Setting key performance indicators (KPI) is important for businesses of any size – from cottage industry to the Fortune 500 companies. Although all business owners are using at least some ways to measure success, we still see plenty of entrepreneurs not using the right KPI metrics or collecting the data but not actively using it to tweak the operations.
Do your KPIs overwhelm you?
Although we are going to concentrate on marketing KPIs in this article, there are a few important notes related to successful KPI implementation in general. The main problem encountered by businesses who have tried using KPIs and then decided to stop is that they find it all a bit too much.
You hear people talking about big data and how leveraging both your in-house data and competitive intelligence data can propel your venture from a small business status to a multi-national superstar, in reality having too much data can be worse than not having enough.
There are thousands of KPI metrics available and I have a feeling the bright minds of business theory keep thinking of new ones on daily basis. The indicators range from obvious things like net profit to super-clever stuff like Bekidou rate (which is a rate of machine’s actual operational time to its total scheduled operational time, in case you were wondering). You can’t be measuring everything. Of course, it would be cool to record the Bekidou rate on your office e computer, however, for the majority of SMEs it would be a total waste of time.
Setting key performance indicators must be based on solid foundations of pre-defined business processes, accountability and measurement. In other words, you should be able to compare your metrics to a benchmark metric and be able to understand what this means for your business. For example, if one of your KPIs is website conversion rate and it is 3.41% - what does that mean for your business? Is that a good conversion rate or do you need to make improvements?
Business and operational KPI examples
Although most textbooks suggest that you categorise your KPIs by characteristics (e.g. quantitative, qualitative, input, output), many businesses will simplify the categorisation and set up groups of KPIs by purpose or by department: operational KPIs (there’s a great guide on manufacturing business KPIs from opsDog), supply chain, financial, employee performance, customer relationship management (CRM), marketing and business key performance indicators.
While some KPIs, like employee churn rate, will only relate to a single purpose – employee KPIs in this case, there will be groups of indicators that tend to overlap. For example, customer lifetime value is an indicator related to CRM, you are likely to be using it as part of your marketing KPI set if you conduct your business online.
Setting key performance indicators for marketing
Unless you’re buying into a franchise business model, there is no universal turnkey solution for setting key performance indicators for your SME. Instead of copying metrics that other businesses are measuring, you should come up with a set of your own. Pick indicators that are relevant to your specific case and make sure you have a benchmark to work with.
Let’s go back to the example of conversion rate. If your current conversion rate is 3.41% and you have a couple of years of Google Analytics data to look at, and you see that your conversion rate was 3.89% back in 2014, this is a solid and measurable piece of data. Or let’s assume you subscribe to a trade magazine and you read about research that had found the median conversion rate in your industry to be 3.59%. Both situations give you a benchmark figure that can be used for comparison. You can also look at the Marketing Analysis Tree approach to help you determine your KPIs.
Keep the number of KPIs to a reasonable number. For a small or medium enterprise, it is wise to aim at between 5 and 10 KPIs per “purpose” or department. So you have no more than 10 operational KPIs, 10 financial metrics, 10 marketing indicators and so on. Even though some will overlap, you’re still going to end up with around 50 data points to measure. If this looks like too difficult to manage, do a brainstorm session and cut it down. It is much better to measure and take action on fewer KPIs than to have too many and under-deliver on their analysis and execution.
So let’s have a look at some of the KPIs that are available to us from the perspective of digital marketing. This is by no means a comprehensive list. If you need help determining which indicators are important for your business growth, drop us a line.
Conversion Rate
This is probably the most valuable metric to be measured. Especially since it is available free of charge to anybody who uses Google Analytics. You need to set up your goal path in your Analytics admin panel to define the actions you expect from a website visitor. In most cases this would be a completed checkout or quote request submission.
Sales per channel
What is your most valuable channel for lead generation or sales? Direct traffic, organic search or social media? You can break it down even further by comparing how mobile users and desktop users are performing within the organic search channel.
Cost per Lead
If, for example, you’re currently spending £10 to acquire a single lead via paid search and £20 per lead via social media, you can optimise the social channel to be more in line with the average CPL or even make a decision of abandoning an under-performing channel and concentrate your efforts on the channels that perform well.
Search Engine Rankings
Although owning top rankings doesn’t guarantee sales, this is something that you want to monitor closely as fluctuations in rankings often indicate an underlying problem.
Google SERPs CTR
More SMEs need to get on board of Google’s Search Console to be able to monitor their search engine ranking page (SERP) click through rate (CTR). It is a good indication on the overall state of your website’s content. Check this article to learn more about ways to maximise Google SERP CTR.
Organic site visits
A filtered view of organic visits (from Google, Bing and other search engines) gives you an easily-comparable point of reference. Your total traffic may fluctuate as new campaigns are switched on or off, however your filtered organic traffic is a good measurement of how much of an authority your website is considered by search engines.
Online Share of Voice (OSOV)
It’s a measure of how well your brand amplification works. The formula is rather simple:
OSOV = (Number of times your brand is mentioned on social media / Number of total times your and your competitors’ brands are mentioned on social media) * 100
Social Networking Footprint (SNF)
It’s measure of brand influence from the perspective of social media. There are many ways of calculating SNF and may involve collating data on brand mentions, interactions (retweets, shares) and traffic from social media. A “cut-corner” approach of measuring your SNF is to monitor your Klout score, however, Klout is not comprehensive. You can have a brand with a Klout score of 70 (ranges from 0 to 100) but if their social media achievements don’t resonate with lead generation or sales their Klout isn’t of much value.
Customer lifetime value (CLTV)
Prediction of the net profit attributed to the entire future relationship with a customer.This KPI is priceless when it comes to streamlining your upsell and cross-sell processes. Once you’ve worked out your customer lifetime value, you can design your upsell and re-activation strategy to maximise CLTV.
Return on investment (ROI)
In digital marketing ROI is usually calculated on a per-campaign basis. As a general rule, businesses are looking to achieve at least 1 to 5 from paid search and 1 to 10 from organic and inbound marketing. This means that every pound spent on inbound marketing should return £10 worth of sales. However, this is very much dependant on your overheads and other business-related characteristics.
