Business leaders have fallen in love.
With KPIs (otherwise known as key performance indicators).
Alas, we might have gone a little overboard—businesses seem to be calling every data point under the sun a KPI these days. But that’s not doing them justice.
For a deep and enduring love affair, it’s important for leaders to get a clearer understanding of what KPIs are exactly, and how to use them to their advantage.
Sailthru’s definition helps set the record straight: “KPIs are an actionable scorecard that keeps your strategy on track. They enable you to manage, control and achieve desired business results.”
KPIs lay the groundwork for digital marketing strategies and put your company on the path to growth, making them perfect for long-term commitments.
But how do we set the right KPIs? It all comes down to selecting the right metrics!
Forward vs. Backward-Looking Metrics
Let’s do a little metrics speed-dating. Chances are, at this moment, you’re staring at a wide range of data and numbers, unsure of exactly which ones to go with.
Your organization likely has a plethora of reports with metrics that are both forward-looking and backward-looking. But maybe you aren’t sure what the difference is. Deciding what type of information you need to inform your strategy is the first step in narrowing down the metrics that you’ll need to set effective KPIs.
Backward-looking metrics ask, “How did we do?” While they’re necessary for trend reporting or establishing normalcy, these past-oriented data points alone can’t guide strategy.
Examples of backward-looking metrics include:
- Emails sent
- Ad clicks
- Page views
- Number of impressions served
- Number of likes
- Revenue earned last month/quarter/year
To hack growth, you need forward-looking metrics (or indicators) that are aligned with your bottom line. They provide a yardstick, asking “How are we doing in terms of reaching our goals?” While they also measure a point in time, forward-looking metrics are especially important because they provide the insights that allow you to correct your course for better future outcomes.
These are the powerhouse digital marketing metrics that you want to bring to your boss—or the team—because they’ll help you make smarter, timelier decisions. These are the data points that will likely be the backbone of your KPIs.
Examples of forward-looking metrics include reports that answer the following questions:
- How recently and frequently do customers visit your site?
- How many people are taking actions on your social media content?
- How many new customers have subscribed for updates in the past month/quarter/year?
- What are the conversion rates from your most recent promotions?
Saying “I do” To The Right Metrics
The metrics you choose depend on the type of business you’re in. While there are no one-size-fits-all solutions, some good rules of thumb for each channel include measuring:
- Conversion rates
- Average order values
- Cart abandonment rates
- Subscriber growth rates
- Average time on site
- Average time per page
- Average pages per visit
- Monthly recurring revenue
- Churn rates
- Acquisition costs
- Lifetime value
- Lead generation
- Lead quality
- Time to close
- Lifetime value
- Customer acquisition costs
Of course, these aren’t the only metrics out there—but they offer a great starting point. Make an informed decision by researching your options to determine what makes the most sense for your business.
Staying Committed To Metrics That Matter
As useful as metrics often are, remember that it’s also important not to go overboard. The key to success is choosing 4–5 metrics that help you make adjustments or optimize performance. From there, you can craft your KPIs.
Follow these steps when setting KPIs and assigning metrics:
- Start by outlining your goals—such as retention, acquisition, a reduction in churn, etc.
- Figure out which customer segment you want to target. Then outline the steps you need that segment to take to achieve your goal. Do they need to sign up for updates? Make purchases? View, read, or interact with content? Fill out a form? Be clear and specific—no step is too minor when it comes to analytics.
- Assign the metrics that will help you monitor your efforts and adjust them if needed to generate the right insights.
- Set realistic goals and timelines based on previous data to make the metrics actionable.
A quick example:
Let’s say we have an e-commerce business and need to drive customer acquisition—a common goal. We may want to look at the number of new users visiting our site and taking actions that we deem important: subscriptions, product page views, sales, etc.
Maybe we choose to prioritize product page views. We’ll then monitor that metric each week and, if we see that it’s falling, we’ll look at the channels that are underperforming and reassign dollars to channels that are performing at higher levels.
A Match Made In Heaven
The bottom line: all metrics should provide views that are actionable—information that you can act on. KPIs help set this process in motion and keep it running smoothly. The buy-in of top-level management is essential, as is having tools that are properly set up, so don’t skip any initial steps.
Once you line everything up just right, you’re bound to find true love with the right coupling of digital marketing metrics and KPIs!