This is another blog entry in our series on metrics.
A short while back somebody asked me this question:
We are helping a company to get more bang for their buck from their social media activities. Of course we also want to develop the necessary KPIs.
In your advisory services, do you have an approach you can recommend?
This blog entry addresses KPIs (key performance indicators).
We also address how one can avoid falling victim to vanity metrics instead of using actionable KPIs. The latter can make a real difference to your bottom line.
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Wine cellar: Inventory needed
I remember when, as a young adult, I worked in a very fine hotel with a great wine cellar that also had a store.
The cellar master told me that to find out what treasures he had in his wine cellar, it was best for us to do an inventory. But while counting bottles was okay, he assured me that was not what he was really after.
Of course, it was nice to know how many bottles there were of each brand and year. However, he was much more interested in learning which wines left the shelves the fastest and sold frequently. He was also keen to know how the various wine types compared when it came to customers complaining about a bottle having gone bad (i.e. had cork pieces when opened).
As the above suggests, his understanding of the term inventory or social media audit included “show me the numbers” – i.e. sales data.
Knowing what insights we want to gain from a KPI helps develop the metrics that deliver the insights we want. As the wine cellar example shows, choosing insightful metrics makes a huge difference.
The above illustrates that besides counting bottles when doing an inventory or a social media audit, you must address such things as:
- Which wines sell the most and are beloved by customers – For social media this means, which types of tweets or Instagram posts get the most likes…?
- Which wines did people complain the most about after consuming the product (e.g., tasted bad) – For social media this means, which bloggers or Facebook users are most likely to complain / write negative entries about the brand…?
- Which wines get many recommendations or word-of-mouth referrals – For social media this means, which types of tweets or blog entries get re-tweeted or receive many reader comments?
Clearly, the wine-making business and social media marketing have more in common than it would appear at first glance. In both cases, before you move forward you need to take stock. In turn, this allows you to gain insights into what you have already accomplished.
2. Effective KPIs depend on a clear objective
Besides taking an inventory of how good things might be right now, you need to know what objectives you must accomplish next quarter or during dinner.
Is the bottle of wine to woo a friend, impress your boss or just enjoy with your company?
To impress your guests it might suffice to simply purchase the wine that your favourite life style magazine recommended a while back.
Pageviews or likes on Instagram might not be the actionable metrics we want. These are like vanity metrics, i.e. we might feel good about large numbers, but they will most likely fail to move product from our shelves.
We need to decide what insights a KPI provides us with that will help reach our goals fast. To illustrate, Arsene Wenger (Arsenal football team’s longest serving coach) used a few metrics that have become legendary in the UK’s Premier League.
Of course, when considering paying to have a new player transfer to your club, you always want to check the medical data. If the player’s key medical indicators are satisfactory, you try to negotiate and hopefully they end up playing with your club.
But even when the medical data looked okay, Wenger was famous for also immediately checking the striker’s acceleration speed. Acceleration speed was a critial KPI on which he based his decision of whether to pursue a transfer or not.
Wenger was of the opinion that with great acceleration speed, the striker was more likely to win a one-on-one fight for the ball. In turn, this would increase the striker’s likelihood of winning many one-on-one contests. Whenever a striker won a ball this way, he could again use his speed to create situations that might result in another goal. Thierry Henri was one of the more famous examples where Wenger demonstrated the importance of this KPI for evaluating a striker’s potential.
What does the Wenger example tell us in the context of social media marketing? For starters, we need to decide whether we are dealing with:
- consumer goods or capital goods, or
- business-to-business (B2B) or business-to-consumer (B2C) situations.
Influencer marketing might work with fashion or luxury items, but paying US$ 40,000 or more for an Instagram post does not necessarily correlate to more sales. Without tracking the result with a URL and discount code, we might get many views but zero additional sales.
In the B2B context, a blogger with expertise in the business you are in (e.g., robotics) might be a good strategy. Here, Instagram posts might be a waste of resources.
In short, if your goal is to sell screws and bolts, try to assess if your KPI has any correlation with a desirable outcome, such as higher sales or more repeat sales.
Your focus could be on increasing awareness of your product or brand with your B2B target audience. Regardless, you want to find a KPI that helps measure this. One desirable outcome of your marketing activity on social networks might be you getting more requests for information or new subscribers to your newsletter, and so forth.
What is your opinion?
Incidentally, we have not discussed what to look for when purchasing a wine. Any wine connoisseur will tell you that what year and time of year the grapes were harvested matters. Many more factors can be considered for determining how well the wine might taste after it is ready to be sold. Of course, if you want to guzzle the very cheap stuff, this may not concern you at all.
Similarly, you must answer these two questions in social media marketing:
- what target audience do you intend to reach, and
- what content will you produce and share on social networks?
Navel gazing or vanity metrics are not very helpful. The KPIs must permit you to gain insights. They must help you improve against yardsticks, such as:
- number of customers, and
- amount of sales per client.
Unless you measure for impact, why measure at all?
We love to hear from you!
- Do you have KPIs that you have used in social media marketing across projects?
- What KPIs do you use in the B2B versus B2C context?
- What is your best KPI in a consumer product versus a capital good (e.g., machine) context?
- What questions do you have about KPIs?
- What do you like or dislike about KPIs?
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The author declares that some of the companies mentioned herein are clients of CyTRAP Labs or subscribers of DrKPI® services.