Every business aims for success but can sometimes find it challenging to measure actual progress in every critical area of the organization. This is where Key Performance Indicators come into play.
The term “Key Performance Indicators (KPIs)” refers to the metric set by which success is evaluated. KPIs are data metrics — you determine — that are critical to the ongoing evaluation of your overall performance and long-term success.
Since KPIs are used for the majority of effectively tracking business performance, understanding key terms will give you a deeper insight into how to boost your performance.
What Exactly Are Key Performance Indicators?
Key performance indicators, simply known as KPIs are measurable metrics used to determine whether a business is reaching its objectives, according to Investopedia.
KPIs evaluate the performance of the business as a whole, but specific indicators are used in various areas.
KPIs cover the vast majority of activities.
They track not only quantitative data, such as sales and margin but also qualitative indicators, such as customer satisfaction.
Managing KPIs improves focus and performance as they are used to better plan future business strategies.
In other words, KPIs drive strategic planning on every level to ensure that the desired results are obtained.
They promote business intelligence and performance-driven actions.
The evaluation and analysis of data obtained through KPI tracking give life to the numbers.
This is what drives companies such as Pisgah Peaks Ventures to aim at providing businesses with the tools to upgrade their performance and make the best of their resources.
KPIs should be tailored to your diverse business units.
Once the different KPIs have been combined, your business will then be able to get a comprehensive view of how well it is performing across all fronts.
How Are Marketing Key Performance Indicators Calculated?
Marketing KPIs are specific metrics associated with a marketing plan to measure its progress.
Marketing campaign metrics are calculated by taking into account numerous variables.
Typically, marketing KPIs include sales revenue and lead generation.
The best way to track marketing KPIs is to diversify the indicators being used until you’ve reliably found the most critical KPIs necessary for the longevity of your business.
A few relevant marketing KPIs to keep an eye on:
- Return on Marketing Investment (ROMI)
- Customer Acquisition Cost (CAC)
- Marketing Revenue Attribution
- Customer Lifetime Value (LTV)
- Traffic-to-lead ratio and conversion rates.
The evaluation of marketing KPIs takes into consideration numerical data such as sales growth, marketing investment, and average sales per customer.
Crunching those numbers can be time-consuming and tedious.
Pisgah Peaks Ventures offers services that can help you identify and keep track of the KPIs most important to your operation.
You’ll receive an in-depth analysis of your KPIs and the recommended measures to proceed.
As a result, you can make strategic decisions based on comprehensive and accurate data sets from the information that can be harvested from your operations.
Does Every Company Have The Same Key Performance Indicators?
KPIs can be unique and specific to your own operation to properly align with your business objectives.
As businesses have different goals and targets, no two companies will have precisely the same KPI that are most critical to the successful measuring of essential operations.
There are at least 15 key performance indicators associated with marketing alone.
That is to say that KPIs can be multi-layered and distinct.
Moreover, by definition, KPIs are specific.
Consequently, they should measure specific metrics within your company.
Different marketing strategies require different KPIs and tracking mechanisms.
The first step in managing the right KPI is to establish SMART (Specific, Measurable, Achievable, Realistic, And Time-bound) goals.
Furthermore, one of the key tenets of business planning is accountability.
Every person within an organization should be held accountable, to a certain degree, for the smooth running of the business and the role they play.
From a psychological perspective, humans need to have a goal in mind to feel motivated.
According to Maslow’s Hierarchy Of Needs theory, motivation stems from five categories of human needs, which include belonging needs.
Hence, for an organization to be successful, its people need to feel valued to work towards a common goal.
Choosing the right KPIs to monitor gives people a sense of accomplishment when the metrics are in concordance with the business objectives.
This way, KPIs not only give your employees something to work for but also drive empowerment and accountability, thus optimizing the use of KPIs.
What Are Some Examples Of Key Performance Indicators?
While there are at least 15 marketing KPIs, below are the top 10 that will increase your success rate for your marketing campaign.
- Return on Investment (ROI)
ROI refers to the amount of return on a particular investment, that is, the profits made with a certain amount of money or resources poured into a business, as stated in Investopedia.
- Customer Acquisition Cost (CAC)
CAC is the cost incurred in trying to get a customer to buy a product or service.
It is calculated by simply dividing the marketing expenses by the revenue generated during the time of the marketing campaign.
- Conversion Rate
Conversion rate is the number of conversions per the total number of visitors reached.
It gives the number of customers amidst all the people who have or heard your advertisement.
- Net Promoter Score (NPS)
Net Promoter Score measures the degree of customer satisfaction.
This KPI gives you an insight into the needs of your customers and how likely they are to recommend you.
- New Inbound Leads
New inbound leads are a type of marketing KPI that tracks the number of new visitors who turn into leads, that is, a potential new customer.
This KPI is especially used in social media marketing, whereby content raises brand awareness.
- Gross Profit Margin (%)
Gross profit margin is a metric used to calculate the net sales of a company after subtracting the cost of goods.
Gross profit KPI is used primarily in the finance department of an organization to monitor the financial health of the business.
- Total Revenue
As it might be inferred from the name of this KPI, it is the total amount a company can receive from the sale of goods or services.
This specific KPI is monitored continuously and used at the end of each fiscal year to determine net profit.
- Return On Ad Spend (ROAS)
Return on ad spend (ROAS) measures the revenue generated from an ad campaign.
It gives an insight into the effectiveness of an ad in generating leads.
Usually, ROAS is the ratio of the money generated to the amount of money spent on the ad.
- Organic Traffic And Leads
Search Engine Optimization (SEO) is an important marketing strategy, delivering high-quality content on websites to entice customers to make purchases.
Organic traffic KPI monitors how good you are on search engines.
It also helps you to streamline your SEO strategy to maximize your reach.
- Customer complaints
Listening to your customers’ feedback and concerns is foundational for the improvement of customer service.
This is a great tool for the Human Resource department to improve customer-seller relationships and upgrade the overall performance of the business.
Final Thoughts On KPIs
While there are numerous potential KPIs that can affect how you measure, manage, and perceive your company’s performance, identifying and setting up a system that can measure critical KPIs is foundational to long-term success.
Even though some KPIs are more easily identifiable and quantifiable, other KPIs can be more subtle, not obvious, and potentially more challenging to measure due to some critical KPIs being based on human feelings.
To get help identifying, setting up, and interpreting the essential KPIs unique to your organization, contact Pisgash Peaks Ventures to get started.