KPI in Marketing: Measuring What Matters

Before we go any further, we should first answer one important question: what is KPI in marketing?

KPI is an acronym that stands for key performance indicator. KPIs provide useful measurements that allow marketers and decision-makers to determine whether they’re meeting key objectives. For example, marketing key performance indicators can help you track the effectiveness of advertising campaigns, your company’s customer acquisition rate, sales and revenue and more. The data gathered reveals many important insights into how well a business is doing and are, therefore, essential for sustained growth and success. This is because KPI marketing allows decision-makers to identify areas of weakness, making it easier to create effective strategies in response.

You may have come across the term “metrics” in relation to KPI in marketing. While metrics and KPIs are related, they do not refer to the same thing in KPI marketing; metrics are the units of measurement used in key performance indicators. For example, if you want to measure conversion rates, you may do this by examining metrics such as the number of website visitors, bounce rates and completed sign-ups. Some of these metrics can be designated as KPIs if they directly align with your marketing goals. However, while all performance marketing KPIs rely on metrics, not all metrics qualify as KPIs.

Key performance indicators for marketing managers can be broken down into five broad categories:

1. Functional
2. Operational
3. Strategic
4. Lagging
5. Leading

By looking at which KPI marketing category an indicator belongs to, you can gain an understanding of its purpose within a business, the length of time it covers and its level of impact. In this section, we’ll examine these categories and provide marketing KPI examples for each.

Functional KPIs in KPI Marketing

Functional KPIs in digital marketing are indicators used to measure progress across particular functions within a business — for example, human resources, marketing or sales. These areas will each focus on different KPIs: marketing might concentrate on brand awareness indicators, while the sales team tracks customer acquisitions. Functional KPIs are important in KPI marketing because they provide clarity on department-specific performance, helping individual teams set achievable goals and create effective, well-optimized strategies for improvement. This ensures that different functions within the workforce all contribute to the overall growth of the business, improving efficiency and enabling better decision-making.

When setting digital marketing key performance indicators according to function, there are a few important tips to keep in mind. The first is to make sure that your KPIs align not only with that particular department but also with your broader company goals and KPI marketing aims. That way, you can be sure that each distinct element of your business is working towards the same outcome. Secondly, make sure that your KPI marketing goals are specific and achievable: this gives each department in your organization a particular aim to work towards, which will help drive progress. Finally, be sure to review and adjust KPIs regularly, working with department heads to ensure you make informed decisions that are aligned with the KPI marketing aims of the business.

Examples of functional indicators in KPI marketing include:

• Brand awareness: Brand mentions, net promoter score (NPS), share of voice (SOV);
• Content marketing performance: Content engagement rates, inbound marketing ROI, organic traffic growth;
• Customer acquisition and retention: Customer acquisition cost, churn rates, retention rates;
• Lead generation: Lead-to-customer conversion -rates, marketing qualified leads, sales qualified leads.

Operational KPIs in KPI Marketing

Operational key performance indicators in digital marketing track the effectiveness of specific organizational operations. Rather than looking at the big picture, operational performance indicators in KPI marketing are more concerned with monthly, weekly or even daily targets. Such KPIs are valuable because they offer real-time insights into the efficacy of certain marketing activities, allowing businesses to quickly identify issues and make timely adjustments. This allows a greater degree of efficiency in day-to-day operations across all elements of a company. Furthermore, these small-scale operational KPIs usually serve larger-scale indicators — think of a specific KPI marketing campaign’s click-through rate affecting the larger metric of conversion rates.

To make the most of operational KPIs, you should set achievable short-term KPI marketing targets and hold up your performance against industry benchmarks to check your progress. This involves tracking and optimizing your indicators using analytics tools, such as Google Analytics, social media insights and CRM platforms.

Examples of operational indicators in KPI marketing include:

• Advertising efficiency: Cost per click, conversion rates, return on ad spend;
• Email marketing: Click-through, open and unsubscribe rates;
• Social media engagement: Comments, likes, shares;
• Website and digital performance: Bounce rates, session durations, website traffic.

Strategic KPIs

Strategic key performance indicator marketing strategies are those monitored at an executive level to measure the overall growth of a business. They are made up of smaller operational goals, as outlined in the section above. Strategic KPIs are important because they help ensure that short-term KPI marketing efforts are aligned with the objectives of a company, providing all departments with clear direction and driving long-term success. They also promote accountability across teams, ensuring that everyone, down to the very last employee, is working toward the same KPI marketing aims.

