What’s needed beyond KPIs?
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty marketing publishing, education and research since 1990.
According to Jonathan Adler, director of insights and analytics at Lenati, KPIs (key performance indicators) are good at providing snapshots, but subpar at providing any context.
“For example, suppose retention was down three percent last month,” Mr. Adler said in an interview. “Is three percent a big drop, or is it the kind of month-to-month fluctuation that should be expected? Was it from customers across all segments or just one type of customer? Was it at one location or across the company? KPIs typically won’t answer these deeper questions.”
While marketers sometimes think having more KPIs will provide more clarity, too many can be overwhelming, and mixed findings from those KPIs can erode trust.
To move beyond KPIs, companies should consider tapping exploratory and predictive analytics.
Exploratory analytics views the data in different ways to get more context of the larger story. Business intelligence tools like Tableau and Excel, or data science programming languages like R or Python, support the deeper analysis.
Establishing a strong relationship with insights and analytics resources is key to exploratory analytics.
“Ideally, you have someone who can translate a business question to a data science question,” said Mr. Adler. “Then go find the right data, and translate that data science answer back to an answer that can be widely understood by the business. Asking your team to explore a data set or respond to a specific question is very different than requesting them to ‘make this graph.’”
Predictive analytics uses advanced statistics and machine learning to gain an understanding of customer lifetime value, customer churn and segmentation. Said Mr. Adler, “For example, suppose there’s a retention problem. You can use predictive analytics to build a statistical model to understand the drivers of customer churn, and predict which customers are likely to leave next.”
Success with both approaches requires a consistent reporting structure — a digital dashboard, a monthly report, an Excel sheet, etc. — to identify issues and find answers quickly.
DISCUSSION QUESTIONS: Are marketers overly reliant on KPIs in understanding and leveraging customer data? What advice would you have about leveraging exploratory and predictive analytics?