KPIs monitor revenue and measure the effectiveness of both financial and non-financial activities. It is used by companies and organisations that care about success-oriented marketing activities. How do you identify a KPI that will have a specific effect in the future?
KPI, or key performance indicator - what is it?
It is increasingly common to refer to a KPI as a performance indicator. It stands for Key Performance Indicators, a scale that measures the achievement of specific goals. It is worth noting that it is mainly used in sales or marketing to measure the efficiency and effectiveness of activities.
It is also important to bear in mind that there is not one specific set of universal indicators that can be used in every situation. Completely different parameters are used in advertising campaigns and others in direct sales. Performance measures are selected individually, depending on the planned activities and the objectives our company wants to achieve.
However, it is possible to identify a few common features that all KPIs share:
- KPIs need to be measurable - quantitative indicators expressed in numbers are used, so it is easy to create summaries and assess whether the company is making progress;
- must not interfere with each other - indicators (at the same time) should not be geared towards data analyses that may lead to contradictory conclusions;
- KPIs must relate to the goals the company has set;
- Indicators should be objective, transparent and specific - this allows for a quick indication of a given value and does not require an employee to analyse the company's processes in detail.
How to define KPIs?
A KPI is defined by setting an authoritative strategic objective. It is this that the other, smaller targets will be made up of. Each of these must have an appropriate value, as this will be determined by the KPIs.
It is also worth remembering that the KPI must be embedded in a specific timeframe. This will allow us to analyse and check the performance of processes more accurately. This, in turn, can be crucial to our company's success.
When creating KPIs, it is important to bear in mind, among other things:
- prioritising key metrics;
- targeting resources on activities that are important for the realisation of the intended concept;
- taking swift action, but only after gathering and analysing the most important information.
KPIs are also used in marketing activities - the number of newsletter subscriptions, the cost of acquiring leads or the number of enquiries from a website can be mentioned here. In sales, on the other hand, the average value of transactions or net sales is important.
With well-defined goals, KPIs will partly determine themselves. Before starting to take action, it is useful to look at the issue a little more broadly and develop some more metrics, keep track of them all for a while and then select the ones that best capture the essence of the problem from among them.
What are the benefits of using performance indicators?
Indicators are an important source of objective feedback for employees on the work they do and the degree of audience engagement. Measurable KPIs provide them with a very important source of knowledge about the preferences of the target group and help them focus on the pursuit of good results.
The data collected is used to make decisions and implement a specific narrative within the company. It is through KPIs that the 'measurability' of a company's processes can be determined. It is therefore worth taking the development of this indicator seriously.
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