If you’ve ever wondered what key performance indicators (KPI’s) are, and how to use them in your business, then you’re in the right place.
First, a KPI is a measure of performance for a specific business area.
Every business is different, of course, so there’s no hard or fast rule on which KPI’s to use.
Imagine you decided to launch a new product using various marketing campaigns. The success of each campaign… each campaign component… and the product launch itself… could be measured in various ways.
My point is: measuring success in business can get very confusing, very fast!
Choosing a few KPI’s and ignoring other irrelevant metrics simplifies things immensely.
A KPI can be anything that measures the success of your business. Once you identify the correct elements you can monitor and interpret them.
Let’s use a mail-order company as an example. They typically sell products using newspaper ads, magazines, catalogues and direct mail packages.
When the mail-order company launches a new product it can get very confusing. There are lots of things they can measure to determine success.
Let’s assign some hypothetical KPI’s to see how they could simplify the process of measuring success.
First, they might decide that £250,000 in sales would signify a successful product launch. KPI number one: total product sales.
They might decide to spend their entire marketing budget on a direct mail campaign. As the goal of the launch is to make £250,000 in sales, it would make sense to measure the number of orders. KPI number two: number of orders.
They might also want to know the average order value and the number of undelivered mail packages, so they can remove names from their list.
But regardless of how far down the rabbit hole you go, assigning KPI’s makes it easy for you to zoom in and out without getting overwhelmed.
Some more examples…
You may wish to measure how many website visitors complete the checkout process. KPI: checkout conversion percentage.
You could measure the success of a social media post by the number of likes, comments or shares.
You could set KPI’s for the number of times each sales team member mentions your new product to customers, and align this with a sales target for the quarter following its release.
Once you’ve set KPI’s, you can then measure them, learn, and make improvements.
If you don’t already do this, give it a go. The level of control it gives you over your business outcomes might surprise you.
And if you already track certain metrics but feel overwhelmed… try to zoom out and set broader KPI’s that help you avoid getting lost in the details.