Why a one KPI strategy usually fails (and how to fix it)

Table of Contents

• Why Marketers Want a Single KPI – and Why it Never Works
• A Breakdown of Key Marketing Metrics
• The Multi-KPI Approach – What You Need to Know
• Why Different Stages of Company Maturity Require Different KPIs
• Why Different Campaigns Need Different KPIs
• How Multiple KPIs Boost Marketing Effectiveness
• How to Implement a Multi-KPI Strategy
• Examples of a good KPI strategy
• How to Overcome Challenges with a Multi-KPI Strategy
• Best Practices for Sustained Success
• Your Next Steps to a Winning Multi-KPI Strategy

Why Marketers Want a Single KPI – and Why it Never Works

It’s completely understandable to seek a single marketing KPI; one manageable metric that’ll provide a clear focus and direction. However, there’s no point looking for this needle in a marketing haystack when it doesn’t exist. Far better to devise a clear plan of metrics to monitor and track which are mapped to different stages of the sales funnel; that aligns with the channels you use, your business goals, your growth trajectory, and company maturity. 

Both you and your customers have distinct objectives throughout the funnel and the KPIs must reflect this. Your business model, industry, and products you sell will also impact metrics. For example, e-commerce businesses focus on conversions, whereas SaaS businesses value insights into the impacts of campaigns on brand awareness.

A Breakdown of Key Marketing Metrics

Relying solely on metrics like Return on Ad Spend (ROAS), Profit on Ad Spend (POAS), or Marketing Efficiency Ratio (MER) won’t provide a complete picture of your marketing effectiveness. But before we explore the benefits of a multi-KPI strategy, let’s take a look at some of the key marketing metrics, how they are calculated, and what they measure:

Return on Ad Spend (ROAS): ROAS measures the revenue earned for every dollar spent on advertising. It’s calculated by dividing the revenue generated from ads by the amount spent. ROAS helps you understand the direct revenue impact of your advertising efforts, so you know how well your ads are performing in terms of generating sales.

Profit on Ad Spend (POAS): This calculates the profit generated for each dollar spent on advertising. It’s calculated by subtracting the ad cost from the total profit and then dividing that by the ad spend. POAS is used to assess how efficiently your ad budget translates into profit, helping you gauge the overall financial return of your campaigns.

Marketing Efficiency Ratio (MER): MER evaluates how efficiently your marketing investments generate revenue. It’s calculated by dividing the revenue by the total marketing expenses. A higher MER indicates that your marketing dollars are being used effectively to generate sales, offering insights into the cost-effectiveness of your marketing strategies.

These metrics are all useful, but they will not deliver a one-KPI strategy. 

While MER might seem attractive due to its simplicity, it can be misleading if, like most businesses, you’re aiming for growth. While advertising may result in revenue increases, word-of-mouth, press features, and higher search engine rankings all play an important role in growth.

Unlike MER, ROAS offers detailed insights into the effectiveness of all advertising spend, highlighting the efficiency of individual campaigns. Yet, due to inaccuracies in tracking, ROAS can sometimes mislead strategies and lead to poor decision-making.

To truly understand the overall impact of your marketing efforts, you need to integrate data from a variety of sources. This approach ensures your sales and marketing strategies are aligned with long-term growth goals and that your budget and resources are optimized at all times.

The Multi-KPI Approach – What You Need to Know

• Helicopter View of Your Performance: Rather than a narrow – and limiting – focus on one business metric, you get the complete view of how your campaigns and activities are performing. This means that one metric isn’t overly-prioritised, while others risk being neglected. 
• Unified Customer Journey Insights: Provides a holistic view of how all channels interact to shape customer behavior, along with comprehensive insights into campaign performance across a range of metrics.
• Better Budget Allocation: Ensures funds are directed towards the most effective channels, campaigns, creatives, products and keywords.
• Enhanced Decision-Making and Benchmarking: Leverages diverse data points for strategic marketing decisions while improving benchmarking by comparing performance against industry standards.
• Automated Adjustments: Enables real-time optimization based on multiple KPIs.
• Predictive Analysis: Forecasts future performance based on historical data and market conditions.
• Increased ROI: Maximises ROI by focusing on the most impactful KPIs.

