Has any other acronym done as much damage to marketing effectiveness as ‘KPI’?

The KPI is coveted everywhere as a thing of gargantuan significance, but as with all pieces of jargon, it gets massively oversimplified and misunderstood.

There’s nothing wrong with measuring stuff and knowing what works. Indeed, we can do this better than ever before.

But the issue with the KPI is that it has been squashed into itself, and in the process it has lost its intended meaning and adopted another. This happens with lots of pieces of jargon; our attempts to simplify things make them simplistic and they pick up a life of their own, often different from the original intention.

Anecdotally, I think this is part of a wider cultural malaise, beyond marketing. So desperate are we for short-and-sharp, black-and-white, wrong and right answers that we gravitate towards single words and acronyms, which then become distortions of themselves (Brexit, anyone?).

Marketing isn’t immune from this trend towards condensing complex concepts into single-word descriptors; it’s why every day on LinkedIn you can find people shouting at each other about ‘brand vs performance’ or ‘marketing vs brand’, and whether or not one or the other is ‘dead’.

It’s hard to unsee it once you’ve seen it, and ‘KPI’ has undergone a similar transformation. It has become a shortcut for ‘metrics’, at the expense of what the words within the acronym actually stand for: key performance indicator, literally ‘the important information that gives an indication of how well we’re performing’. Or, even more prosaically, ‘stuff which gives us a sense that we’re on the right track’.

Context is king: Why brands are rethinking their KPIs

Results are not necessarily KPIs

An indicator is a relatively nuanced thing. A sign, a signal. It’s directional, and is a much broader and more accessible concept than a simple, blunt metric.

For example, your bottom-line ambition as a marketer might well be (and probably should be) financial: sales and profit.

Are sales and profit numbers a key indicator of performance? They’re certainly a measure of output and results, but on their own do they tell us much about the performance that caused them to go up or down?

During the Covid pandemic, loads of business hit huge sales and profit numbers (garden supplies, painting and decorating, dogs and cats). Good performance?

Similarly, loads of businesses’ sales and profit went through the floor (restaurants, cinemas, train tickets). Bad performance?

They’re extreme examples, which illustrate the problem of equating numeric output – results – with performance.

You can hit a sales number with big discounts. You can hit a profit number by using cheaper materials. But both those could well be really bad approaches to performance.

Single metrics are clearly blunt instruments, so when people talk about KPIs it often comes hand-in-hand with the concept of a ‘dashboard’ holding in one place an assortment of key metrics.

The dangers of dashboards

While there is obviously great use in seeing a range of data together, the myopic focus on KPIs and dashboards encourages dangerous behaviours.

The first danger is the drift towards short-termism and silos. The bits which move on a dashboard tend to be recent history. Last week’s sales. Monthly conversion ratios. Year-to-date profit.

All important, of course, but if those are the metrics driving your brand, then they overlook the longer-term, slower-moving indicators of performance like brand awareness, recognition and salience.

What’s interesting about those longer-term metrics is that they’re a combination of multiple factors, channels and activities. When we isolate single numbers, we overlook that interconnectivity and the potential side-effects or compound impact that much marketing activity creates.

The second danger is that metrics and numbers are exceptionally bad at helping us understand what we really need to know about customers and the role our brand plays in their lives in the real world.

Life is messy, contradictory, nuanced… and hard to wrap up in a single number.

I remember once going on a ‘customer safari’ to better understand the lives of professional decorators. It was a great initiative designed to give us a richer insight into their lives, and it worked.

When I asked a decorator how he decided whether or not he could do a job or not he replied: “Mate, if it’s not on fire, I’ll paint it.” He went on to explain that he loved being a decorator because he could flex his hours in order to indulge in his passion for hang-gliding.

You might say he was unique, but all customers are. They’re not ’45-year-old men who live day-to-day, read the Sun online and share sport-related content on social media’.

That information isn’t wrong, as such, it’s just that people are much more than data points, and viewing them as dots on a dashboard disconnects us from their reality.

Life is messy, contradictory, nuanced… and hard to wrap up in a single number.

The final danger is that the metrics on the dashboard are typically pretty poor measures of the things that genuinely drive performance.

If you ask any CMO worth their salt which things really make a difference to their team and business performance, you’ll usually get a list that includes some or all of the following:

• The culture within my team, and their partners inside and outside the business
• How well we understand the world our customers live in and the role our brand plays in their lives
• The respect and appreciation the rest of the business has for marketing
• Our ability to connect marketing and brand levers into other areas of the business beyond our control
• How capable and creative we are and how quickly we can upskill when we need to
• The capacity we have to do the things we need to do…
• …and how accepted it is for us to say no to stuff.

WARC released some research recently that identified organisational culture as the leading blocker to creative excellence in brands, alongside six ‘building blocks’ to build a culture of creative effectiveness.

And, yes, metrics and evidence are one of those building blocks; but so are vision and alignment, having a common language, and including partners within and outside the organisation.

It’s much less about the objectives and the results, and much, much more about what happens in the middle and the people who make it happen.

Ritson: There’s one true measure of marketing effectiveness – marketing(t)

Obsess over inputs

So what to do?

As with all things marketing and creativity, the only definite answer lies somewhere between ‘it depends’ and ‘it’s complicated’.

Chris Shambrook – a performance psychologist who has worked on multiple Olympic Games as well as multiple commercial sectors – knows a fair bit about the difference between performance and results.

His perspective is to see the opportunity in the problem: “The marketing world knows the importance of precise language, so there’s a great opportunity to unleash the power of performance by defining it more simply, as ‘doing the things you need to do to get the results you want’. When you’re equally obsessed with the inputs that drive success as you are about the scoreboard that shows it, that’s when the value really starts to hit new levels.”

It’s a winning formula. Personally I’d love to just burn the acronym KPI altogether, but that’s utopian. More realistic is to make sure that, whenever there’s a conversation about KPIs, we marketers take a moment to clarify whether we’re talking about results or performance indicators.

Are we looking for hard numbers, metrics and binary answers to questions about results? Or are we talking about performance and the deeper, messier, more complicated, but ultimately more important answers to the really important question: why?

Johnny Corbett is an independent marketing specialist who has worked in marketing and commercial leadership roles for large corporate businesses, startups and agencies, in sectors including food and drink, technology, financial and professional services, politics and the public sector.