The Ultimate Guide to Selecting the Right KPIs for Your Business
Accumulating and auditing data encourages you to make better decisions and helps you proactively spot, nurture, and reverse trends. Even though it is believed the more data you have, the better, a surfeit of data can actually paint a clashing picture of the performance of your business.
KPIs or Key Performance Indicators help you filter out and get straight to what is big of a deal for your business. But there are numerous factors that you need to take into consideration before promoting a metric into the omnipotent KPI slot. And even though you have already determined which key performance indicators will lead your strategic decisions, specific supporting metrics can ensure your business is on the right track to achieve your KPI goals.
All Metrics Are Not KPIs
Though businesses use both KPIs as well as metrics to calculate some facet of the performance, and key performance indicators fall within the broader definition of metrics, the difference is noteworthy because KPIs are more crucial to your campaigns’ overall success.
In essence, metrics can be defined as a quantitative unit used to track and evaluate the status of a particular process. That is to say; it is a measurement that you record to track some facet of your business activity. On the other hand, while KPI is a measurement too, it is related to a particular business goal and mirrors how successfully your business is meeting that goal.
Metrics mirror how successfully a business activity is accomplished to support the key performance indicator. In a nutshell, metrics are tactical, whereas KPIs are strategic.
Find Out the Right KPI for You
- Understanding the Stage of Growth Your Business Is at
At the end of the day, it all comes down to identifying which stage your business is currently at and understanding its current goals. This is the key to determining your key performance indicators, and bear in mind there might be more than one KPI.
You need to ask yourself these questions:
- Are you working towards generating more brand awareness or driving more conversions?
- Is your company sensitive to external factors like seasonality and market demand?
If you are a startup business considering crowdfunding for a new consumer product, your ROAS to get in front of the potential financiers most probably matters more than the time spent on-page.
- Find the Answers to These Necessary Questions
Although a lot of metrics might appear equally vital to your goals, your key performance indicator should cut through the noise. Ask yourself the following questions to identify that KPI.
- What is a quantifiable business activity that can get you nearer to your goals?
- How can you evaluate your effectiveness at that specific activity?
- What figures indicate recent or long-term business performance?
It is crucial to delineate between short-term and long-term goals. Consider how often you have to measure your business performance or make modifications since this time interval will primarily rely on your business’ nature and the industry it operates in. For instance, MRR (Monthly Recurring Revenue) probably matters a great deal to a company offering subscription model services compared to a seasonal retailer selling Christmas trees, decorations, and accessories.
- Time to Narrow Down Your List
Moving your priorities in a single direction implies that your focus might be withdrawn from the rest of the areas. So think about how these new goals might impact your business operations before establishing your key performance indicators—for instance, making your website’s organic SEO rankings your primary KPI might lessen the significance of your social media channels, which can potentially lead to siloing your social media teams.
While narrowing down your potential KPIs list, keep in mind that the ones you finally commit to at last must be noteworthy, contribute to an overall goal, and therefore, convert to business benefits. Moreover, from a business point of view, having an easily recognized set of key performance indicators can help you align goals across all teams effectively.
Strengthening Your KPIs
- A Metric for Every Phase of the User Journey
A crucial step to maximize your customer success is to break down your user journey phase by phase, align each phase with a particular goal, and reconstruct your customer touchpoints correspondingly. Moreover, this process can also help you track your different marketing channels and acknowledge how these channels impact your KPIs better.
That’s not all. This process will also help you correct the journey by spotting the irrelevant steps or blockages that your potential customers might be coming up against. Once you identify these problems, you can take measures to solve them by either streamlining your user journey or offering meaningful content or services that can help them along the way.
For instance, suppose the services page of a food delivery website gets boatloads of traffic or visitors, but it also sees a high bounce rate. In this case, the odds are that safety and convenience are your customers’ top priorities. Therefore, including details about contactless delivery and PPE that your employees use within the services page may have a positive effect and help reduce that bounce rate and increase sales.
Apart from this, funnel analysis can also help you identify bottlenecks hindering your conversions, allowing you to take appropriate actions to correct them. For instance, if your renewal rates are particularly low, it might be an indication of a problem with your product’s long-term durability or the customer service you are offering. In addition to this, funnel analysis can also help you zero in on what is working well for your company so that you can take marketing decisions more strategically.
- Lagging and Leading KPIs
Other KPIs can/should be utilized to make informed decisions that will further bolster your key performance indicators. One way to do this is to divide the other essential metrics into two sets: lagging and leading KPIs.
Lagging KPIs convey what has happened already and give you some useful insights into the status quo of your business, including last quarter revenue and feedback scores are a few examples of lagging KPIs. Since this data is rooted in the past, it is most likely easier to calculate. Moreover, you can also use it as a benchmark for future projects and campaigns.
On the other hand, leading KPIs like the total number of contact forms filled, clients who have committed to long-term contracts, and website traffic can help you anticipate your future business performance. Such key performance indicators can come in handy to help you measure the probability that you will achieve your target KPIs.
Let’s understand this with an example. Suppose for your food delivery business, you have decided that your primary KPI is your average revenue per order. In this case, the total number of active and engaged email subscribers might be a leading KPI. You can send them discount coupons for 20% off on orders of $100 and above, motivating them to speed more on your website. This will ultimately increase your open rates along with your primary KPI. However, your customer loyalty rate could be a lagging KPI that can tell you when you may need to source feedback and review your user journey so that when customers do purchase from you, they will probably spend more.
- KPIs Keep You Data-Driven
Powerful KPIs always keep data at the front line of your business decision-making process rather than depending on feelings and guesses. KPIs can be established at all business levels, from organization-wide goals to individual backer’s objectives and key results (OKRs).
Wrapping It Up
This was all about selecting better and right KPIs for your business, what things you need to consider in the process, and how you can strengthen your most crucial metric. We hope by now you must have got a pretty good clarity on all these areas. Remember, it all comes down to identifying the current stage at which your business is, its overall goals, and the supporting metrics that can help you reach there. Keep these points in mind, and you’ll be all set to go!