Defining strategic KPIs should be a cross-department effort involving team leaders and department heads from every function of the business. This means everyone has a clear idea of what’s expected of them and how they should perform in the coming weeks and months. Regular meetings can also be helpful, as they provide a useful forum for feedback and help ensure that the various departments are all aligned, resulting in a more cohesive KPI marketing strategy.

Strategic key performance indicator examples for marketing include:

• Market growth: Brand awareness index, customer sentiment score, market share;
• Profitability: Customer lifetime value, marketing-generated revenue, return on marketing investment.

Lagging and Leading KPIs in KPI Marketing

The final two ways you can classify KPIs in performance marketing are as lagging or leading indicators — that is, whether they measure past performance or forecast the future.

Lagging KPIs measure past performance, providing KPI marketing insights into a business’s progress and helping marketers determine which KPI marketing strategies worked and which did not. Marketing-specific examples include customer acquisition cost, lead-to-conversion rates and market share. By contrast, a leading key performance indicator for marketing is one that helps you determine what you need to do to achieve a particular KPI marketing outcome. Lagging key performance indicator marketing examples include website traffic and social media engagement: an uptick in either might indicate a higher chance of future conversions.

You may be wondering, “What are key performance indicators in marketing good for?” The answer to this question depends on what kind of KPI we’re talking about. Key performance indicators in marketing play an important role in measuring a business’s success and guiding strategic decisions, but not all serve the same purpose. This is because different aspects of a company’s performance require different types of KPIs. A holistic approach to these various elements of KPI marketing will help any decision-maker or marketer drive growth and success in their company.

Brand Awareness KPIs

All marketers should be aware of the sales funnel — the process by which a consumer turns from a potential lead into a paying customer.

The top level of the sales funnel, and the first stage that all customers must pass through, is awareness. During this step, consumers are made aware of your brand for the first time and discover the ways in which it can resolve their pain points. As such, company visibility is of crucial importance, so you should make use of brand awareness KPI marketing tactics and marketing metrics tools to measure performance. These indicators are KPIs to measure marketing campaign efficacy by gauging how well your target audience recognizes and recalls your company. Some key performance indicator examples in marketing that fall into this bracket include:

Lead Generation KPIs

As consumers move through the sales funnel, they will hopefully convert into viable leads. As they progress, there is a greater chance they will eventually become paying customers. Lead generation marketing performance KPIs measure the effectiveness of advertising efforts aimed at attracting consumers and converting them into leads. They focus on tracking how well a business is generating attention and nurturing that interest into actionable sales opportunities. Some marketing key performance indicator examples that fall into this category include:

• Cost per lead;
• Lead conversion rate;
• Lead quality;
• Number of leads generated.

Customer Acquisition KPIs

The next step in the sales funnel involves leads converting into actual customers, a process commonly referred to as customer acquisition. Customer acquisition key performance indicators for digital marketing measure the effectiveness of KPI marketing and sales efforts in attracting and converting customers. They are important because they help marketers understand not only how successful and efficient their customer acquisition strategies are but also how much they cost. These KPI marketing insights are essential for determining the return on investment (ROI) of advertising and sales efforts. Some examples of key performance indicators in marketing that fall under this KPI marketing umbrella include:

• Customer acquisition cost;
• Customer acquisition rate;
• Lead-to-customer conversion rate.

Customer Retention and Loyalty KPIs

Once you’ve successfully acquired a customer, you want to do all you can to hold onto them and hopefully generate repeat sales. This is called customer retention and is an important part of driving business growth and increasing revenue. Recent statistics by Smile.io indicate that around 35% of an e-commerce site’s revenue is generated by its top 5% of customers, with most of those being made up of repeat buyers. Loyalty KPIs are used to gauge how effectively a company can retain existing customers and encourage repeat sales. This can help business owners understand how to keep clients engaged while also helping to identify opportunities to improve the customer experience and enhance business sustainability. Examples from this KPI marketing category include:

• Churn rate;
• Customer lifetime value;
• Customer satisfaction;
• Repeat purchase rate.

Sales and Revenue KPIs

When asking things like, “What are key performance indicators in marketing all about?” One answer comes to mind immediately: helping increase business growth. An essential part of expanding any company is achieving financial success, and if you’re looking to assess how well you’re doing in this area, sales and revenue KPIs are essential. These indicators help marketers understand a company’s financial success and track its ability to generate income and drive growth. This makes it easier for decision-makers to see how effective their KPI marketing and sales strategies are in driving revenue, revealing whether the business will be sustainable in the long term. Examples of such KPIs include:

• Average order value;
• Customer acquisition cost;
• Revenue growth;
• Sales conversion rate.

