What Does KPI Mean? Different Industries and Businesses
Key Performance Indicator or KPI has become a universally accepted method in determining a company’s success in achieving its business objectives. Regardless of the field or industry, KPIs can help maintain tracking company goals and targets.
Simply put, it is a versatile tool that can measure any type of organisational performance, once paid attributes to the vitality of choosing the right methodology, to assess the organisation’s targets.
There are numerous factors to achieving great results.
Depending on the business KPIs can be measured through minding data reporting, average order value, news vs. returning customers, hold time, success vs. stated business goals, conversion rate, and open rate.
What Are KPIs?
Advertising and Digital Marketing agencies work on implementing impressive KPIs as part of their marketing and community reach strategy to raise awareness on-ground or digitally about a certain topic, product or highlight a new service in the market.
To fully comprehend what these indicators are and what they represent. It was crucial to shed light on exactly what constitutes a correct key performance indicator.
What are the significant KPIs one should misses? The attributes of a good KPI, the dos and don’ts. Finally, the vitality of KPIs in Marketing, Sales, Operations and Employee Management.
What Are The Most Important KPIs?
As the saying goes, “Every KPI is a metric, but not every metric is KPI.” KPIs help businesses put their foot down; know where they stand and upgrade from there.
There is no one significant indicator. However, depending on each case or business, the needs may vary, and the important indicators, do too.
For instance, if an up-and-coming digital media startup is working on implementing its first hit campaign, the team should set a couple of external KPIs to track their progress before, during and post the campaign. KPIs are made to tackle core business objectives.
So, in this case, the startup should focus on target audience reach, interactions, satisfaction, and retention. They also should mind the online marketing and traffic rate.
KPIs can be very precise. From core business goals to top-management and even to function and department specific targets. Organisations now use them for employees to evaluate and improve their work performance? Choosing the right KPI can be tricky.
It’s vital that you allocate proper attention and avoid easily manipulated data.
According to Outlier, employers might feel the urge to make changes just to improve their KPIs.
Or for instance, focus on narrow niches that do not represent the company’s performance correctly. Another tip is to steer clear from slow metrics which will not reflect the company’s work for days or even weeks.
KPIs can be quite competitive. While it’s true that business owners should bear in mind the data of competitors as they can heavily determine their company’s stance. It’s often forgotten that KPIs are only meant to help and improve.
They are not supposed to negatively impose pressure on employees.
Another important note is that depending on each company or department needs, the term ‘important KPI’ can be very subjective and misleading.
Internal And External KPIs
There are two types of KPIs that all businesses deal with. The first type is internal indicators which department managers strive to achieve in order to improve the company’s human resources, employee satisfaction, or the performance of a certain department.
On the other hand, external KPIs are the umbrella over any external goal the business is trying to accomplish.
What Are The Attributes Of Good Key Performance Indicators?
Not every given metric is a correct one. Performance indicators are not hypotheses. They are measurable, quantifiable statistics that can be easily comprehended and used by managers and owners. A valid KPI has to follow these conditions.
- Be available: the possibility of checking the status at all times is vital.
- Easy measurable: indicators come down to the tiniest detail. They should be measurable as percentages or ratios.
- Relevant: if the indicator doesn’t show direct correspondence to the business goals or the project goals. This means that the indicator isn’t very accurate, thus, having faulted or inaccurate results.
- Instantly useful: (e.g. Return Of Investment) One can easily access and understand the ROIs.
Here are more insights into how to develop successful KPIs:
KPIs in Marketing
Offline and digital marketing platforms alike need strong measuring metrics to determine the effectiveness of their campaigns. Key indicators allow companies to calculate their inbound and outbound marketing work; budget per campaign as well as new sales accounts.
The beauty of this metric system is that companies can easily break down campaigns based on activities, target audiences and more. Providing employers with useful data to improve their performances over time.
The following points are significant in evaluating the impact of social media work:
Determining the Number of Lead Conversions Via Each Social Media Outlet
Each channel has its own nuts and bolts. Checking the individual leads will help in improving the campaign’s messages and directing more leads along the way.
Measuring the Number of Customer Conversions Via Each Social Media Outlet
Employers might be getting interesting lead conversions statistics but not so great customer conversions. This conveys that the campaign messages are clearly missing something or is not hitting the right segment.
Assessing the Traffic of Each Social Media Outlet
Since the world is turning digital, marketing agencies have become so consumed with putting attractive indicators for online interactions; likes, shares, etc.. without proper measurement or assessment of how these statistics are actually beneficial to the marketing objectives.
VP of Marketing and Partnerships in Float Hybrid argues in a piece published in Forbes that: “While many savvy marketers would agree that measuring clicks is not the most effective way to gauge ROI given this level of fraud, clicks are still the predominant key performance indicator.
Since programmatic media can generate a large number of clicks, it is a major focus area for most marketers.”
On the other hand, Impactbnd advises companies to look behind their steady or increasing traffic, and pay more attention to their low or decreasing traffic-to-lead ratio. When this data isn’t coherent, it indicates missing a clear call-to-action.
