{squeaky lean}

Objective Setting for Dummies

Every company should have a robust objective setting process that all managers are trained in.

But they don't.

The reason they don't is that once people get to a position in a company where they're first asked to write some objectives, they decide it would be too embarrassing to say "I don't know how. Can someone show me?".

So they set some anyway, and their boss accepts them.

They are a bit surprised by this, but the more they think about it, the more they begin to think "you know what, WHY am I surprised?! I must simply be a natural at this!"

They're not. So thinking this is bad.

Soon, they start to get cocky and begin criticising other people's objectives. They can sometimes be heard trying to explain to people in patronising tones, the difference between 'tactics' and 'strategies' – "that is in fact a tactic, you see, not a strategy, you should listen to me, you see, I am an expert, I write objectives you know" – STOP LISTENING TO THEM! Their lips are moving up and down for the sole reason of letting nonsense fall out of their mouths. You won't get anything useful out of the conversation.

That might sound harsh, and what they are saying might even be technically correct, but for these people it's not about having GOOD objectives, strategies or tactics – it's about persuading people that they know what these things are. They think that's enough.

IT ISN'T! Nowhere near enough. In fact, its dangerous to let someone loose on the objective setting thing if they think this way.

So ignore them until they learn their lesson. And know this – it's because so many people act this way and get away with it, that objective setting doesn't get identified as a skills gap, and nobody thinks there's any need for training.

This has to stop.

So I'm going to kick off and say this:

Until recently, I didn't know how to go through a process that would enable me to identify the right objectives for a project I was responsible for. And I am a senior manager at a major publishing company.

There. I've said it. Join me people!

As my qualified statement implies though, I do know how to do it now. And I'm pretty smug about it if I'm honest.

Turns out it's easy. All you do is…

1. Create a diagram showing the journey of a customer who interacts with your product

Within this, make sure you cover the bits of the journey from where the customer finds out about your product, engages with it, does whatever they need to do for you to make money from it, through to the bit where they put it down and later decide whether or not to pick it up again.

Couple of acronyms to help make sure you cover the bits you need to cover:

ARM (Acquisition, Retention, Monetisation)

See the diagram from Kontagent (Analytics company widely used by social games companies)

  • Acquisition (Think: Cost per Acquisition – CPA)
    How do I get the right audience to turn up for the least amount of money
  • Retention
    How do I persuade them to come back of their own accord, so I don’t have to pay to get them again
  • Monetisation (Think: LifeTime Value – LTV)
    How do I persuade them to buy stuff or do other things that make me money

Your customer journey has to cover all three of these elements. Read more on Nicholas Lovell's blog.

REAL (Reach, Engagement, Activation, Loyalty)

I find this one is good for ad-driven businesses; it covers:

  • Reach
    The fact that people might be aware of your product before they respond and use it.
    Ideally you want to affect this response rate.
  • Engagement
    Once someone does respond, with an ad-driven business model, they need to engage, consuming more content so you drive more ad inventory,  and showing real interest. Interest that advertisers want a share of.
  • Activation
    There's always something you want your audience to do that will make them more valuable. Sign up for something, buy something, refer someone, consume more valuable content (e.g. videos). Activation covers this. You want to activate the customer in terms of making them do the thing(s) that makes them more valuable to you.
  • Loyalty
    Same as Retention in ARM – But if we used 'Retention' here, the acronym would be REAR, rather than REAL. So… Loyalty.
Right. I've taken these, mulled them over and developed a diagram for the user journey on a publishing website. Here it is:


Lets walk it through:

