Key performance indicators, or KPIs, are quantitative metrics that organizations use to track and analyze performance. Overall progress in achieving your business goals.

Organizations track KPIs they consider critical to the company’s success. These can be financial, commitment, and traffic metrics. KPIs help a company understand its performance in the essential areas for its success.

Examples of metrics used as KPIs

Each metric can be a KPI. The metrics chosen usually measure aspects of the business that are relevant now and shortly. KPIs change over time as the company matures and strategic goals evolve. Each team (product, marketing, sales, design, support, etc.) can and should have its own KPI to track performance. This way, they can evaluate their performance in the areas that matter most.

Selecting metrics

👉 Question
What do I want to know about my users or product?

👉 Analysis
Does the question meet the purpose of the study? How can I measure each of the components of the research question?

👉 Metrics
What numbers will allow me to describe the phenomenon under study objectively?

Theoretical validation of metrics

1. Is the metric technically measurable?
2. Is the low/high value of the metric unequivocally good/bad?
3. Is the rise/fall of the metric unequivocally good/bad?
4. Can we influence the metric or perform actions based on it?

Features of the perfect KPI

👉 Conforming to the strategy
KPIs are tracked and communicated frequently. If what is being measured is not related to strategic activities.

👉 Priority
If an organization has not prioritized projects or initiatives that will impact a given metric, it may be removed from the KPI list.

👉 Measures what changes
If the KPI only ensures that the status quo is maintained, it probably isn’t that important to keep it at the level of the KPI.

👉 Changes affect the business
KPIs are tracked and communicated frequently. If what is being measured is not related to strategic activities.

A good KPI is related to growth, revenue, profitability, cost savings, or customer satisfaction. It probably isn't significant enough if it doesn’t help in at least one of these areas.

Set-up and tracking

👉 Adjusting KPIs to more significant business objectives
Metrics should help your organization make informed business decisions. Thanks to them, we base our decisions on data, not assumptions.

👉 Make sure your KPIs are operating
Don’t set a single KPI like increasing free trial downloads of a new tool by 15% in the second quarter. This could be your long-term goal. It would be best if you also had temporary steps and goals to enable you and your team to work towards that greater goal. For example, increasing traffic from pay-per-click ads by 10% each month to attract people to view a subpage from which they can download a trial version of your new tool.

👉 Check KPI regularly
Meet your team regularly and monitor KPI progress. If you don’t check it out, you won’t know if you need to change your approach.

Examples of KPI activities, taking into account the areas of activity

Each industry has its own laws and we will not be able to successfully apply the same key performance indicators to each of them. We have listed four sectors below with examples of relevant KPIs. Let us remind you once again that they should be numerical values. This allows for their fully objective assessment.

E-commerce:

• Increasing your conversion
• Reducing the ratio of abandoned carts
• Number of sales leads
• Website traffic from organic search

Finances:

• ROS (net return on sales)
• ROA (return on assets)
• Gross profitability of sales
• Gross commercial margin

Sale:

• Net sales
• Average transaction value
• Monthly sales increase
• The average duration of the sales cycle

Customer service:

• Number of calls made
• Duration of the conversation
• Quality of the interview assessment
• Number of complaints

Examples of KPIs in practice

You are a perfume manufacturer with ten employees. At the time of preparing KPIs, each of them prepares 15 pieces a day. You have 10 machines that can make a maximum of 30 pieces. Your goal is to produce 400 units and increase your revenue by 15% compared to the previous year.

Key performance indicators for the next year:

• increasing employee productivity up to 30 units
• purchase of 4 additional machines
• margin increase by 5%
• 8% reduction in administrative fees
• acquiring five new contractors

The above KPIs comply with the SMART principle as they are specific, measurable, within the range of possibilities, important for the company’s development, and are defined in time.

KPI in marketing

As the subject of the entries is marketing, let’s finally mention a few more KPIs in broadly understood marketing.

Traffic on the site — is one of the key factors in marketing. The potential income depends on the number of visits to the website. Appropriate website management will allow you to attract future users who may become your customers.
Conversion rate — The proportion between visits to the website and finalized transactions.
Response time from the sales department — the shorter the customer’s waiting time, the higher the probability of a successful closing of the transaction.
The cost of acquiring a sales lead — depends on whether it will be measured on the amount spent on advertising, calls made, hours spent searching for potential customers, etc.
A number of newsletter subscriptions — again, this indicator comes down to the number of potential customers.

How to choose KPIs for your business

Know what KPIs are and what they are for in order to evaluate which ones will help your business succeed. Not all KPIs are relevant to every type of business — consider your industry, purpose, and company needs.

First, define what you want to achieve. Divide the plans into different stages, for years or quarters, to focus on different aspects of activities and apply different KPIs in each stage. For example, in the first quarter, the company’s attention will be focused on generating more leads — this is where marketing KPIs will be useful — and in the next quarter, the company’s goal will be to turn leads into sales. KPIs should reflect the company’s main goals.

Here are a few things to keep in mind when choosing the right KPIs for your business:

• Make sure the KPIs you choose are directly related to your goals. For example, research issues such as website traffic and conversion rate if your goal is to increase sales.
• It’s not worth measuring everything at once just because you can do it. Choose a few of the most important KPIs. Only when the company optimizes activities in these areas, it move on to the next set of KPIs.
• Think about what stage your company is at. Are you just starting your business? Are you entering the market? Are you planning a rebranding? Each stage has a different set of goals and other KPIs.
• Avoid using indicators just for image enhancement. Some KPIs give the impression that your business is doing great, but really have little to do with achieving your goals. The numbers that show “likes”, impressions, and clicks may seem impressive, but they don’t tell you if or how close you are to your goal. Choose KPIs that help you grow your business, not those that only look good on paper.
• Take a look at the competition. You can be inspired by the example of market rivals and implement the same set of KPIs. If you have a similar business model, product, or service, knowing how you compare against them will be very useful.

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