What Do KPIs Mean?
- KPIs (Key Performance Indicators) are measurable values that indicate how well a business is achieving its goals and objectives.
- Understanding and tracking KPIs can help businesses identify areas for improvement, make data-driven decisions, and measure the success of their strategies.
- When selecting KPIs, businesses should think about which KPIs to track, ensure that they are measurable, and regularly review and adjust their KPIs as needed.
If you’re on the marketing team or are researching the topic of analytics for agencies, sooner or later, you’ll come across KPIs. While many have heard about the term, few know what they stand for, and why they are important.
In this blog post, we’ll define what KPIs are, why you should define them, and how they can help your business.
What KPIs means
KPIs is the shortened plural of Key Performance Indicator (KPI). The acronym refers to values that a company defines in a given time-frame to achieve a certain goal, and measure performance. KPIs can be set for pretty much anything, from response times in tickets to revenue growth.
With that said, KPIs shouldn’t be confused with OKRs, which stands for Objectives and Key Results. OKRs are a method to set goals in order to improve performance. And KPIs are needed in order to set OKRs.
What makes good KPIs?
Good KPIs are realistic, easy to measure, and related to the business activities. Take the following tips from the SMART method to heart to ensure that you define good KPIs:
Specific: “Let’s make this company great” is not a specific KPI. What is great, how do you define it? A specific KPI would be: “let’s increase our Twitter follower count by 100.”
Measurable: Every time you define KPIs, ask yourself if you can measure them. Does your company have the right tools to track the relevant metrics?
Attainable: As a business owner, you shouldn’t start measuring everything just for the sake of it. Focus on KPIs that are relevant, for instance: for a design agency that relies on monthly recurring revenue, it makes sense to keep an eye on churning customers.
Realistic: Defining fancy KPIs that look good on paper, but are not achievable, don’t help anyone. Instead of wanting to grow your revenue by 100%, start small with a more realistic 10%.
Time-bound: When setting KPIs, make sure that you set realistic time-frames. For instance, find five high-value clients that spend $10k per month by the end of the year.
With these tips in mind, also make sure that all your KPIs are actionable without having to huddle in countless meetings. If one of your defined KPIs is to get 15 new leads per month, your team should know how to achieve that. With that said, do think about your short term goals before setting long-term OKRs.
KPI examples to inspire you
Now that you know a bit more about the different types of KPIs, let’s look at which kinds you can define with concrete examples. In order to do that, we’ll split the KPIs up into different business departments.
Reach out to 5 long-time customers each month for upselling, and increase their monthly spend by 20% on average.
Identify 2 customers each month who could upgrade to a higher plan.
Reduce average ticket response time to 4 hours.
Increase average ticket rating to 4.
Increase conversion rate on trial page by 15% by adjusting the copy in the next 12 months.
Launch a new landing page to capture 12 X type of leads in the next 18 months.
Increase the average order value by 35% in the next 6 months.
Reach out to previously lost leads and convert 10% of them in the next 18 months.
Improve trial to conversion rate by 20% in next 9 months by creating an in-app onboarding flow.
Add a subscription downgrade suggestion during cancelation to decrease the churn rate by 15% in the next year.
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How to track KPIs
Tracking KPIs efficiently is easier said than done. Depending on your tech stack, you might have to save data first, then pull the data into a reporting tool such as Google Data Studio.
Without a tech-y person in your team, this will be too much for most business owners. Luckily, modern tools allow you to track some KPIs you might be interested in automatically.
If you’re using agency management software such as Service Provider Pro, you can:
see the revenue for each service
track the ticket response time
see how often a coupon has been used
and much more
Without such a tool, you have the following options:
Spreadsheets: Good old spreadsheets allow you to visualize data with a few different charts—a good start if you’re not ready to invest in anything fancy. If you have to copy-paste data manually, though, there’s a high chance your data might be wrong our outdated. Tools such as Zapier can at least automate the data collection.
Reporting tools: Google Data Studio and other tools help you visualize your data points nicely. It takes time to set up, and you might not be able to connect to every one of your data sources. But once set up, your reports should be accurate and easy to read.
Analytics software: Special software with analytical capabilities allows you to do more with your data than traditional reporting tools allow. You might be able to calculate the churn rate in a given time, or look for the ticket response time in a given period.
Frequently asked questions about KPIs
What are the 3 types of KPIs?
There are three types of KPIs: a leading KPI helps you check if your goal is achievable; a lagging KPI to help you understand which activities you can make progress with; a counter KPI to balance your actions.
What do KPIs measure?
Key Performance Indicators (KPIs) measure the performance of an objective over time. For instance, was the average ticket response time in the past six months below four hours?
Should KPIs have targets?
All KPIs need to have a clear target or goal in mind. The idea is to make measurements and check if the goal can be reached within the proposed timeline.
What are KPIs based on?
KPIs are based on different data points that help measure the performance of business activities in order to find out if the proposed goal can be achieved.
It’s your turn to make use of KPIs
By now you should have a good understanding of what KPIs refer to, how they are defined, and how you can set them up. There are many tools to ease you into the process. In the end, you should be able to more accurately define goals that help you grow your business—and your entire team will be a part of it.