Regular evaluation of your business can provide invaluable insights into those areas that need improvement or modification. But before this, your business must establish some key performance indicators (KPIs), which will track your performance and which you can use them as benchmarks. These indicators are tools that measure your product’s performance. Using them, you’ll understand if your product meets your goals and if your strategy is working well.
Choosing the right KPIs isn’t always easy. Employing the wrong metrics or using too many might be detrimental and ineffective for your business objectives. This article provides the steps marketers need to take in order to choose and implement the right metrics for their business.
What are key performance indicators?
Key performance indicators are a performance measurement tool used to identify an area that needs to be evaluated, and based on certain criteria, will give different results.
Developing key KPIs is done with the company’s objectives in mind. For example, a retail company would include average customer spend, or customers satisfaction as a KPI, while a company that offers professional services could measure the rate of bookings.
Why key performance indicators matter
KPIs provide insights of the success or failure of your business, and help the company identify areas that might need additional attention. By identifying KPIs, a company can make those modifications necessary to become more productive, and can be used even further, on a higher scale, as evidence of the company’s success.
In a nutshell, key performance indicators are the objectives that the company aims to reach. In order for an indicator to be effective, it has to be measurable, attainable, and specific. It’s the first step towards measurable improvement. And things that can be measured, can often be improved.
How to choose the right ones?
While the answer to this isn’t always easy and straightforward, it comes down to several things that a business should take into consideration. Below are some of the factors that could influence your choice of the most important KPIs for your business.
They should fulfill the following three features:
- A key performance indicator must resonate to the company’s goals.
- KPIs should be quantifiable and controllable so that your team can influence the outcome.
- KPIs should be focused on measurable outcomes. Having a specific outcome established will enable you to track it over time.
Characteristics of good KPIs
In order to be effective, KPis should have certain features. Below are some of the most important:
- Relevance and impact. A metric should be relevant for your business and provide a firm impact.
- Straightforwardness. Everyone in your business should understand the KPI and its importance, so it should be simple for explanation and usage.
- Timeliness and balance. The KPIs for your business should serve both short and long-term goals and needs of your company, and should be measured within a certain time frame – weekly, monthly, etc.
Step 1: Choose KPIs directly related to your goals
First and foremost, make a list of all potential KPIs that relate to your core business objectives. Asking the following questions could be of help: What are the company’s goals? What are the top priorities for the team? What is the major focus for optimization?
Here are some examples:
Goal 1 – Increase conversion rate for 5% in the following 6 months. In this case, KPIs could include conversion rates, shipping rate trends, competitive prices, etc.
Goal 2 – Sales boost by 5% in the following year – here, KPIs could include daily/weekly sales, site traffic, conversion rate, etc.
Goal 3 – Increase site traffic by 15% next year – here, KPIs might include traffic sources, site traffic, click-through rates, social sharing, bounce rates, etc.
It’s easily noticeable that these examples show the relation between the potential core goals of a certain business and the potential KPIs.
Step 2: Use Quantitative and Qualitative KPIs
Quantitative indicators, like daily profit or active users measure the quantity of something, as the name suggests. This means that your business will benefit from collecting statistical, hard data. On the other hand, qualitative indicators, such as customer feedback, will provide insights about why something happened, for example, why users aren’t satisfied with your product. The mix of these two types will give you a balanced feedback about the performance of your product, and will keep you focused on the your goals.
Step 3: Explore numerous, but include only a few KPIs
When it comes to digital marketing, everything can be measured with specific metrics that go into details. Conversions, opening rates, views, click rates, and son on. However, it’s not very wise to include everything – on the contrary, less is more in this case makes more sense. Focusing on just a few key metrics is the best practice.
Since every business is unique and has individual and specific goals, it’s not easy to specify how many precisely you need to include. It’s up to the company to decide on the number, but as said previously, it shouldn’t be too high.
Step 4: Consider the growth of your company
Whether your company is already a well established enterprise or has just been established, makes a difference – not all KPIs will be equally important. Some will be more in focus.
Bigger, older and established businesses will be more interested in delivering long-lasting values and might focus on cost per acquisition, while those in the early stages of development will be oriented towards validation metrics.
Let’s say, you want to include digital marketing goals in your overall business strategy. Today, many brands and businesses have been undergoing digital transformation for one simple reason – to keep track of the current trends and reach out to their consumers, who are spending much of their time on various devices.
Since digital marketing includes many different layers and areas of focus, below are presented only a few of the more prominent areas of interest for businesses in the current digital landscape:
Sales and marketing
|Time spent on website||Conversion rate||Page views|
|Return visits to website||Cost per sales lead||Share ratio|
|Number of unique site visitors||Search engine ranking||Unique visitors|
|Followers/growth||Page views||Average order value|
|Link click-through rate||Unique visits||Visits to purchase|
|Unique visits||Bounce rates||Conversion rate|
A business that has no idea where’s headed is a recipe for a failure. Knowing your company’s strengths and weaknesses is a good starting point in determining and developing your plans for further improvement. In short, KPIs provide a solid ground for an ongoing success, and below are some of the benefits of having a specific, carefully selected KPIs for your business and industry.
- Improved decision-making – Having precise KPIs will help your business reduce uncertainties around your main goals and will provide a clearer view on where your company is standing. On the long run, they could the decision making process and lead your business in the desired direction.
- Goal alignment – KPIs help in aligning your company’s goals by dividing all the complex information into smaller, comprehensible steps. In this way, everyone in the company will will be on the same page with regards to the common business goals.
- Improved budgeting – Establishing KPIs means your company’s budget should include and provide a certain amount of money that should be spent at a given time period. So KPIs are in a way contributing to cutting down unnecessary costs, by focusing the budget on the most important goals which they represent.
- Enhanced performance – KPIs help identifying those sectors in your company that perform well, and those that don’t. With these insights, you can create strategies to improve the weaknesses in your business.
- Increased efficiency – When your company uses KPIs for growth and success estimation, this gives your team measurable goals to achieve. And when someone clearly knows what to achieve, they end up focused on meeting the goals. The result is, an increased overall efficiency.
Key performance indicators allow businesses to improve their performance, while also improving the people working on the company’s goals. Having well established, specific KPIs is the basis of your company’s goals. They are also a measuring tool for determining whether employees are performing at expected levels within the company.
Finally, KPIs encourage employees to focus on the right goals and work towards them, making necessary modifications on the way to success. All in all, KPIs are useful in creating a high-performing culture, since they allow businesses to balance quantitative and qualitative measures in understanding the wanted performance.