A key performance indicator (KPI) is the backbone of any business goal or initiative. KPIs are used to monitor the most important areas of a business and are the basis for deciding whether an initiative is succeeding or failing. It’s important for the leaders of a business to understand what their KPIs are and why they are important to achieving the goal at hand.
Deciding which KPIs to track can be deceiving. The most commonly referred to KPIs for many business owners are revenue or sales. However, revenue and sales are simply metrics and each is not necessarily a KPI. They become KPIs when they are put into the context of a business goal.
Instead of just increasing overall revenue, why not set a goal to increase average revenue per order? By selecting a specific KPI, the business owner has a true percentage to work with. He or she can monitor this over time, chart the progress and make adjustments. Identify a goal that can be measured by a metric and figure out how to transform it into a KPI.
Ratios and percentage tend to make great KPIs. It does not do any good to double your sales volume if the average order price is discounted at 50 percent.
KPIs can include any number of elements and they will vary depending on the goals of the organization. Some common KPIs might include:
• Customer Engagement
• Customer Complaints
• Market Share
• Carbon Footprint
• Employee Satisfaction
• Return On Investment (Roi)
• Share Of Voice
• Newsletter Engagement
One you have identified a business goal or initiative, defining the proper KPIs becomes much easier. If one of my business goals is to increase sales through our newsletter, I would look at KPIs such as the percentage of website visitors that sign up for the newsletter. I would also look at the percentage of people opening the newsletter and the percentage of people who click my website link. Once I have identified which areas provide the most important information for reaching my business goal, I will figure out what adjustments need to be made.
To increase the conversion rate of email sign ups, I might use a special promotion or make the call-to-action button more prominent on the website. To increase the email open rate, I can experiment with different headlines. Again, once the KPIs are identified, the path to success will become much clearer and the goal much more attainable.