KPIs are quantifiable measures that express the effectiveness of your business actions: knowing and using them helps you make better decisions about how to achieve your goals.
KPIs, viz. Key Performance Indicator: have you heard of it yet?
It is yet another acronym in English that you may have found somewhere without quite knowing what it is.
Don't worry, you're probably not the only one!
Yet, they are important for understanding the performance of your business: they are in fact measurable values that tell you whether your performance and strategies are working or not.
If you know them and know how to use them, they become essential tools to help you make informed, strategic and operational decisions. Monitoring them is then essential to check the evolution of your marketing activities.
They are the basis of the activity of Data Analysis Which, as we have already seen In the last article, is critical to optimizing efforts and resources in your investments.
Incidentally, while it is true that metrics have always existed, it makes just as much sense to say that the digital environment we deal with on a daily basis, where every activity is more easily tracked and competition is increasingly fierce, has made such performance indicators even more important.
So let's have a good explanation of what they are and how they are identified, also helping with some concrete examples.
Read on to find out everything you need to know 😉
What are KPIs
First, let's give a definition.
KPI stands for Key Performance Indicator, in Italian "key performance indicators."
Don't be frightened by so many words: in reality, these are simply metrics, i.e., very specific numerical values or ratios that are intended to be achieved.
As the acronym itself says, they are performance indicators: after setting certain goals, they are used to measure the progress of the various activities planned to achieve them.
In a nutshell, they tell you whether what you are doing is effective or not.
They are a way to evaluate success, quantify performance over time, measure progress, and make concrete decisions based on rational calculations.
Therefore, each KPI should be related to a specific outcome and defined according to the main objectives, concerning projects, programs, products or other initiatives.
Such indicators tell you what focus to maintain to improve the strategic and operational aspect, create an analytical basis for decision making, and help direct attention to what matters most.
Why KPIs are important
As you may have already guessed, KPIs are important in managing your business for several reasons:
- They allow you to be consistent in your strategies and keep everyone involved in the same project aligned toward one well-defined direction;
- They give you a realistic look at the health of your business;
- They allow you to constantly evaluate the effectiveness of the initiatives you undertake;
- They help you clearly see successes and failures, as well as strengths and weaknesses, so you can straighten up when necessary;
- They are a guide to get you exactly where you want to be and focus only on what matters most.
Types and examples of KPIs
We have said before that KPIs are some metrics. But what exactly does it mean? A metric can be a number or a ratio: in the same way, then, we can have Numerical KPIs (such as revenue or number of leads) or Report KPIs (such as the conversion rate or bounce rate of your effective landing page.
However, it is important to make a point: all KPIs are metrics, but not all metrics can be used as KPIs. A metric is anything that can be measured, but the fact that something is measurable does not automatically make it useful: to be a KPI it must have a relevant impact with respect to your business goals.
Moreover, a KPI is not a goal in itself; it must accompany one to be one. Let me explain: a goal is a certain outcome you want to achieve; a KPI is a value that tells you whether you are on the right track to achieve it.
That said, we can distinguish three main macro-categories of KPIs:
#1 Business KPIs
They measure the performance of a main business objective; for example, if you intend to "acquire more customers," your business KPI might be the "growth rate" of those customers.
They are a measure of the overall performance of the activity and must obviously have a significant impact on the end result to be achieved.
#2 External KPIs
They are tied to external goals and are used to determine how well you or your team are achieving key objectives.
They must be specific to a department or function; usually, when we talk about KPIs in general, we refer to just this type.
Some categories of external KPIs relate to sales, marketing or finance.
For example, if your overall goal is, as before, "acquire new customers," an external goal can be "acquire new customers through organic website traffic in the next month," and the external KPI will be "percentage increase in website sessions through organic traffic."
#3 Internal KPIs
They are linked to internal goals and are used to measure optimization efforts; may also not be directly related to the main goals or activities.
For example, if you are running a Google Ads campaign, an internal KPI that allows you to monitor it and optimize it can be the conversion rate or CTR (Click Through Rate).
Or, if you would like to improve the quality of your e-mails, you can choose "response rate" as an indicator.
When to use KPIs and how to identify them
Well, now you are probably wondering when you should use KPIs and especially how you can identify them.
First of all, as already mentioned, a KPI can be exploited only and exclusively when you are clear about the destination and need guidance to get there.
To identify KPIs that are useful for your business, then, the first thing you need to do is to define the goals to be achieved. These must be SMART, i.e., specific, measurable, concretely actionable, realistic, and placed in a specific time frame. So instead of simply proposing to "find new customers," it is better to aim to "sell your online course to tot new customers in two weeks."
Next, you can identify KPIs to help you achieve that goal. You don't need many; in fact, too long a list would probably be counterproductive; 4 to 10 would suffice. You must then ask yourself what the critical success factors are.
In the example above, it will be useful to "get tot new potentially interested people signed up for your newsletter" to whom you can target e-mail marketing to promote your course. Accordingly, the percentage of visitors to your site or blog who click on "Subscribe to Newsletter" can be a Important KPI.
Finally remember, a "good KPI" Must have the following characteristics:
- Be usable and measurable;
- Have a strong impact on the corresponding goal and be relevant;
- Be immediately useful so that you can act quickly on it;
- Be at your disposal promptly.
Well, now you should have a little clearer idea!
In the effort to achieve your goals, I am sure that KPIs will be your best allies.
Whatever you do, being able to identify the most relevant data, be able to understand it and translate it into strategic choices will determine the success and growth of your business.
There is no real limit to the number of useful KPIs you can find and use to your advantage. It all depends on the nature of your business, the industry you work in, and your goals.
If you are already trying to do this in your business of web marketing and you find yourself struggling a bit, fear not: I have some future directions in store to help you do so.
What you can do is give yourself time and never lose sight of what you want to achieve.