Most marketers have heard the saying, “what can be measured, can be improved.” Nowhere is this truer than in online marketing.
Unfortunately, companies that haven’t developed a reliable set of key performance indicators (KPIs) are bound to have a difficult time measuring or improving their business’ success. Because of this, choosing KPIs for your company is critical, and knowing how to select the right ones makes all the difference.
What Are KPIs & Why Do They Matter?
Key performance indicators are occasionally referred to as key success indicators. These are the metrics that companies evaluate to determine how well the business’ performance is supporting pre-set goals.
Through a good set of KPIs, a company can identify areas of weakness and develop a plan for improvements, all of which help to create a more streamlined and successful business. What’s more, a good set of KPIs also allows a company to enhance its performance, budget more efficiently, and boost sales in a more targeted and effective way.
The Elements Of A Good KPI
Since KPIs are so crucial to the success of a company, they can’t be chosen at random. Instead, a good KPI must possess the following traits:
- Relevance to pre-determined business goals. To be quantifiable and valuable, a KPI must be directly related to a company’s overall goals and objectives.
- Alignment with a company’s current growth stage. A KPI that is out of sync with a company’s current phase of growth does nobody any good. It’s critical to ensure that the KPIs you select for your business take into account your current growth phase. For example, startups will have a different set of KPIs than large enterprise-level firms. The KPIs chosen will need to change as the company grows.
- Specificity and a focus on essential metrics. While KPIs are meant to help companies determine what to measure in their operations, the KPIs chosen must be specific and focused on important metrics rather than a large and random assortment of data. In addition to making them easier to interpret, this also allows the company to focus on the most relevant KPIs. As an added bonus, you can avoid getting lost in data overload.
- Ability to be measured in a timely fashion. To be functional, a KPI must be able to be measured on a regular, convenient scale, such as every week, day, or month. This helps provide accurate results and allows the company in question to track its progress regularly.
Choosing KPIs For Your Business: 5 Smart Tips
To select the right KPIs for your business, follow these tips:
1. Determine Your Business Goals From The Outset
Since KPIs are meant to support your business goals, defining your goals at the outset is essential. Keep in mind that the more specific the goal, the better able you are to choose the right KPI to support it. Because of this, it’s essential to get as granular as possible with objectives.
Instead of saying your goal is to “increase sales,” say that your goal is to “increase sales by 10% in the next six months.” The latter statement is more measurable and, thus, offers a better foundation for good KPIs.
2. Choose KPIs That Directly Support The Goals You’ve Set For Yourself
The best KPIs are the ones that support your business goals directly. The most critical step in choosing the right ones is to ensure they are directly related to your company’s objectives. As you choose your KPIs, be sure that you’re considering things like your firm’s purpose, the goals you’d like to achieve in the next year, and which metrics that will allow you to determine whether or not you’ve reached your goal.
3. Ensure That The KPIs You Choose Are Measurable
Again, a good KPI is a measurable KPI. By selecting KPIs that are both measurable and quantifiable, you ensure that the KPIs you’re investing in are efficient and sustainable for the long-term. Also, consider if they will help you meet your performance goals and improve your company.
4. Keep Your Chosen KPIs To A Minimum
As you’re in the process of selecting your KPIs, remember that less is more. It’s easy to get lost tracking too many KPIs. You’ll have more success if you choose to focus on five relevant KPIs rather than 20 irrelevant ones.
With this in mind, be ruthless about narrowing your KPIs down. A highly relevant selection of KPIs allows you to track your company’s success accurately. You will also be able to spot areas of inefficiency or poor performance quickly and easily.
5. Define Your Primary KPIs
Most businesses have KPIs that they consider central, and other KPIs they deem secondary. For example, if your goal is to boost sales over the coming fiscal year, one of your primary KPIs may be conversion rates, while your secondary KPI could be cost-per-acquisition.
By defining your main KPIs, you develop a sense of focus for your business, while also determining where you can most efficiently allocate your resources.
The Case For Good KPIs
For a company to succeed and meet its corporate goals, defining useful KPIs is key. While this can be difficult for businesses that have never done it before, these five steps can help your company set its most efficient KPIs and target operations for a more streamlined and efficient process.
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