What Does KPIs In Sales Stand for?
The ‘key’ in KPIs for sales is basically the departments’ efforts to keep track of the monthly sales target while putting the goals and percentages in mind.
Other crucial figures are also the cost of sales to revenue ratio, the sales growth vs goals, as well as the conversion of Marketing Qualified Lead (MQL) to Sales Qualified Lead (SQL) and ultimately winning conversion rate.
KPIs are an integral part in any sales department. According to HubSpot, there are eight points every sales manager should be measuring:
- New Leads/Opportunities
- Client Acquisition Rates
- Sales Volume by Location
- Competitor Pricing
- Existing Client Engagement
- Employee Satisfaction
- Upsell/Cross-Sell Rates
- Net Promoter Score (NPS)
How Do You Write KPIs?
Key performance indicators can be used to track strategic objectives, projects progress, employee performance and more. The integral difference is the components used to reach the specific indicator.
Whether the goal is to impress a client or a stakeholder, or evaluate the productivity of an internal department, make changes in strategic aspects to cope with market trends. In order to successfully develop insightful KPIs, one needs to include the following elements:
- Produce clear objectives that best represent the task at hand.
- Share them with stakeholders.
- Review, review and review some more.
- Decide on an expressive call to action.
- Adapt to market and business changes.
- Update and modify objectives as needed.
KPIs for Strategic Measures
They simply allow businesses to evaluate their goals and objectives in order to produce the desired outcomes. This includes, but not limited to, Customer/Stakeholder goals, Financial and Internal Processes immediate or end results as well as Organizational Capacity.
KPIs for Operational Measures
Constituting a highly-needed tool to moderate and keep track of all operational functions; tactics, strategies, services, delivery.
KPIs for Project Measures
It’s hard to assess projects’ progress and effectiveness without using attainable metrics. KPIs are great for post-project evaluation and provide clear representations of the misses and hits of every decision or action taken.
KPIs for Risk Measures or Emergency Alarms
Help with understanding and preparing for potential risks and threats that may affect a company’s or a campaign’s progress.
KPIs for Employee Measures
As the name suggests, these metrics are human-centric. They focus on employee overall behaviors, satisfaction, skills and performance. These KPIs allow employers to put their foot down when it comes to determining their workforce capabilities and executing plans.
Having elaborated on the vitality of the aforementioned KPIs, PwC KPI Guide notes the following: “Management should not feel compelled to create KPIs to match those reported by their peers. The overriding need is for the KPIs to be relevant to that particular company.
Management should explain their choice in the context of the chosen strategies and objectives and provide sufficient detail on measurement methods to allow readers to make comparisons to other companies’ choices where they want to.”
How To Measure KPIs?
First off, companies should ensure the relevance of each measure throughout the progress of their campaigns and tasks.
Secondly, they, too, should target quantifiable data. Not merely to save time but also to keep track of progress more practically and clearly.
Next, employers must decide on actionable KPIs that perfectly resonate with their objectives. Also, it’s better to focus on timely data that can be quickly traced and evaluated. Lagging KPIs do more harm than good.
While KPI measurement can subject to the particular indicator being measured, there are rules to live by when developing and testing these performance indicators.
The stress on the importance of KPIs specifics is never overrated. With the KPI being crystal clear, a company can feasibly research and collect info on the best methods to reach that certain goal.
For instance, if a company is looking to improve their sales, the KPI should include particular time frames, budgets, and locations. Moreover, it should pay attention to competitors’ rates for similar goals.
Backing up indicators with relevant data only pours to a company’s strength. Developing key performance indicators is easy, sticking to them is the hard part. What differentiates between the former and the latter is good data support. A great tip is to always put in mind how competitors are moving forward.
When all is set. Companies should carry out their utmost assessment measures. The easiest way to do so is by breaking down each KPI and evaluating every component individually.
For instance, if the KPI is increasing market reach, the subjects should include lead conversions, customer conversions, and social media interactions.
Check How to Set Objectives, KPI’s, and Key Supporting Messages:
How to Perceive KPIs From Now on?
To sum up, key performance indicators are great anchors that facilitate tracking and assessing the performance of companies. In addition, they determine the strengths and potential risks and threats of every possible business move.
As elaborated above, KPIs can be easily adjusted to fit various business sectors and sub-departments including but not limited to marketing, sales, strategies, operations, projects or even employee management.
KPIs are the metrics of all metrics. However, if not carried out correctly, they can be a bit tricky.e business owners and department head staff often feel the urge to elevate their KPIs with no stable merits at sight.
The thing with any measuring metric is that it can be manipulated somewhat to make the results at the end look better.
A set of general rules and measurements bind the attribute of insightful KPIs.Since with great power comes great responsibilities, there are many pitfalls that employers should note when determining and taking into account certain metrics. For instance, available statistics and measurable numbers are vital to the accuracy of KPIs.
Also, relevance and consideration to business goals help focus on the most needed percentages and ratios, thus, instantly useful results. In spite of that, KPIs – if used properly – can elevate future performances.