Why Different Stages of Company Maturity Require Different KPIs

As companies mature, their focus and KPIs evolve. Startups tend to prioritize KPIs related to sales and top–of-the-funnel metrics like impressions and click-through rates. Scale-up brands shift focus to metrics that offer insights into brand awareness and retention, like share of voice and repeat purchase rates. 

For many start-ups, the main goal is acquiring new customers. For this goal, KPIs like customer acquisition cost (CAC) and new customer growth rate are best.

For scale-up companies, revenue growth could be the primary goal. In this case, KPIs like monthly recurring revenue (MRR) and customer lifetime value (CLV) could work well.

For mature companies, profitability becomes the main focus. Here, KPIs like net profit margin and return on investment (ROI) are crucial.

Marketing attribution platforms facilitate this transition with customizable dashboards and automated budget allocation based on predefined rules. This ensures businesses can adapt strategies and KPIs to align with their maturity stage.

Naturally, the best approach for your business will depend on a number of factors; your customer profile, buyer journey, budget, resources, and the kinds of tools you use – to name just a few. Our own journey and experiences at Billy Grace have shown us that the above KPIs help us maintain focus and get the best results for our brand and our customers. It’s about finding what works for you, which is part of the fun!

Why Different Campaigns Need Different KPIs

Segmenting KPIs creates order in your marketing attribution strategy by aligning campaigns with different marketing funnel stages. For top-of-funnel awareness campaigns, focus on impressions and reach. Mid-funnel campaigns, targeting customers at the consideration stage, should measure clicks and engagement rates. Bottom-of-funnel campaigns, designed to drive conversions, must prioritize conversion rates and sales metrics. 

Marketing attribution platforms help track and monitor the KPIs over time, identifying which campaigns need optimisation. 

How Multiple KPIs Boost Marketing Effectiveness

Evaluating various KPIs ensures everything is on track and that you optimize performance at every stage of the customer journey, via every touchpoint. By monitoring a diverse set of metrics you gain a comprehensive understanding of what is working and what isn’t so you can identify – and capitalize on – areas of success and uncover opportunities for improvement. By using this comprehensive view, you can make data-driven adjustments and continuously refine your strategies, leading to better results.

All this takes time, of course. Marketing platforms help you automate and customize every day tasks and activities, such as pausing underperforming ads or increasing daily budgets for high-performing ads, which results in continuous optimisation and boosts ROI. You can also use predictive attribution models to forecast what should work based on market conditions and past performance.

How to Implement a Multi-KPI Strategy

Defining your KPIs can be challenging. Here is a high-level guide to get you started. 

Identify Business Objectives

Every successful marketing strategy starts with clearly defined goals and objectives. For example, if growth is the goal, focus on KPIs that measure acquisition and expansion. 

Make sure every KPI is specific, measurable, relevant, and time-bound. 

Choose the Right Tools to Monitor Multiple KPIs

Analytics tools help create order out of what can become chaos in your marketing data. No doubt you’re familiar with Google Analytics but you could also consider specialized platforms to help you aggregate and visualize multiple KPIs. We’d be neglecting our own KPIs if we didn’t mention the Billy Grace solution. Rather than blowing our trumpet on this guide, why not find out more for yourself and hear from some satisfied customers? 

Map KPIs to Funnel Stages

Create a KPI framework that covers each stage of the funnel.

For top-of-funnel awareness campaigns, focus on impressions and reach.

Mid-funnel campaigns, targeting customers at the consideration stage, should measure clicks and engagement rates.

Bottom-of-funnel campaigns, designed to drive conversions, should prioritize conversion rates and sales metrics.

