“I’m currently happy with how things are going. Our ‘Talking about This’ figure is currently 5000.”
“We have a vibrancy of 40 and would like to increase this over the next 6 months.”

Sure, I understand the words ‘engagement’, ‘vibrancy’ and Facebook ‘Talking about This’ (TAT) metrics. But I struggle to understand what any of this means because the numbers cited aren’t being contextualised.

Engagement and vibrancy can be measured in a series of ways; they can be expressed as a percentage of the total fans on a Facebook page, interactions per individual, post reach, TAT vs. Fan base, and various combinations of other metrics available. Before we can attempt to assess the figures, we need to look at what we trying to achieve. What are your goals as a business? Are you trying to reach people, engage people, or get followers? Only once we know the answers to these questions can we determine, based on experience and competitors, what can be considered good performance, and where we can improve.

To use a sporting analogy, you probably wouldn’t set the same Goal Scoring KPI for a football striker as you would a defender, would you? In fact you might not even have a Goal Scoring KPI for the defender at all, because that’s not his primary task for the season. Instead, what we would do is set KPIs that are meaningful to the defender’s role. We would then set targets that are meaningful to those KPIs, that are measurable, and that all the players understand.

A great example of this is the TAT statistic in Facebook. If you are measuring ‘engagement’ (which many people perceive as the effectiveness of posts in generating interactions with a brand), then it’s important to understand that this figure incorporates new page ‘Likes’. As such, it doesn’t necessarily reflect the effectiveness of your daily post. So while a goal has been set (great!), and a KPI has been set (fabulous!), the wrong figures have been used, and the statistic isn’t fit for purpose.

In the end, I don’t mind what the KPI is, or what targets are set, as long as they are meaningful. If your KPIs tell you a story and help you learn why you smashed some of your goals, and why you missed others, then I think you have a winning formula that will allow your brand to keep moving forwards.

Next time someone sets a KPI for you, ask yourself if this just sounds impressive – or if it is really going to help you improve and grow.

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  • http://twitter.com/simuddell Si Muddell

    This is a great post and love the sporting analogy. This got me thinking slightly left-field on the topic of KPI’s, which I wanted to share and add to the above. 

    Probably like a lot of clients, I have to set KPI’s to almost manage/appease/reach two objectives.
     
    1. Business objectives / direction
    2. Upper Management ‘management’Often upper management want to see hard and solid returns from social.

    Some senior managers are accustomed to digital marketing metrics, and even fewer have a real knowledge of social. I think social media KPI’s are often a juggling act between a known measurement metric that are familiar to senior managers, and the also the marketing objectives/vision.
    This doesn’t make it right but unfortunately it’s the reality of a lot of businesses, and its how a lot of clients have to contextualise their agency facing KPI’s. 

    TBH I have read very little that really convinces me that the social media industry has mastered social measurement, it’s an area of debate for sure. As a practising marketeer with real targets and financial accountability, I believe we are still in the learning stages. Caveat – I am a social advocate and want us to crack this. For social (and all marketing) to be really understood, then all marketing and customer relations should be driven from one centralised system, where learnings are built up over time on customers / prospective customers across all touchpoints. Only then will we truly know what an action on social really means, be also mindful this will differ drastically for different industries. What does a like mean, what does a follower mean, what does a share mean? They can only be really understod if we are tracking the full customer journey across all touch-points. Products like Marketo, which integrates with Salesforce are an example of this intelligent way of data marketing. That said, it’s difficult to really set accurate social KPI’s without doing this, and even harder to feed this information back into ROE discussions with senior managers.

    Analysis:
    If a marketing team are doing their jobs properly, then there should be a lot of ‘behind the scenes’ data analysing and general thinking about what the KPI’s actually mean, how they fit in with the marketing objectives, and what is the longer term goal’s of the brands overall marketing. For example granular KPI’s on social are likely to be different to KPI’s for call center agent retention.

    There is an obvious cross over between the two as they are both customer touch-points and forums to ‘save-retain’ or ‘add value’ or ‘neutralise’. The metrics of analysis and specifics targets by channel may differ, but the overarching cross-over KPI’s in essence can be the same.

    It’s about testing KPI’s, being pragmatic about your plan, and re-evaluating the rationale for them on a frequent basis. Oh and measure, measure, measure. ;)