Smash or Pass: KPI Edition
Key performance indicators, more commonly referred to as KPIs, are incredibly important when it comes to marketing for any business. They can help inform decisions of what to focus your future efforts on by measuring what works and what doesn’t.
As the name might suggest, KPIs provide data that can help you understand how successful your business is. KPIs measure quantifiable aspects of your company so that you can compare that information with your short and long-term goals.
What actual data your KPIs should measure can definitely depend on your industry, but it also depends on what’s relevant right now. We’ll list some outdated KPIs below, as well as very relevant ones.
Importance of KPIs
Before delving into the more technical side of things, you may want to know why you should care about KPIs in the first place.
Depending on your company’s goals, the reason behind examining KPIs can vary. No matter what end you plan to use it for, however, the data is very helpful to have ready access to.
Most businesses will examine a series of different key performance indicators together in a “flash report,” which are held at regular intervals to evaluate progress. It can be very efficient to compile all your KPI data in one place so that there’s minimal confusion for anyone looking to refer back.
Flash reports can also show you areas where your company’s performance may be lacking, but by looking at KPIs frequently you can make sure you are on the correct course.
KPIs can refer to a lot of the moving parts of your business, both on the large and small scale. Lots of people look at day-to-day tasks in their flash reports, but don’t forget to consider larger projects and your employees as well.
Naturally, you won’t be able to solve all of your problems by looking at KPIs, as they focus entirely on what’s quantifiable, but they can certainly be a big help in many aspects of your business.
Regular financial analysis is vital for the success of any company, both via the aforementioned weekly flash reports and post-mortems at the end of the month. You need to know how much money is coming and out to adjust accordingly.
Likewise, KPIs will help you keep track of where you’re at with your budget so that you can make sure everything is operating smoothly. You’ll have a good idea of what areas you need to focus on adjusting from what data you gather.
KPIs are very important in order to monitor your company’s success— making sure all the indicators are moving in the direction you want ensures you can meet your goals for that period of time.
You can also measure patterns through KPIs, which means that if certain numbers drop off at a particular time of year you can prepare for it! In this way, KPIs can also help you solve problems within your business and predict how successful new projects may be.
Another way that a lot of businesses make use of KPIs is for employee measures. While you won’t be able to use them for employee morale, productivity is very important to measure so that you can maximize it.
Compare work hours with performance to get a good idea of when your employees are most productive. You can also compare data from different departments in larger companies.
Keeping up with relevant KPIs can be a big help for any business, though.
Despite how helpful many KPIs can prove, putting too much weight on outdated data will have the exact opposite effect. There are several KPIs that have become much less relevant in recent years, so you can avoid them altogether.
Let’s go through some outdated KPIs that experts don’t recommend using to inform important business decisions.
For starters, though keeping an eye on your budget is important, you shouldn’t measure success based on how much you spend. Don’t have a goal that centers around spending a certain amount. Profit should always be the priority.
Instead of scale— for example, wanting to spend X amount on a certain project —think about efficiency. Start with what goal you want to meet, such as an ideal return on investment. From there, you can think about costs.
If you focus on what you want to spend before taking anything else into account, chances are you’ll wind up spending too much in some areas and too little in others.
Another KPI that you should avoid relying too much on is platform-provided CPA, or “cost per action.” If you’re looking to advertise via social media, lots of sites such as Facebook and LinkedIn will have set costs to do so.
Before advertising through these channels, shift your focus to customer relationship management CPA. Evaluate the quality of certain digital marketing strategies before you commit to any one campaign.
Knowing what you want to pay and what results you want to achieve before reaching out to these types of platforms.
Another outdated KPI is cost-per-click, or CPC. Measuring the success of a digital marketing campaign by how many people click on it used to be much more relevant than it is today.
Engagement is important, but by focusing your attention on clicks and cookies won’t factor in the success of advertising campaigns that focus on making an impression instead. For example, this KPI wouldn’t include video ads on YouTube or cable.
