KPIs aren’t a new notion; they’ve been around for a long time in the field of business analysis. A key performance indicator (KPI) is used to extract key patterns from large, sometimes diverse sets of data and display them as a series of clear, unambiguous indices – a snapshot of how your company (or website, in our instance) is doing at any one moment.
KPIs do precisely what they claim to accomplish. They show progress (or lack thereof) in crucial aspects of your website’s performance.
Why are KPIs so important?
The true benefit of KPIs is that they allow you to quickly extract meaning from your data. It’s all too easy to become lost in the avalanche of data that your web analytics solution generates if you don’t have them.
It’s a typical example of missing the forest for the trees. By establishing and monitoring your KPIs, you’ll be able to create a regular picture of your marketing’s success over time.
You understand that if this KPI rises, it implies one thing, and if that one falls, it means another, and so on. Your KPIs not only offer you an instant idea of how well your marketing is doing, but they also help you spot possible issues and push you in the correct direction before you dig further into your data in search of answers.
Choosing the Right KPI
The Web Analytics Association (WAA) defines a KPI in the context of web analytics in the publication ‘Web Analytics Key Metrics and KPIs‘ (Creese & Burby, 2005).
KPI (Key Performance Indicator): a KPI may be a count or a ratio, although ratios are more common. While all Web site types may employ basic counts and ratios, a KPI is infused with business strategy – thus the title ‘Key’ – and so the collection of suitable KPIs changes across site and process kinds.
It’s also worth noting that the terms KPI and metric are often used interchangeably. This is incorrect because, although a KPI is always a metric, a metric isn’t always a KPI. So, how do you tell the two apart?
KPIs are always clearly linked to long-term company objectives
Management defines KPIs: decision-makers must identify, define, and accept responsibility for the primary drivers of their organization’s performance.
KPIs are linked to value drivers that are crucial to attaining major business objectives: they should act as “deal breakers” in the pursuit of your organization’s objectives.
Valid data is required for KPI: you only get out what you put in
KPIs must be quantifiable: you must be able to track and measure your KPIs over time in a consistent and meaningful manner.
KPIs must be simple to comprehend: they should serve as a barometer of your company’s success — a fast look at your KPIs should inform anybody in your company, from management to interns, how well your marketing is functioning.
KPIs may be changed by positive action and used as a trigger for it: one of the key benefits of KPIs is that they quickly show areas where your company ‘might do better,’ and places where action is necessary to bring things back on track.
Choosing the correct KPIs for digital marketing is critical for efficiently evaluating your marketing’s effectiveness and making informed choices for continual development. However, with such a dizzying selection of indicators to pick from, pinpointing precisely what constitutes a KPI for your site is notoriously tough.
If you’re having trouble with this, hiring a professional web analytics expert for a session or two might be money well spent. Don’t allow the consultant to take over – you know your company better than they do.
Instead, use their web analytics skills to help you set your own KPIs. The crucial thing is that you wind up with a modest set of KPIs (typically in the single digits) that together represent your website’s success.