Marketers: Beware the Siren Song of KPIs!

The Primary Purpose of Marketing is Not to Optimize KPIs

In many marketing departments, the digital revolution and modern martech have brought the power, if not seduction, of numbers. Now, marketers too, can use numbers to demonstrate their effectiveness to the business—just like the sales, finance, and operations functions. No longer does marketing have to worry about being a second-class citizen that comes to the table without spreadsheets and charts based on hard numbers while suffering the perception of being a cost-center rather than an essential function of the organization. Marketers now have the real-time ability to show how many customers and prospects are interacting with the company’s brand(s), what media channels bring in customers at what rates, and which marketing messages are most effective—thereby bringing an entirely new level of perceived value and legitimacy to the marketing department. And marketing departments everywhere are embracing their newly found legitimacy through numbers.

But is this really a good thing? Is everything we can now measure, and indeed do measure, actually that important? Or are we just enamored by the ease with which we can finally impress those colleagues from other business functions who naturally think in numbers and quantify everything as a normal component of their particular business function? In other words, are marketing KPIs really as critical to the marketing function as many today make it out to be, or are they merely a seductive siren song that will lead the marketing department ever farther away from what their original function was meant to be – ultimately to founder against the rocks as those sailors in Greek mythology?

The answer to these questions, I believe, depends on the measure of success one chooses for what marketing does. If the definition of marketing success is framed in short-term, tactical terms (e.g., weekly leads/sales), then emphasizing marketing KPIs will lead to incremental success, particularly in the near term. However, if marketing success is framed in terms of more substantial business growth, then reliance on marketing KPIs actually may be detrimental.

Let me explain what I mean: Marketing of products and services is about persuading people. And not only are people not all alike, they also do not behave like rational, logic-driven beings (as much as we’d all like to think we do). Rather, people behave in ways that are determined more by their environmental and social context and their emotions than by logical, rational thought. While most economists pretend that consumers behave in rational ways and that reality maps perfectly to behavior (i.e., lowering price increases demand), marketers know that is, at best, a gross over-simplification. In fact, higher price can and does lead to greater demand (see, for example, our post on Veblen brands). People buy on emotion. They rationalize their choices with logic, for sure, but they are not machines. People want to look good and impress others. They want to signal their social status, align with and belong to certain social groups and not others. They make decisions based on heuristics, biases, attitudes, and beliefs. This is not a domain where quantification through numbers tends to do well in aiding our understanding of first principles and likely behaviors.

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Here are a few examples to illustrate the subjectivity of people in general, and your customers in particular:

  • The same product presented at a higher price or under a brand name or in heavier packaging will tend to be perceived as being of higher quality
  • Customer complaints about waiting times often are prohibitively expensive to solve by changing actual wait times and much easier and cheaper to ameliorate through psychological means, such as counting down how long the remaining wait is (people hate uncertainty) and/or distracting them through some form of entertainment
  • Simply implying something is scarce is sufficient to drive purchase behavior (e.g., “only 3 rooms/seats/tables/products left”)
  • Providing social proof improves customer experience (e.g., “most callers choose option 3”)
  • Just saying “Now 50% off” increases purchase likelihood
  • Contactless payment (e.g., through a smartphone) feels like the purchase was 15% cheaper simply by virtue of the act of paying being so frictionless
  • People are more motivated to avoid a loss than experience a gain of the same value, which is why free (but limited) trial offers and x%-off vouchers are so effective
  • A trusted figure saying, “this works” or “this is good quality” will tend to instill that same perception in others (known also as the “placebo effect” and “halo effect”)

These few examples demonstrate the importance of taking a psychological perspective, in addition to, or even instead of, an engineering or finance approach. Both reality and perception are important to business success. The most effective approach in achieving the greatest outcome at the lowest investment is not always obvious unless both are explored.

In fact, in the words of the renowned business consultant, Peter Drucker:

“Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

While innovation creates (hopefully) desirable new products and services in the physical realm we know as reality, marketing’s primary purpose is to create desirous perceptions in people around both new and existing products and services. Both are valid ways to increase sales.

So, coming back to marketing KPIs, while there is some incremental value in measuring and acting on the plethora of data modern martech provides, marketers should always remember (and remind all others in their businesses) that the primary function of marketing is to make their company’s offerings more enticing and desirable to people. And that means understanding human perceptions, emotions, beliefs, and attitudes concerning the needs, desires, frustrations, and aspirations of prospects and customers and how the business can and should address them with current or new products and services.

Do that well first and foremost. Then worry about tweaking your digital marketing efforts based on KPIs.

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Frank Schab
An experienced marketing and branding strategist, Frank has been helping clients optimize the value of their brands through insightful analysis and effective strategy for more than three decades. Along with holding positions at General Motors and Pfizer, Frank served as a Managing Partner at Interbrand New York and VP of Global Brand Research at Opinion Research Corporation before co-founding Six Degrees. His brand-building work in various sectors including hospitality, medical device, pharmaceutical, automotive and technology has taken him to 17 countries on four continents. Frank holds a doctorate in psychology from Yale University and speaks fluent German.

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