HBS 4DX for Marketing

By Jasper Meurs
July 3, 2021

It starts with an idea. We’ve all had great ideas on what we want to see or what we want to improve in our marketing strategies, and we start by reverse-engineering a strategy or process on how to get there. The problem though is sometimes we’re not focused on the right criteria and we may forfeit some great ideas (and potential results) because of the way we’re interpreting our data. But the question then becomes, what should we really be looking for?  

It can be hard to decide which of the 120 things in a strategy list are working well, and which ones aren’t working so well. And while they may seem equally important, it doesn’t mean we need to jump start all of them at the same time. Personally, I like to develop a core list of 2-3 ideas that are absolutely necessary to the overall process. Two types of KPI metrics that I think are invaluable for executing a successful marketing strategy are Lead and Lag KPI metrics. Lead KPIs measure performance before the end goal of the business or process starts to take shape. In this sense, they’re providing you with insight on how your initiatives are currently doing on a micro-level. Lag KPIs measure the bigger business goals you are after, like leads, revenue, etc, a more macro-level of observation. Lag metrics are usually the goals we set out to achieve, but take more time to materialize than we may think. This is where most mistakes are made, by evaluating a marketing campaign based on lag KPIs. And if that’s the case, how do we focus on the right KPI at the right time? Let’s read on.

Let’s apply the idea of lead and lag KPI metrics to a marketing strategy aimed at increasing revenue of an e-commerce store. A lead KPI would be setting a target of 5,000 visitors to our webstore, a target we believe will be sufficient to achieve our end goal. In turn, these visitors will make enough purchases to increase revenue by approximately 20%; this revenue increase will function as our lag KPI. Let’s also assume our main strategy to increase web traffic is an increase in SEO and SEM spend, combined with email marketing campaigns.

After executing our strategy, we’ll first see an increase in website traffic (lead KPI) before we see an increase in revenue (lag KPI). And the good news, this increase in visitors to our store indicates that our strategy is working as we hoped to achieve our lead KPI: a target of 5,000 visitors to our webstore. But, this doesn’t necessarily mean we will see an immediate 20% increase in revenue once user number 5,000 enters the site. Does this mean we’ve failed? No. Do some decision makers think this spells failure and often pull the plug too soon? Yes. But here’s why. 

The people making these decisions and evaluating these results have tied our lead and lag KPIs so closely together, that it seems like this strategy isn’t working, simply because our lead metric was achieved before our lag metric, rather than happening at the same time. But just like we mentioned at the beginning, we first need to execute our marketing strategy before we see an increase in web traffic. So, why would one assume the moment a lead KPI is achieved, that the lag KPI would also be achieved? Some things take a little bit more time, and that’s where it’s most important to focus our attention.

The number of visitors to the site doesn’t necessarily correlate to an immediate number of sales, this is due to the decision making process when making a purchase (compare buying a phone case to buying a refrigerator). It will likely take a bit longer to see our final result of a 20% increase in revenue. It’s not because our first strategy didn’t work, it’s simply because we’ve tied our lead and lag KPIs too closely together, one does not depend solely and exclusively on the other.  

This is even more true when we explore B2B sales and marketing strategy. There tend to be more decision makers in the process, a different kind of internal employee buy-in and pain points may prevent immediate conversion or execution of ideas. But by focusing on the correlation between our lead and lag KPIs, we’ll soon know if we’re heading in the right direction, or if we need to change course.

The bottom line is keeping a sharp eye on what the goals are, and how they’re truly being measured. Arming your teams with the right information at the right time means they will thrive and develop the right strategy based on accurate data. The weight that each data metric carries throughout the marketing strategy lifecycle, as well as setting the right expectation for each area of the equation is paramount. I’ve seen time and time again how some truly great marketing strategies are cut short because the numbers they’re hoping to see are taking longer than they thought because decision makers lack focus. It’s not always easy to align the actions you’re taking with the bigger goal you set out to achieve, but looking at the right metrics at the right time when executing a marketing strategy will absolutely set you up for success.

If you want more information about the 4DX framework in general, consider reading The 4 Disciplines of Execution: Achieving Your Wildly Important Goals by Sean Covey.

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