  1. We have to Reach a customer to make them aware of the product.
  2. They need to RESPOND so we actually Acquire them.
  3. Once acquired, we need to ENGAGE as many of them as possible (i.e. make sure they were happy to have turned up in the first place) so we increase our overall level of Engagement, maybe the total number of pages viewed.
  4. As we engage them they are generating ad inventory. For our business to make as much money as possible we need to create enough inventory that our sales team doesn't run out of ad space to sell. This is our AD AVAILABILITY RATE.
  5. At the same time we hope they might buy something from one of our affiliates. We want as high a percentage of people as possible to do this. This percentage is our CONVERSION RATE.
  6. Our AD AVAILABILITY RATE and our CONVERSION RATE drives our Monetisation. Which is, umm… the amount of money we make.
  7. Now we'd like to activate them further. Before they leave we hope some of them sign up and give us some contact details, so we can talk to them without having to wait for them to come back (REGISTRATION RATE) and/or tell a friend about us to give us some free advertising (REFERRAL RATE). If more people do these two things then that improves our Recruitment and Referral numbers.
  8. Finally, once we've got everything we can from them this time round, we hope we've been impressive enough that as many of them as possible remember us and come back again (RETENTION RATE), to improve the overall number of returning customers, which gives us our Retention number.

There. That pretty much covers it. Lets go to step 2.

2. Measure every step of the customer journey

Measure all of it.

And then fall in love with your metrics.

That's what I said, yes. LOVE. METRICS.

Get emotional about them. Lose sleep over them. Keep refreshing your inbox over and over until new ones show up. Feel bitter if your metrics reveal themselves to someone else before you. Lose your temper with them when they say something you don't like, make up with them when you realise it's not their fault (it's yours) and then fall in love with them all over again when they turn to you and say what you've always wanted them to say. – "Your retention rate is up 20%" – oh yes. Such sweet, sweet words!

In the diagram above, we'd need to measure all the white boxes (these will be volume numbers) and all the blue boxes (these will be percentage numbers). Your customer journey diagram has to alternate between volumes and percentages: number, rate, number, rate, number, rate – you get the idea. If it doesn't then you've done it wrong – probably missed something out.

Measuring all this might take a while. Most people already have lots of metrics for the first part of the journey (Acquisition suff) and the middle part (Monetisation stuff), but have much less for the latter part (extra Activation stuff and Retention stuff). So get ALL the measures in place. You DON'T want blind spots! You would be amazed the amount of times a business or project has spent months or even years persevering with an objective that would have clearly been doomed to failure if only they had the right metrics in front of them early enough.

Measured them all? Good. Step 3 then.

3. Identify your strategic gaps

If steps 1 and 2 are done properly, this bit is easy. Look at the percentages for your blue boxes. These are your Key Performance Indicators (KPIs). They tell you how well you are performing at persuading your customers to do the things you need them to in order to make your business work.

Firstly, marvel at the fact that you now have this information. And then at the fact that you didn't have it beforehand.

Next, pat yourself on the back for the KPIs that show you are performing well at something.

Now get over yourself and look at the numbers that tell you the things you're not doing well at. If you want to set proper objectives then finding these numbers are like finding gold. Because once you've found one then you've found a proper objective.

If it's your Engagement Rate, then your objective is to increase your Engagement Rate. If its your Retention Rate then your objective is to improve your Retention Rate (you get the idea).

You may think this suddenly sounds too simple. But its only simple because of the work you've done in steps 1 and 2.

Follow this through and while you are correctly concentrating on the real weak spots of your business, e.g. Retention Rate, your competitors might still be pouring money into the wrong places, e.g. marketing for new audiences that aren't engaging or returning.

They probably don't know they are wasting money, because they probably don't know they have problems with retention. And while they're wasting their time, money and resources on this, you're improving your product to the point where spending marketing money might have become a good idea – which is when you decide Reach and Response Rate have become the weaknesses in your business.

In short. You're being cleverer than them. Enjoy.

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By Kevin Heery.

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2 Comments

  1. […] sure, as a team, you've agreed your objective along with an immediate KPI to improve. Read objective setting for dummies for more on […]

  2. […] (For more on this principle, read Objectives Setting for Dummies) […]

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