What is a KPI?
Well, let’s start with definition. You probably have heard about this in university or faced it in your business.
KPI stands for key performance indicator. It is important to understand whether your strategy is efficient and to define aspects you could change to see whether a different approach would gain more results. From this we are able to conclude that these indicators can tell us something important about the performance of our product or company. There are a number of KPIs, more than 1,000 in fact, and they differ for each business and task. So which ones are yours and how are they defined?
How do we define a KPI?
KPIs are often confused with metrics. A metric is just a number while a KPI helps track performance and progress. Some blogs may define a specific KPI you should use, but the truth is that your KPI depends on your goals and business. The indicators need to be defined according to your core business goals. The first step is to consider these questions:
- What is your desired outcome?
- Why does this outcome matter?
- How will you achieve your outcome?
- Which metrics will inform you that you are on the right path?
How do I use it?
The next step is to compare your goals with an outcome. What we can do is provide an example of how it works.
Let’s look at campaign A, which is a row of events for an alcohol brand. The goal was mentioned twice before event 1 and event 2 (columns 1 and 4). After the event, each position was measured. Here is what we see in the Week 1 and Week 2 columns (columns 2 and 5).
It is time to make conclusions for the next event. To do so, we should compare the goals and the results (Columns GOAL VS FACT), and we start thinking about which actions lead us to our goals.
For the moment, let’s imagine that we just have had event 1. Here we see that goal and fact differ, and we create extra actions to reach our goal, such as better training staff for the next event to sell more products.
A few weeks later we organize another event for the same brand but with these improvements implemented. The results of event 2 show us that our goals are still different, but now we can compare these two events and see whether our actions affect our performance.
The orange column is an indicator of efficiency, and that is how we know whether we should continue with this strategy or we should change something. Based on these KPIs, the strategy for event 3 will be corrected. That is how it works.
KPIs differ in each situation
For marketing, manager reputation of the brand is important. In this case, this person will pay attention to brand awareness and visibility metrics. Whereas a trade marketing manager is interested in sales, and for this person the most important metrics will centre around sales. For a business owner, the revenue will be the most important criteria. There is no one system for everyone.
In summary, KPIs are important for each business and even in your life when you set goals, as illustrated below:
- KPIs help clarify performance expectations and compare performance to meet your strategic and operational goals.
- When you have right KPI, it is easier to correct your strategy if needed.
- You can run business in more efficient way.
- KPIs focus your attention on what is important.
- KPIs help you manage more objectively.
- KPIs differ in each situation.
You can decide whether or not to use KPIs. It is your responsibility to know where you are going and how fast you will reach your goals.