What Key Performance Indicators (KPIs) Should You Measure?
The only way for you to accurately understand which Key Performance Indicators (KPIs) you should track is to understand which answers you are seeking. Reports are useless if they don’t tell a story, give insights and offer measurable/actionable tactics that help you achieve your goals. You must take a step back and develop a thought process that maps KPIs to your overall business strategy.
Here's an example. Maybe you’ve recently deployed Google Analytics on your website and you’re wondering why you haven’t been able to leverage the great data that’s being gathered such as:
- Total Unique Visitors
- Bounce Rate
- New Visits
- Traffic Source
- Average Time On Page
The ubiquity of free analytic tools has created a flood of raw data, which has caused business owners to get bogged down by countless reports and lose focus on overall business goals. For example, you might think the KPIs you absolutely must track consist of everything served up by your new best friend, Google Analytics. This information overload makes it difficult to glean insights and develop actionable plans.
So, let's consider your 2011 company priorities independent of any technology or data. Whether you’re planning to increase revenue by 15%, increase average revenue per customer by 20% or increase site traffic by 30%, these goals must be set prior to identifying KPIs. That’s the easy part.
The greatest challenge in this process is identifying the data, which may or may not already exist, that most effectively drive the desired results. In his book Web Analytics – An Hour A Day, Avinash Kaushik offers a great process to follow called, “Three Layers of So What?”. This is a simple, yet effective, way to confirm that a specific metric tells a story and offers insights that lead to action.
Asking yourself this simple question is very powerful as can be seen in these two examples from the book:
Top Exit Pages on Your Website (is there a trend?)
“These are the top exit pages on our website in January 2011.” So What?
They don’t seem to have changed in 6 months.
“We should focus on these pages because they are major leakage points in our website.” So What?
We have looked at this report for six months, tried to make fixes but these pages have not dropped off the report.
“If we can stop visitors from leaving the website, we can keep them on our website.” So What?
This seems to be a great metric but really doesn’t provide insight that drives results.
Visitors are going to leave our website at some point and maybe these are simply logical exits.
Conversion Rate for Top Search Keywords
“The conversion rate for our top 20 keywords has increased in the last three months by a significant amount.” So what?
“Our pay-per-click (PPC) campaign is having a positive outcome, and we should allocate funds to these eight keywords that show the most promise.” Okay.
That’s it. No more “So what?” With just one question, you have a recommendation for action. This indicates that this is a great KPI and you should continue to use it for tracking.
Although you have access to hundreds of potential KPIs, it’s important to remember that perhaps only a few warrant your attention. Here’s a quick guide to follow when identifying the best KPIs to track:
- List your business goals such as:
- Grow revenue by X%;
- Increase customer retention by X;
- Increase partner sales by X%;
- Cut average cost of customer acquisition.
- Align KPIs with business strategy;
- Execute “Three Layers of So What?”
- Identify measureable outcomes for each business objective;
- Analyze data on a daily basis.