Friday, January 7, 2022

Setting Targets For Your Marketing KPIs Can Destroy Them As KPIs. Here's What To Do About It...

Photo by Vitolda Klein on Unsplash
I wish I'd been taught Goodhart's Law when I was in school. In fact, I wish everyone was taught Goodhart's law. Understanding this axiom would improve the way we lead and measure any discipline, but it's crucial for those seeking to improve marketing and customer experience. Goodhart's law is:
"When a measure becomes a target, it ceases to be a good measure"
(Actually, that's the simplified version. Since the adage comes out of economics, it is stated in a more scientific and fancy way: "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." Clearly, simpler is better.)

The point is that once we make one of our KPIs a goal for measuring success, we can quickly and inadvertently destroy the value of the KPI as a measure of success. If that sounds counterintuitive, let's explore three real-world examples:

Setting targets for social media likes and followers destroyed the value of social media likes and followers

In the early days of social media, brands providing the best experience and earning the most significant loyalty also collected the most likes and followers. Had brands merely competed for authentic likes and followers by providing the best customer experience, then tallies of their followers and likes could've remained a valuable sign of affinity, loyalty, and interest. Instead, marketing departments set targets to increase followers and likes, each wanting more than the competition. As a result, marketers deployed strategies to deliver on the goal, such as giving away free product, Farmville items, and entries into sweepstakes in return for follows and likes. Targets were achieved, but those strategies annihilated likes and followers as a valid measure of, well, anything. And it isn't just that brands ruined the value of those social metric metrics; the brands that bought fans with freebies also found they collected less meaningful fans--not people interested in or with an affinity for the brand, but people who just wanted free stuff. Likes soared, engagement plunged, and no one benefited. Social media marketers ignored Goodhart's Law and learned the hard way that how we earned fans and likes mattered more than that we improved our fan and like measures.

How you increase your email subscriber list affects if your efforts help or hurt your brand

Email helps us reach our customers with lower cost and less interference than ads and social media posts, so marketers naturally want as many subscribers as possible. But, once we set targets for more extensive email lists, we inspire list-building activities that deliver on the goal while doing nothing for (or harming) our marketing objectives. Buying lists, giving rewards for subscribers, and automatically adding customers to mailing lists without consent efficiently produce larger lists, but they also encourage lower open rates, diminished deliverability, customer annoyance, and spam reports. By setting a target, we encourage strategies to hit the goal without proper consideration for whether those strategies do more to help or harm overall marketing objectives. We cannot celebrate that we added addresses to our email list without also understanding how we achieved that target.

Decreasing your Cost of Acquisition is not beneficial if acquisition strategies also decrease the lifetime value of customers acquired

One of the most critical metrics in the marketing world is also subject to Goodhart's Law. Of course, marketers want to reduce their cost of acquisition. But when we set this as a goal, what sorts of behaviors and tactics do we encourage? A credit card company found that many acquisition strategies were, inadvertently or not, designed to collect people who game the system, switching from one credit card to the next merely to collect as many points and perks as possible. The cost of acquiring these customers was meager compared to acquiring affluent customers more likely to remain loyal and deliver higher lifetime value. When the brand made the right offer with a competitive promise of free points, the network of blogs and communities dedicated to points gamers would spread the word and deliver clicks and conversions. Without considering who we acquire, we miss that how we lower the cost of acquisition is more important than that we lower that measure.

This list could go on and on. Net promoter score (NPS) can be abused by altering surveys and sample rules. Ad cost per impression can be reduced by using cheaper, lower-quality ad buys. A bank that set new accounts as a target encouraged illegal activity to open accounts for customers who didn't want them. An automaker targeting lower emissions manipulated its testing to show emissions 40x lower than real-world driving conditions. Even bottom-line profit itself is subject to Goodhart's law--how many accounting scandals have we seen where company leaders altered bookkeeping to give the appearance of a higher margin (and thus receive more generous bonuses)? There is literally no measurement for which you can set a target that cannot be controlled, abused, or sabotaged, whether purposefully or unintentionally.

To read the complete blog post and see the five actions recommended to improve the way you set and measure targets that matter, please read the complete post on

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