Conduct Regular Reviews and Adjust Accordingly

KPIs must reflect changes in your business, customer base, and market developments. So, it’s crucial to monitor and adjust your strategy to stay aligned with business needs.Aim to conduct weekly or monthly KPI reviews to audit results and optimize budget and use predictive tools to reduce the burden on your time and resources.

Examples of a good KPI strategy

As we’ve explored above, creating an effective KPI strategy requires aligning your metrics with business objectives, using the right KPIs for different funnel stages, monitoring the relevant metrics, and employing the most effective tracking tools. However, many marketers make the mistake of focusing too narrowly on a single goal.

Let’s have a look at the following case: 

You’re CMO of the brand X and within the marketing team you apply the following funnel stages:

• Touch
• Tell
• Sell
• Care

If your main goal is to acquire new customers, you might set KPIs like:

Business performance KPI: 

• New customers

Funnel KPIs:

1. Touch: Click-through-rate
2. Tell: Qualified lead (for example: with an assigned value such as 30 seconds on your website or three or more pages visited). 
3. Sell: New customer revenue
4. Care: Customer retention rate

While this focuses on acquiring new customers – and does have its strengths –  it’s too narrow. Imagine you achieve a 30% increase in new customers over six months, but profit per customer drops due to high branding or advertising costs. Despite reaching your goals, you’re losing money on new customer acquisitions.

A healthy KPI strategy should balance your primary objective with other relevant metrics. For instance:

Business Performance KPIs: 

• Total revenue
• New customers
• Profit margin
• Total costs

Funnel KPIs:

1. Touch: New Website Visitors, CTR, engagement rate
2. Tell: Qualified lead, add-to-basket, pages per session
3. Sell: New customer revenue, conversion rate, cost per acquisition
4. Care: Customer retention rate

Approaching your KPI strategy with a broader perspective helps ensure sustainable growth and a healthy sales funnel. It should make it easier for you to hit your targets, and maintain good customer retention and satisfaction while avoiding pitfalls.

How to Overcome Challenges with a Multi-KPI Strategy

Even with a clear and cohesive approach, obstacles can arise. Here are some common challenges and ways to overcome them. 

Data Overload 

Managing and interpreting vast amounts of data without getting overwhelmed is tough. You need the right tools to get your data ducks in a row and make sense of these powerful insights. Always choose tools that genuinely help to simplify data analysis, are secure and compliant, and ease your workload. 

Maintaining Focus and Alignment

Anyone who has implemented a CRM or marketing platform will tell you that getting your team on board is essential. Every user and stakeholder should fully understand their role and the importance of achieving long-term success. The tools you choose must be easy for your team to use and manage, long-term. 

Avoiding Conflicting KPIs

Smart prioritization will help you manage and mitigate potential conflicts between different KPIs. As will getting a firm understanding of marketing attribution models. 

Best Practices for Sustained Success

With your KPI strategy in place, let’s look at how to optimize your efforts, long into the future. 

Continuous Learning and Adaptation: Stay flexible and open-minded when reviewing and refining KPIs. Remember that your business, market, and customers are always evolving.

Integrating Feedback Loops: Take the time to really get under the hood of the insights from your KPI performance and use them to inform your ongoing strategy. Ask for input from colleagues (including sales, product development, and customer service) as well as your marketing partners. A/B test where relevant, focusing on one element at a time. 

Your Next Steps to a Winning Multi-KPI Strategy

If our multi-KPI strategy for this guide was to inform, engage, and entertain, we hope to have succeeded. As you start your journey remember that a single KPI approach is impractical and will stop you from making the impact that you, your team, and your brand deserve. You need a multi-KPI approach that is tailored to specific business needs, reflects the nuances of the customer journey, and helps you focus on the metrics that matter. 

Armed with these insights you can optimize, maximize and revolutionize your marketing performance. You can ensure every campaign, message, advert and stage of the customer journey resonates with your target audience, and keeps your brand one step ahead. 

It can feel like a lot to take on board – there are only so many hours in the day, after all. But you don’t have to do it alone. Contact our team today to discover how we can help you build a multi-KPI strategy that hits all your creative and strategic goals.