KPIs or Key Performance Indicators – what are they? Why do you need them?
In business, setting specific, realistic, and measurable goals has been one of the core foundations of a successful enterprise. These goals are broken down into objectives, which serve as the primary measure of progress towards your biggest goals. In addition to being indicators, these objectives also help managers adapt and adjust their approach to attain the most efficient strategy.
Key Performance Indicators, however, go a little deeper by focusing on individual factors that are often overlooked by having broad goals or objectives. Each factor should be well-defined and has an established means of measurement. Additionally, it should have a target value that can help managers come up with the necessary adjustments to become efficient.
For example, professor Stan Bevers determined a total of 13 Key Performance Indicators for cattle ranchers to measure the productivity and cost-efficiency of their practices. One of which is the pounds weaned per exposed female. And by measuring the value of this KPI, ranchers were able to optimize their reproduction rates to increase weaning weights and reach the goal of having 460 or more pounds per female.
Of course, you shouldn’t limit yourself to only one or two KPIs. There is virtually no limit to how many factors you can develop and use. Some of the other identified KPIs that helped ranchers achieve the optimum productivity rate include revenue per breeding female, cost per hundredweight of weaned calf, and debt per breeding female.
Developing Key Performance Indicators for your Online Business
With all the data that KPIs can offer, business managers should be more than capable to create better decisions with measurable results. The same can be said for online businesses (eCommerce websites, blogs, etc.) that have a set of specific goals to be accomplished.
By now, you should already be aware of some of your online business goals. But if you’re an average entrepreneur, these are most likely tied to only the amount of money that flows into your bank account, the traffic that goes to your website, and other simplified indicators. Sure – you can set a specific value for these metrics in order to set clear objectives. For example, let’s say you want to reach 10,000 unique monthly visitors or up to $20,000 monthly revenue for your online store. These objectives are inspiring, yes, but they alone won’t suffice if you want a clear projection on how each will affect your business down the road – let alone how you’re going to achieve them.
When all is said and done, it comes down to the manager himself to formulate specific KPIs that fit the needs of the business. Here are the key steps that can help you identify and develop KPIs for your website.
1. Determine what you want to achieve
First, you need to identify one thing that you want to achieve on your site. It must be fitted to what your site is built for. For example, if you have a business blog website, some of the common goals include increasing awareness for your brand, generating leads in the form of subscribers, and increasing revenue through ads. Identifying these goals will help you pinpoint the specific metrics to be monitored, such as the visitor subscription rate and ad clicks per visitor.
2. Establish a system of measurement
After defining your goals, the next step is to have a concrete system for measuring said goals. This is probably the easiest step thanks to the availability of analytics/web metrics software such as Cyfe. Since you’ll probably be investing money to obtain reliable data, it’s better to go for a service that enables the collection of different web metrics within a single platform.
3. Continually monitor your goals and find ways to optimize your processes
Using the web metrics you obtain, look for the key data related to a specific goal and plan the necessary actions to make the process more efficient. From here on out, your next moves should be based on educated estimates and trials and errors. And in order for this to work, you need to constantly monitor each process’s performance on a regular basis.
Formulating a Strategy
In order to effectively set and utilize blog KPIs, you need to focus on more refined factors that can help you measure the efficiency of your management decisions. More importantly, you need to take these factors and know where they fit in the equation.
There are no strict rules on how you can apply KPIs in your strategy. For example, you can take the amount of dollars you spend in Facebook Ads, divide it by the number of new leads you made, and then you’ll get the average cost per lead through Facebook ads. The equation would then look like:
Facebook Ad Budget / New Leads Made = Cost per Lead made with Facebook Ads (KPI)
You can then specify the ideal value for this blog KPI by lowering the money you spend for each lead and formulate ways on how to reach this target. For example, focus on cutting back the cost of producing content by repurposing old posts, eliminating video ads, optimizing your ad targeting, and so on.