What is a KPI (Key Performance Indicator)?

Bret Kershner on Content Marketing

infographic designIf you try to measure too many things at once then you’re likely not measuring anything well enough to create effective action plans.

KPIs (key performance indicators) are metrics that track the performance of tasks critical to attaining important business objectives in a time-sensitive way. These are the numbers that, when used to drive your team to perform better, will bring you closer to reaching your organization’s strategic goals.

Everyone agrees that sales revenue, overhead costs, and customer churn rates, are fantastic areas that should be monitored closely.

The problem is, it’s very hard to limit your purview to only a handful of these. Website metrics, such as a number of page views, unique visitors, and time-on-page can be fascinating to monitor.

Let’s also consider customer acquisition metrics, such as cost per click, cost per action and cost per transaction.

Not to mention there’s a laundry list of metrics that surround other important areas, such as customer loyalty and satisfaction, social media, and email marketing efforts, just to name a few.

The operative question becomes — when does a regular metric graduate to something greater?  Something that makes it stand out from the pack? This is where KPIs come into play.

Distinguishing KPIs from Other Metrics

We actually don’t recommend lining-up your current list of metrics in one long row so that you can slowly scrutinize them from head to toe to see who’s in and who’s out.

Instead, take the reverse approach and thoughtfully determine what the most important objectives of the business are. KPIs vary from one organization to the next, so you won’t be able to pick-up off the shelf a set of “can’t lose” industry-standard KPIs to plug-and-play into your organization for instant success.

This is where you’re required to think strategically about the vision of your organization (or department) and the larger goals that need to be realized to help achieve that vision.

Is the goal to increase customer satisfaction levels? Perhaps it’s to increase employee satisfaction levels as well. Maybe another is to overhaul the overall experience with your website of your web visitors.

These are large goals, and effective KPIs will drive you closer and closer to attaining these goals while keeping your eye on the performance of the KPI.

KPI’s Must Have Time-sensitive Targets

You don’t really have yourself a true KPI until you find one that is both aligned with an important strategic objective and one that can be tracked in a time sensitive way.

If a goal representing true improvement is attainable in a reasonable amount of time, then you have a KPI that is both actionable and contributing to your organization's important goals.

This makes the time periods that you choose for your KPI measurements crucial. It’s up to your organization as to what works best, but consider monitoring KPIs in daily, weekly, or monthly intervals over the course of the entire year. As you assess which business objectives are important to you for future years, you can choose which KPIs to keep and which ones are no longer needed.

KPIs that aren’t reactive to change in the short term isn’t useful. Setting and working towards incremental goals are the best way to utilize your KPIs.

Insightful and Actionable KPIs are the Best

Let’s say that you want to take your number #1 salesman (your website) and overhaul the user experience. Of course, the main goal here is to increase sales and conversion rates, but instead of tracking this number directly a more granular metric would serve as one of your KPIs.

Let’s take, for example, the average number of pages visited by your web visitors before a transaction is completed. This could tell important details about how your shoppers use your website.

Do they need to visit an unnecessary number of pages before the purchase is made? Are your customers going in circles unable to find the information that they need? Driving this number lower could enhance the experience of your shoppers, which should lead to higher sales from your website.

Everyone in the Organization Should Use KPIs

KPIs are a great tool for everyone in your organization, not only those who are in management and decision making roles.

Including KPIs within job descriptions are a perfect example of embedding these metrics into the day-to-day operation of your organization.

All team members should know what KPIs are included in their job role, and how these metrics directly contribute to the growth and success of the organization as a whole.


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