Proxy metrics—the hidden signposts to your most elusive KPIs
Data gaps and latency can kill even your best measurement efforts. Installing proxy metrics into your strategy is a great way to continue proving the value your marketing produces.
Data drives the world, and no industry has become more data driven in the past twenty years than the world of marketing. There's no question: measurements are the be all and end all of data-driven marketing. Every action you take needs to be based on data: you can’t optimize what you don’t measure.
You see it everywhere you turn: warnings to keep an eye on your KPIs, stories of failure involving gaps in data and critical misinterpretations. The need is high, but the ability of most firms to fulfill that need is low—and we're not just talking about small businesses with one marketing guru on staff: we're talking about businesses with entire marketing teams who are still struggling just to measure what's happening (let alone to make smart decisions based on those measurements).
The reality of today's business world is that there are thousands of metrics that need to be measured (and only one you). Ironically, we might also say that there is simultaneously too little to measure—because the only measurements that really matter concern KPIs connected to value (and not simply to marketing activity).
Even worse, all the work you have to put in to measure all these metrics might not even matter if it's taking too long. Assuming you're measuring the right metrics and you have the capacity to measure them all in a meaningful way and interpret them, what good do they do your firm when you react to them too late?
It's a mess—but fortunately, there's a solution to data gaps and latency:
Proxy metrics—overcoming the gaps
Not all measurement strategies are created equal: how, what, and why you measure matters. Performance hinges on your ability to figure out where opportunities for optimization are hiding (and your ability to make recommendations in a timely manner). Proxy metrics are the tools you need to overcome the gaps between the KPIs you wish you could measure and the data you actually have (and can successfully and intelligently parse).
To put it simply, a proxy metric is an indicative metric you can easily (and quickly) measure that is upstream of the KPI you're actually trying to measure. Your KPI shows actual value produced, but you can't quite measure it. Your proxy metric is the data that gets generated along the way and that correlates to changes in that KPI.
We know that strategy matters here. A recent study by Bain and Google reveals that marketers who have more developed KPI measurement strategies (including proxy metrics) are able to tie marketing activities to companywide outcomes, such as profit or revenue. Installing proxy metric measurement into your strategy is one way to continue proving the value your marketing produces.
We also know that leading marketers are finding success measuring proxy metrics. Here's an incredible example from the linked article about Estée Lauder:
"The company’s marketing team knew that measuring the success of its efforts solely on ecommerce sales didn’t paint the whole picture, because so much of its business still comes through in-store sales from retail partners—and that sales data isn’t available to the brand in real time. So Estée Lauder used Google’s store visits to uncover a proxy metric. This solution correlates people going into a store with their phones to an ad click and calculates the sales lift. As a result, Estée Lauder was able to see the total success of its campaigns and pivot or scale as needed in real time."
Proxy for the win
Useful proxy metrics are generally simple to measure, are often correlated to business goals (and can be used to predict success or failure), are often far more concrete and unifying than the KPIs downfunnel, and enable faster reaction (because your insights aren't being held up by analytics or parsing).
So how do you find proxy metrics for your brand? Start by identifying those KPIs you want clarified more than anything else, the ones that mean the most to your business. Then evaluate the entire customer journey from top to bottom and note what data you want and what data you actually have.
Then explore the data and analyze correlations. Look for proxy metrics that point to your chosen KPIs. After you do some analysis, do some testing. See if you can optimize based on those metrics. See what happens when you try to push the needle—see if the KPIs that correlate with value start to be affected.
It’s important to look across all channels, devices, and touch points, rather than viewing them in isolation (as the Estée Lauder example shows). Look for hidden proxy metrics, and once you have a clear cycle of experimentation down, accelerate your optimization strategies. That's the real power of proxy metrics—your ability to move agilely and discover potential growth strategies in time to maximize their effectiveness.