Focus on incrementality instead to measure the impact of all your ads rather than interactions with specific ones.
When it comes to data like CPA or ROAS— return on ad spend —you shouldn’t look at the averages. Looking at averages in data like this won’t give you the most accurate information.
Look at marginal CPA and marginal ROAS instead to find out what you paid for significant returns. This avoids the assumption that all customers will be the same.
Last but certainly not least, an outdated KPI to avoid putting too much faith in is impression share lost to bidding. For people looking to decrease how much they spend, the two main ways to do it are through dropping bids and dropping budget.
Our sources tell us that you’ll definitely find more success doing the latter. By lowering bids and targets, you may produce more clicks for the same budget, but lowering the budget itself will maintain more efficiency.
Though the above KPIs may not be as helpful as you would originally think, there are certainly plenty of key performance indicators that are very useful.
KPIs Experts Recommend
In order to find the most useful information from the data, you may want to track these expert-recommended KPIs. The ones we have outlined below fall into four major categories— sales, marketing, customer service, and finance.
For sales, some of the KPIs you’ll want to keep an eye out for are pretty self-explanatory. Keeping track of revenue— and more specifically, monthly recurring revenue —is very important to make sure your business stays afloat.
By looking at revenue on a month to month basis you can also reasonably predict what your annual revenue might look like.
You should also look closely at customer data as a key performance indicator. How long from first contact did it take you to close a deal with a client? How many new paying clients have been acquired lately? Asking these questions can give you a good idea of what’s working and what’s not from a sales perspective.
After all, attracting new customers is an essential part of any business. So is retaining customers, so you can look into recurring revenue and the repeat purchase rate as well.
Some other sales KPIs to analyze are average order prices, opportunity win rates, and the number of sales meetings you have in a month.
Finance KPIs are even more technical, with a large focus placed on your profit margins. Both gross profit margin and net profit margin are important to look at. How much revenue have you generated recently compared with costs? This is a basic question that you should always be able to find the answer to.
For similar reasons, you want to stay up to date with your operating cash flow. Making sure that you always know how much you have in your accounts will help you keep everything in the green.
Revenue growth, total profit added, and budget variance are all also important key performance indicators for finance.
On the marketing side of things, a very important and often overlooked KPI is how many leads you generate. Lots of experts place leads at a higher value than views in digital marketing.
Targeted advertising to generate leads that could potentially turn a profit is absolutely vital. Keeping a pulse on your successful leads can show you where to dedicate energy. Cost-per-lead is very important, too.
Aspects of engagement are definitely important too, though. Social media reach, traffic on your own website, click-through rates, email marketing subscribers— you should keep track of all of these.
Pay special attention to places where you already have a large audience so you can put effort into retaining it. Likewise, find out where you have room to grow.
Two final important marketing KPIs are customer lifetime values and customer acquisition costs. This will help answer the question of who you want to market to.
To that end, customer service KPIs should never be underestimated. Good customer service is absolutely essential when retaining and expanding your target audience.
Pay attention to your churn rate, or the rate at which customers may stop doing business with you. Introduce individualized processes to lower this number.
Your net promoter score and customer satisfaction scores are also very important. The former shows how likely customers will be to recommend your business, and the latter allows them to rate how pleased they are with your customer service.
A lot of experts believe that customer satisfaction scores can help inform decisions that may influence other important KPIs, such as your customer retention rate.
Similarly, client renewals are also very helpful to look at. For example, if you offer a subscription service, look at who is renewing their subscription or deciding to pay more for the next level.
You should also examine the cost per resolution of a customer service time to figure out how you can be more efficient going forward, as well as the average response time.
Paying customers want to feel like their questions and concerns are being heard in a timely manner, and if that’s not the case it could mean you need to make changes to your customer service department.
All the different types of KPIs can be very important for future business decisions and successes, so we encourage you to pay attention to them.