2.1 What are Key Performance Indicators (KPIs)? - Video Tutorials & Practice Problems

<v ->So probably most of you have heard of a KPI,</v> a key performance indicator. So, a KPI is a number. So it's a metric, but are all KPIs metrics? Are all metrics KPIs? So what distinguishes a key performance indicator from just your garden variety metric? Well, the answer is that it has accepted business value. So what that really means is someone outside of the specialty of that metric would actually understand the business impact of that KPI. So if you were trying to select KPIs for your business, emails openend is probably not a great KPI because nobody really knows what that means outside of a specialist in marketing. But revenue could be good, conversions could be good, leads could be good. Things that people kind of understand if they have a general business background, those are typically the things you choose for key performance indicators. Now, the attributes of a KPI basically go by the names, so key. Key means that it's actually a focus. It's actually important. It's something that your business really cares about. Now there's no business even the simplest one that has only one KPI, there's also no business that needs to have 100 because then you don't have any focus. So what you really need to do is to pick a small number of KPIs and how many there are depends on the complexity of your business. But if they're aligned with your core business goals, if having those numbers improve actually means your businesses getting better, that's what we mean by key. These are the focus areas, the target areas, these are the really important things that your business needs to focus on. What about the P, performance? That means it's tied to business results. It's about how your business is performing. So it provides a picture of where your business is, and if you're lucky where it's going. So does it indicate that things are getting better? Or does it indicate what the future might be? And that's where we get to the next one, the indicator. So the indicator really says, hey, where are you going in the business? And what is the progress to maybe an even larger goal? Is there an even bigger KPI or an even better goal for that KPI that you're tracking towards? And is it possible that this KPIs even predictive. If you see this goes up, there are other KPIs that it might predict are going to go up in the future. And so all of these things are really what we mean when we talk about a key performance indicator. Now, KPIs are typically tracked in marketing dashboards. Now a dashboard is going to aggregate data from multiple sources. It will help you filter the data by different segments and compare those segments to each other. Now, hmm, do you remember hearing those words before? That's how you do reasoning with numbers. Aggregation, segmentation, and comparing. And so that's what dashboards help you do. And they help you do it in a way that shows you what happened. And that's typically called descriptive analytics. We'll show you what other kinds of analytics are called later, but descriptive analytics basically show you what happened in the past. And dashboards are a great way to communicate that. So aggregate, segment, and compare, your three key ways of reasoning with numbers, that's exactly what dashboards help you do. And dashboards can help drive organizational change when you use them properly. So how would you do that? Well, if you're about to embark on some type of marketing campaign or other type of marketing program, what you wanna do is first decide what are the numbers that we all agree are the ones that will help us track whether this is successful or not. So what are the KPIs? And even what are the underlying metrics that we wanna look at that tell us basically the health of this program or this tactic or this campaign? Once we've done that, then we wanna set some goals. So when we set the goals, we're basically saying what should this number improve to. After we do this campaign, how many visitors will we get to the website? Or how many leads will we have? Or how many whatever the campaign or tactic or program is designed to do? What is a specific goal? So not just say increase leads, but we're gonna say increased leads by 3%, or we're gonna say drive 30 leads in the next month. We're gonna pick something very specific as our goal. So the KPI might be leads, but the goal might be 30 leads in a month. Then what we do is we track them. So what happened after a month? Did we get the 30 leads? But we probably wanna track them more frequently than that. What did we get after a week? How about two weeks? If you see it's going wrong, you might wanna change things. And so regularly track the progress to the goal and do it by segments. So remember what we talked about. You don't just wanna aggregate things, you wanna segment them and then compare them. Because suppose you have a campaign that had several different keywords in a paid search campaign. And suppose it's not going that well, you're not tracking to driving the leads that you wanted to. Well, why not segment by the keywords and look at the numbers there, because maybe some of the keywords are doing exactly what you hope they would, but others are not. And so maybe you need to focus on changing the ads for the keywords that are underperforming. So segmenting is gonna help you figure out what things are going right and what things are going wrong. Now the dashboards can also communicate value. The value of what you're doing. So the value of your program or your tactic or your campaign. And so who do they communicate that value to? Well, they can communicate it to executives. So that's who really focuses on the KPIs. They wanna know about the return on investment from marketing. They wanna know how we're doing against our competitors, but dashboards can also communicate value to stakeholders. You might be running a campaign, but it's on behalf of some folks in the business. Maybe people who own the product that you're promoting. And so you wanna know how the business unit is doing or how the product line is doing. You might wanna know what that central marketing team that's running campaigns is doing for me. But we also can communicate value to ourselves. We can see how those campaigns are going and we can also maybe figure out by looking at some insight data. How we will actually find our next opportunity for the next campaign? So what can dashboards communicate? Well, they basically could communicate the success of marketing along several different spheres so they can help you figure out if you're attracting more people. So perhaps increasing traffic to your website. So that's an example of reach, where you're reaching more people. They could also help you know if you're retaining that traffic. So once people come to the website, the dashboard can tell you whether people are bouncing, whether they're continuing, how many pages they're looking at the time on the site. They go to also help you understand if you're converting. So are you actually getting them to fill out that lead form or checkout with that shopping cart? And when you add all of those things up, then it can might help you a little bit with customer satisfaction. So are you providing a better customer experience? Dashboards can be designed to reveal the answers to any of these questions and many more.