A key performance indicator (KPI) is a quantitative number that enables companies to measure and assess their progress toward specific goals. It’s necessary to have knowledge about what insights your company is gaining and what things are necessary to elevate your brand to the next level.
What is a KPI?
KPI stands for key performance indicator, which is a quantitative measure of performance over time for a specified goal.
KPIs give goals for teams to work for, milestones to track progress, and insights to help people throughout the business make better decisions. Key performance indicators (KPIs) assist every department of the business in moving forward strategically, from marketing and sales to finance and human resources.
A few examples of common KPIs include return on advertising spend (ROAS), revenue, client satisfaction, customer lifetime value (CLV), and conversion rate (CVR).
Why Are KPI So Important?
KPIs are an important tool for ensuring that your teams are working toward the company’s overall goals. Here are some of the most important reasons why you need key performance indicators:
Keep your teams aligned
KPIs, whether analyzing project success or staff performance, help teams stay on track.
Provide a health check
Key performance indicators provide a realistic view of your organization’s health, including risk concerns and financial indicators.
Make adjustments
KPIs enable you to clearly understand your achievements and shortcomings, allowing you to do more of what works and less of what doesn’t.
Keep your teams accountable
Ensure that everyone adds value using key performance indicators that let employees track their progress and supervisors move things.
What Makes a Good KPI?
The best strategies include five to seven KPIs to measure and manage development. The best designed KPI plans contain each of the “SMART” criteria:
- Specific:
Describe what each KPI is supposed to assess and why it is essential.
- Measurable:
KPIs should contain measurement standards.
- Achievable:
The KPI should be a practical and achievable target.
- Relevant:
KPIs are designed to boost business moving forward. Therefore, they must be relevant to improving results.
- Time-bound:
It’s important to establish an achievable timetable based on previous performance and ensure that the team meets its deadlines.
Steps for Setting a KPI
KPIs should be created strategically, with established targets that match a company’s targeted outcomes and strategic goals. Remember to make your KPIs quantifiable, explicit, and time-bound. Here are the steps to create a KPI:
Determine main Objectives:
Begin by identifying the main objectives, keeping in mind that KPIs should help teams align with an organization’s goals.
Identify Intended Results:
After the objectives have been established, identify the outcomes required for success.
Use Lagging and Leading Indicators:
Let’s take a look at leading and lagging indicators of KPI. Lagging indicators examine historical performance factors, such as revenue and profit, to determine the result of past performance. Leading indicators indicate the activities required to attain goals and meet overall objectives.
Establish Goals and Boundaries:
Establishing goals and boundaries gives teams a means to track their progress over a KPI-objective time frame.
Assess Progress and Readjust:
KPIs will most likely need to be modified as a project progresses, so monitoring progress on a frequent basis highlights any difficulties and helps keep the goal on track.
KPI in marketing
Let’s look at some KPI examples that marketers commonly employ in their campaigns.
Campaign reach:
Select KPIs that reflect the size of your campaign’s audience, such as ad impressions, email sends, and pageviews.
Campaign Engagement:
Use key performance indicators to measure how audiences react to your campaign, such as clicks and clicking rates, bounce rate, social shares, and video completion rate.
Campaign outcomes:
The KPIs used to measure campaign success might differ based on what you want your audience to perform. Product sales can be used in a lower-funnel campaign, brand memory in an awareness campaign, and the conversion rate (CVR) on an online form in an email campaign.
Conclusion:
KPI provides a great way for measuring and tracking a company’s performance across a range of parameters. Managers can more effectively optimize their businesses for long-term success if they learn exactly what KPIs are and how to execute them precisely.
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