Choosing the right digital marketing key performance indicators for your company is essential for tracking progress, aligning teams and making informed business decisions. However, knowing where to get started with KPI marketing can feel quite daunting, especially if it’s your first time writing a business plan. Below, we’ve put together a step-by-step guide on choosing the right key performance indicators for online marketing.

1. Align KPIs with business goals: The first step in choosing the right KPIs for your company is to define what your KPI marketing goals are. Whether you’re focused on growing your business, increasing customer retention or enhancing operational efficiency, the indicators you choose should reflect these KPI marketing objectives. For example, if you set the KPI marketing goal of increasing brand awareness, you may want to focus on indicators like social media reach, impressions and website traffic.
2. Understand key business areas: Identify the core elements of your company (i.e., sales, marketing, customer service, etc.) and assign KPIs that reflect the focus of these various areas. For instance, your sales department might track KPI marketing factors like conversion rates and average order values, while your marketing department may focus on lead generation and brand awareness.
3. Make KPI marketing goals specific, measurable and achievable: The whole point of setting KPI marketing goals is to give your company something tangible to work towards. As such, you should choose specific, measurable indicators in order to track your progress effectively. For example, rather than aiming simply to “improve performance,” you might seek to increase sales by 10% in the next quarter.
4. Set realistic time frames for KPI marketing: Keep in mind that some KPIs track long-term growth while others are focused on short-term KPI marketing results. Consider the difference between measuring customer lifetime value and monthly sales. Align your KPI marketing focus with various time frames to track progress effectively over different periods.
5. Keep it simple: Setting too many KPI marketing goals can convolute things and lead to a lack of focus. With that in mind, try to choose only a few crucial KPIs for each business function. They should be directly related to your goals and effective at measuring success,
6. Review and adjust your KPI marketing goals regularly: It is crucial to review and adjust your goals regularly to ensure your KPIs align with your evolving business goals and market conditions. Short-term indicators should ideally be reviewed on a monthly basis.

Tracking and measuring key performance indicators in digital marketing and knowing how to analyze the results is essential for making informed decisions and meeting business goals. This process begins with defining clear and relevant KPIs that align with your company’s overall objectives. Once that’s done, you should then set up tracking systems, leveraging analytics platforms like Google Analytics, CRM software and email marketing tools to establish goals and track your progress. For a comprehensive overview of your company’s progress, make sure to measure KPI marketing performance across multiple platforms, including your website, social media presence, email campaigns and offline advertising efforts.

Once you’ve collected enough data, it’s time for analysis. Comparing current KPI marketing data against historical performance and industry benchmarks can help you understand how well your business is doing and gauge whether your advertising efforts are on track. Identifying trends in your KPI marketing data can offer further insights, allowing you to pinpoint effective strategies as well as areas for improvement. Additionally, audience segmentation can be useful in KPI marketing, as it can help you tailor future advertising campaigns for high conversion rates.

Remember that data alone doesn’t provide actionable KPI marketing insights: you must contextualize your findings in order to interpret them effectively. For example, when tracking website traffic, pay attention to factors that might be influencing your results, such as recent campaigns, seasonal events and website redesigns.

Business success depends on continuously improving product marketing key performance indicators and using data-driven advertising strategies. This begins with measuring and analyzing KPI marketing data, as explained in the previous section. Once you’ve completed this step, you can then move on to refine your advertising efforts, hopefully increasing customer engagement and driving conversion rates. In this section, we’ve outlined a few strategies you can apply to help you improve your KPIs’ performance in marketing:

• Personalization is one of the most important tools in KPI marketing, with 80% of surveyed businesses reporting increased consumer spending thanks to bespoke experiences. Many businesses also see an increase in customer retention rates and engagement when they start offering customization. You can use data from CRM systems, website analytics and social media to tailor content, product recommendations and offers to individual consumers.
• A/B testing is another helpful strategy for KPI marketing. It allows marketers to try out two versions of a webpage to identify which marketing elements are more effective. Landing page designs, call-to-action (CTA) buttons, email subject lines and alternate ad copy are all examples of different elements you can test. This KPI marketing practice can result in more effective advertising materials, leading to higher lead and sales conversion rates and fewer bounce-backs.
• Following best SEO practices and developing a robust content KPI marketing strategy can help attract high-quality leads and improve brand visibility. Researching keywords, using backlinks and technical SEO and creating high-value content are all tactics you can use in this area. Audience segmentation will also help here, as you can analyze your findings to discover which parts of your audience respond positively to the content you post.

