What are Key Performance Indicators (KPI’s)?
KPI’s are used as indicators of success, often a quantifiable measure allowing you to track the progress of long and short-term objectives. Managers, stakeholders, departments and organisations use KPI’s at different levels to demonstrate and measure the value of success. For example, high-level KPI’s may focus on overall business direction and performance, whereas low-level KPI’s may be department specific or measure a tactic.
You need to remember that KPI’s are only as valuable as you make them. Don’t measure something that doesn’t need to be measured. At the same time, don’t measure something to then ignore the results.
How are KPI’s used in digital marketing?
No matter what size your business, if you are investing in digital marketing activities you should set KPI’s. One of the many beauties of digital marketing is that you can measure hundreds of metrics online to truly evaluate the effectiveness of your efforts.
There are a wide range of KPI’s in the digital marketing industry, but you only need to utilise a few, so be sure to measure what matters. Your KPI’s should be in direct relation to your digital marketing objectives. For example, if you’re investing in a new E Commerce website design with the overall objective of increasing online sales; some basic key performance indicators could be to 1) measure cost per acquisition (CPA) and 2) measure online conversion rate metrics.
– Cost per acquisition measures the amount of money it takes to drive a sale.
– Online conversion rates can measure the percentage of clicks to the site in relation to the amount of sales.
Why are they so important?
Without establishing key performance indicators, how do you know your campaign is successful?
Establishing KPI’s and sharing them with key stakeholders means there is a streamlined vision for your marketing efforts. This means that everyone is working towards the same goal and understands the metrics for measuring success.
Once your organisation has KPI’s in place you can review ongoing performance. This allows you to manage, control and establish whether your marketing efforts are supporting your overall business objectives and make any necessary changes on the way.
Evaluating your key performance results allows you to make improvements for future marketing activities. If it didn’t work, why? If it did, how can you improve it for next time? Anyone can measure data, but the strategic part is measuring what is meaningful to the organisation.
What are KPI vanity metrics?
Vanity metrics refer to the numerical data that is collected that has no significance in supporting your business goal. The numbers may look impressive, but they offer no further direction for marketing decisions. For example, if your goal is to increase conversions on your E Commerce website, there is no point shouting about the thousands of followers you have on your social media page.
Setting the right goals, objectives and KPI’s
Settings the right KPI’s takes time and effort, but it is worth it. To ensure your goals, objectives and KPI’s are clearly understood by everyone they need to follow the SMART structure.
Specific – Objective and exact, so there is no room for confusion.
Measurable – Quantifiable metrics so you can unbiasedly measure the results.
Achievable – Set goals that are realistic to your available resources. Make it actionable, don’t measure something that you can’t then later act upon or improve.
Relevant – Don’t measure something that’s of no use to your organisation. Remember to ask yourself, what does this mean in relation to our objectives and the overall business.
Time-bound – Set a time frame to review and complete the goal. You need to continue to evaluate and re-evaluate.
Check out our case studies and see what SMART metrics Digital Ethos used to measure their success.
What you should be measuring
Too often businesses take on generic KPI’s, but this can be detrimental to your marketing efforts. Don’t waste your time measuring something that is irrelevant to your marketing objectives. Below are some examples of the different areas of digital marketing you can target your KPI’s towards:
Conversions rates – These are crucial to understanding and improving lead generation and sales activities. Measuring conversion rates allows your business to establish whether you are operating the right platforms, targeting the right audience and level of engagement. For example, Cost per acquisition (CPA), Click-Through Rate (CTR), Website traffic.
Revenue – To establish whether your marketing efforts are worth investing in, you need to measure Return on Investment (ROI). Understanding the details behind budgeting will allow you to stay in control and best leverage your available resources.
Customers – At what point are your customers passing thought the sales funnel, what do they find appealing? What percentage of customers have previously purchased from you? Do you need to measure retention rate and are you choosing to target new customers or existing customers? What is the customer lifetime value and are they worth investing more money in?
Evaluating and improving your digital marketing performance
An important element of key performance indicators is the ability to evaluate performance and make improvements for future activities. It can be compared to a trial-and-error process, in that you are continuously analysing and adjusting strategies and metrics to get them exactly right. You should measure performance at three stages of your marketing campaign, pre-implementation, during the campaign, and post-implementation.
Pre-implementation – It is crucial to take current measures as a base line metric to refer to as a comparison. This allows you to measure the percentage of improvement and help establish the campaigns success.
During – gathering metrics during your marketing activities allows you to review the ongoing success and whether your objectives can be achieved within your time frame.
Post-implementation – Evaluating your overall marketing activities and gathering feedback to make improvements to your future marketing efforts can help reduce costs and improve performance.
For example, if you plan to increase website traffic by posting rich blog content, you need to measure current website traffic and then compare that figure to later traffic once your blogs have been posted.
Planning and implementation
There is a lot to consider when setting your digital marketing KPI’s, if you invest the time and effort in the beginning, you will see return in the long-run.
When planning your key performance indicators, you need to choose who will oversee the marketing campaign and gather the reports; this might be a single person or spread responsibility across a department. You then need to decide how frequently you report on the progress in relation to your overall time frame.
At Digital Ethos, we work closely with our clients to agree on strategic key performance indicators and we deal with all the metrics for you. We utilise Google Analytics to create regular reports so that you can see the returns on your investment.