KPIs — The Basics

What are KPIs?

KPI stands for Key Performance Indicator. A key performance indicator is basically a measurement of progress — using different metrics — towards a company’s goal. These measurements can help us set new marketing goals for our companies, and also ensure that we meet old ones.

KPIs are different for different businesses! To give an example, a simple KPI for a digital marketing agency (like ROI Media Works) might be defined as the number of clients we have or even the quality of those clients. Whereas a KPI for a local coffee shop may simply be quantifiable by how many units of coffee they have sold.

What KPIs should your company use?

KPIs are based on goals. Whatever your business objective is, your KPI will reflect that. If your goal is to create brand awareness for your company, then your KPI may be the number of impressions you have for an ad online. If your objective is to generate sales revenue, then the KPI would be how much revenue you made. Define your goals, then use KPIs to determine how effective

There are four basic characteristics of KPI’s, as defined by AboutMoney.com:

1. Quantifiable
2. Practical
3. Directional
4. Actionable

A KPI must be quantifiable, as in you must be able to present your KPIs with numbers and facts, not opinions. They must be practical in the sense that they align with company goals in a feasible way. They must provide a direction for your company and set progression towards its goals. And lastly a KPI should be actionable, meaning that they can be put into practice and effect a realistic outcome.¹

The Steps for Building the Right KPIs for your Goals

These steps, brought to you by Thinking With Google, are a great guideline for setting up the proper KPI to measure whatever goal you’re trying to reach. These questions are geared towards a video campaign on YouTube, but these questions are similar to what you should be asking yourself every time you aim to set up KPIs for your business:

1. “What is your primary marketing goal for this campaign?”
   • Make sure that you communicate with the team that is helping this specific goal come into realization, whether it’s the marketing team, the sales team, logistics, or anyone. Define your target audience, and ask what it is you’re trying to accomplish with them. You need to figure out if what strategy you will use to reach your goal.²
2. “What are the KPIs for that marketing goal?”
   • Now that you should have clear goals and audiences set, you should be able to easily determine the KPIs which you will use to measure your success. In their example, Google’s sample goal is to create brand consideration, and they were going to attempt to do this through video on YouTube. They decided one of the best KPIs to measure brand consideration was view-through rate of the video they used.²
3. “What are the best video analytics tools to measure your KPIs?”
   • For Google’s example, since the video in question is for YouTube, the company used YouTube Analytics to measure the view-through rate. If your goal is to create more conversions from your website, then you may look at Google Analytics or Google AdWords to find  information for that KPI.²
4. “How will you optimize for your KPIs?”
   • To optimize for you KPIs usually means learning from your mistakes or past actions and results. This is one of the best things you can do for your business when setting new goals and KPIs. Go through the first three steps, and then do it all over again, while adjusting your target audience, strategy, tools, and measurements to help you reach your goals faster and more effectively.²

It’s so very common to limit your business to a few KPIs. For example: net profit, leads, return on investment. While these are crucial indicators of how your business is doing, it’s imperative that you try to branch out, and set goals for other aspects of business, such as customer value, and landing page conversion rates, which will, in turn, lead to a higher net profit! Be specific. Find your target, aim for it, and reach it in the most accurate way possible.³

There you have it

At first, it might be tricky trying to determine what the best key performance indicator would be to measure your goals, but the more you practice using KPIs for your business, the easier it will be to implement them in effective ways. If you have any questions about KPIs, and would like help integrating them into your business’ marketing plan, we’d be happy to talk! Contact us via Facebook or Twitter, or just give us a call.

Sources: AboutMoney.com¹, Thinking with Google², Impact B&D³