As we’ve shown, tracking key performance indicators for marketing is an essential part of any business plan, but there are certain pitfalls you should always avoid. We’ve put together a list of the top five mistakes to be aware of when tracking KPI for marketing.

• Tracking too many KPIs at once: While it’s important to track key performance indicators of marketing for business growth, using too many can lead to information overload and make it difficult to find your focus. We’d recommend monitoring just a few high-impact indicators — ideally, somewhere between 3-5 per department or KPI marketing campaign.
• Choosing the wrong KPIs: When selecting a KPI for digital marketing efforts, remember to set clear, achievable business goals, find indicators that clearly align with them and provide actionable insights. For example, if you wanted to track brand awareness, focusing on customer acquisition cost or lead-to-customer conversion rates wouldn’t be very useful, as these indicators don’t relate to your goal.
• Ignoring data context and trends: Examining KPI marketing data in isolation without considering recent market trends, seasonality and external factors tells you relatively little. For instance, many websites see a rise in activity during the holiday season and a decrease after the new year. This is unlikely to be because their campaigns are failing. It is much more likely to be because of a seasonal dip.
• Measuring KPIs without a clear marketing benchmark: If you track KPIs without comparing them to your past performance or to an industry benchmark, then the data you’re collecting won’t tell you anything useful. According to recent studies by MailChimp, the average email conversion rate is between 2-5%. If you haven’t done your research, a conversion rate of 3% might seem low to you when in actuality, it is perfectly acceptable according to industry standards.
• Failing to adjust KPIs over time: Businesses that use the same KPIs for years on end are unlikely to reap the full benefits. A startup might place a focus on the number of new sign-ups they get, but it makes little sense for a well-established business to prioritize sign-ups over customer retention. As your company grows and changes, so too should your KPI marketing technique.

We’ve already touched on the importance of audience segmentation in KPI marketing. Many businesses divide their demographic by factors like age, gender, location and income, but psychographic segmentation is another popular advertising method. This form of segmentation involves dividing an audience based on their psychological traits, including everything from beliefs, lifestyles and values to activities, opinions and interests.

A psychographic approach to KPI marketing provides advertisers with a more nuanced understanding of the inherent needs and motivations that drive their target audience. It allows business owners to understand not just what their audience might buy but their motivations behind making a purchase in the first place. This, in turn, makes it easier to craft more effective advertising materials that will resonate with the viewer.

That said, there are several challenges that come with psychographic segmentation in KPI marketing.

• Gathering the necessary data can be time-consuming: While it’s relatively easy to obtain and verify relatively straightforward demographic information, acquiring psychographic data often takes more time.
• Acquiring customer data can be resource-intensive: Holding surveys, conducting interviews and analyzing behavioral data — these practices are useful when it comes to psychographic segmentation, but they use up a lot of resources. This can be particularly challenging for small businesses and startups that may not have access to the kinds of KPI marketing tools enjoyed by larger companies.
• Interpreting data comes with its own difficulties: People are complex and multifaceted, so it makes sense that understanding the subtleties of consumer motivations is no mean feat.

Psychographic segmentation is a worthwhile activity, particularly when it comes to setting effective key performance indicators in marketing. However, marketers must be prepared to face and overcome a number of hurdles in data collection, interpretation and resource allocation to fully leverage its potential. Working with MGID can help you navigate these challenges and make good use of this invaluable information source in KPI marketing.

KPI marketing is an essential tool for tracking business success and guiding the implementation of effective marketing strategies to drive further growth. By selecting and tracking the correct KPIs, marketers and decision-makers can gain valuable insights into performance across a variety of functions, from customer service to sales. Regularly reviewing and adjusting these indicators ensures that all departments within a company work toward a common goal and all move in the same direction.

In order to use KPI marketing effectively, you must be able to track and analyze indicators, viewing them within the broader context of your company’s historical performance and current industry standards. With that said, this can be a daunting prospect. If you believe you would benefit from expert advice on KPI marketing, as well as access to a wide variety of advanced marketing tools, you may want to create an account on MGID. Through our service, you will enjoy the benefits of a dedicated personal manager and an entire department of creative specialists, all committed to providing you with professional assistance.