What are key performance indicators?

Key Performance Indicators (KPIs) are essential for measuring the success of any business, as they provide metrics to track progress and help you identify areas for improvement. But knowing which KPIs to focus on can be a challenge. That’s why it’s important to understand the key concepts behind KPIs and how to select the right ones for your business.

KPIs and goals can sometimes be used interchangeably, but they are not the same thing. A goal is the outcome you desire, whereas the KPI is the metric you use to see if you are reaching that goal.

KPIs align with your goals

KPIs are metrics used to measure the success of a business against its goals. As such, they should be tailored to your specific business needs and objectives. In the world of big data, almost everything is measurable, so your KPIs should align with the goal you are trying to achieve. If you are trying to increase sales and focus on your social media content, it doesn’t matter how engaged people are in it unless it directly leads to sales.

Different industries will have different KPIs according to their requirements. For example, a retail store might focus on KPIs like sales, customer satisfaction, and inventory levels, whereas a digital marketing agency might focus on metrics like website traffic, conversions, and lead generation.

KPIs provide actionable insights

Your KPIs should give you information that you can act on. The more specific it is, the more you can determine if your tactics are working. For example, knowing that your sales are increasing is great, but knowing where this increase has come from is invaluable. This data allows you to do more of the same, or try something new if it isn’t working.

It’s also important to remember that KPIs should be measured regularly in order to provide valuable insights. It’s not enough to simply set goals and track progress. You need to be able to measure the impact of your efforts in order to make effective decisions.

However, make sure that the KPIs you set drive the right behaviour. If your goal is to increase sales and you set your KPIs to measure the number of people your sales people talk to in a day, you could end up decreasing customer satisfaction if people feel rushed through the system.

Which KPI to use?

As discussed, the KPI you use depends on the goal you are trying to achieve. There are so many things you can track, and they tend to fall into several different categories:

Qualitative KPIs

Satisfaction surveys, feedback forms, and reviews all form part of qualitative KPIs. They are not based on numbers, but on opinion.

Quantitive KPIs

Measured in numbers, these are the most common KPIs. Displayed as percentages, decimals, ratios and whole numbers to indicate progression up or down of a given factor.

Leading KPIs

Leading or outcome KPIs are designed to lead behaviour towards a particular pattern. For example, if you want to get rid of stock, you might try a sale or BOGOF offer to lead the behaviour you want.

Lagging KPIs

These are used when you don’t know how to get results, but you know the result you want. They are a bit more vague, such as increased sales, and then refined as you try different methods to reach that goal.

Financial KPIs

Measure progress to reach financial goals, such as profit, accounts receivable, inventory turnover, cost of goods sold, etc.

Marketing KPIs

Measure metrics such as website traffic, conversion rates, click-through rates, customer acquisition costs, customer lifetime value, churn rate, etc.

Process KPIs

Support ticket times, efficiencies, recalls, internal processes can be measured here.

To sum it up, KPIs are essential for measuring the success of any business. They should be tailored to your specific business needs and objectives, and should be measured regularly in order to provide valuable insights. By understanding the key concepts behind KPIs and how to select the right ones for your business, you can ensure that you’re getting the most out of your efforts.

For more help with determining the right KPIs for your business goals, please get in touch with Cat on: cat@ckgmarketing.co.uk