My first consulting role was at Arthur Andersen. While at that firm, I worked on many types of projects in several industries. Many of our projects helped companies develop key performance indicators (KPIs) that focused everyone in the organisation on the company’s goals. I found these metrics were helpful for employees as well as their organisations.
These engagements started with a discussion of the company mission statement, value proposition, and vision of success. Companies then defined their strategic objectives and identified the processes that supported value creation for customers and the achievement of the strategic objectives. Once these processes were identified, and they often crossed several operating functions within the company, we developed metrics for measuring success. These metrics were KPIs, and they were often used for compensation plans, promotions, and bonuses.
Back in those early days of digital dashboards, publishing these KPIs daily was a remarkable tool for management, and we quickly realised the power of KPIs and incentives to affect individual and group behaviour.
You get what you measure
In our work with news publishers, we have observed the power of KPIs to help employees succeed in reaching their individual goals, which were aligned with the goals of the organisation.
One recent example is the use of the KPI “subscription years sold” to get subscription sales teams to acquire longer-term subscriptions. Prior to the adoption of this metric, sales people were measured on new starts, and the average subscription sold was six months. Following the use of the new KPI, the average subscription term sold was 1.5 years. The retention improvement led to print circulation growth for the first time in 10 years. Sales people began to boast about the number of subscriptions years they had sold on a given day.
Another interesting case was the use of a pair of KPIs to improve the performance of advertising sales teams. They were given a target win-rate and average price level. Sales people had to reach both of these metrics to receive a bonus. Achieving one KPI by itself was insufficient. This pair of KPIs gave sales people the incentive to acquire profitable new business instead of focusing on sales volume alone.
Unintended consequences of poor incentives
Occasionally, there have been cases where poorly designed KPIs caused adverse behaviour. On a couple of occasions, contests among customer service representatives (CSRs) has led to unprofitable changes to customers’ accounts. For instance, in multiple companies, bonuses tied to digital subscription starts led to large conversions of print customers to digital products, which were not as profitable for these publishers due to the much lower digital prices.
Another example of an adverse incentive created by a KPI is a sales commission plan tied to monthly sales with a cap on a salesperson’s income. Once the month’s sales target was reached, there was no incentive for sales people to close more deals. And we observed a surge in new contracts submitted on the first of each month.
In another case, a management incentive plan was tied to consistent improvement year-over-year. This led to delayed implementation of profitable initiatives to future years.
The key takeaway in these cases is that people will react rationally to incentives. These examples of adverse behaviour were not the fault of the employees but the result of poor KPIs.
Application of KPIs to today’s news media business
When we look at current trends in the news media industry, there are opportunities to apply the lessons learned about KPIs to improve business performance. One significant opportunity is to provide journalists with data about the consumption of their articles. Due to the important investigative role of newsrooms, journalists are not data driven but data informed. And news coverage should not be determined by KPIs. However, there is an opportunity to use data to improve newsroom economics.
At a recent conference, Josh Awtry of Gannett shared how the company used data on content consumption to allocate newsroom resources away from content that had little value to audiences. He shared that the bottom half of content as measured by Web traffic was generating less than 5% of total pageviews. Gannett was able to focus its newsrooms to produce fewer total content items each week that generated more pageviews in total.
Patrick Tornabene of Newsday and his team of data scientists created a database of prior articles with performance metrics for comparison with current articles. This tool enabled journalists to see what article attributes led to greater engagement or subscription sales, and it recommended potential changes to the authors. Key words in headlines, the use of images, first-person narratives, and other elements had significant influence on article performance.
Mark Francescutti of The Dallas Morning News and the newsroom at that newspaper used data on article performance captured by the Listener tool to understand an article’s value. Article value could be realised from advertising inventory, the conversion of readers to digital subscribers, and the engagement of existing readers. They used these insights to compensate freelance journalists, justify investments in the newsroom, and allocate resources to different projects.
Other opportunities and further reading
Several KPIs for print and digital audience operations have been discussed in prior blog posts. Read more about total customer lifetime value (TCLV), core relationships, and renewal pricing KPIs, specifically yield.
Recent developments in content economics have led to KPIs for digital news sites. These include engagement, which is often defined using recency, frequency, and breadth metrics. Engagement has been found to be critical for digital subscription sales and retention.
Other non-content related KPIs important for digital products are load speed and page weight, which are important for user experience. Another KPI that has emerged in several companies has been given different names such as meter stop rate (MSR) and modal hits. This is the percentage of unique visitors each month that are presented with an offer modal, either through a metre or a “freemium” content strategy.
When we look at the critical processes for a subscription business — produce content people will pay for, maximise subscription sales attempts, remove friction in the sales process, and retain customers — it becomes clear what should be measured. The creation of KPIs that produce desired results and avoid unintended consequences is a key step on the path to success.