What Are Your Key Performance Indicators?

going up.jpg

How do you know if your business is doing what it is supposed to do? How do you know if you are doing well or not?

Sounds like an easy question to answer, doesn’t it. But for too many companies, it is not so black and white.

But it should be.

What Are Key Performance Indicators?

Key Performance Indicators (or KPIs) are the business-defining metrics that you will use to answer the questions posed above. And the only person that can tell you what those KPIs are, is you.

Each industry and each company might have different ones. You might have just one of you might have five. They might be focused solely on revenue or they might be focused on new customers.

Not Just Any Metric

The key is in the name – Key Performance Indicator. This is not just any metric. This is the one that gets right to the heart of success. If the metric is positive, you are doing well. If not, you have work to do.

A good test to decide whether a metric is truly a KPI is to think about a situation where said metric was moving in the right direction, and yet the company itself is moving in the wrong direction.

For example, let’s say you choose a new customer metric. Is it possible that you could be seeing strong growth in new customers, but at the same time see shrinking revenue? If so, than new customers alone is not a great KPI.

Can You Have Too Many KPIs?

Yes. Most businesses will have more than one. But it is important to limit it to as few as possible.

Why? Because the more metrics you have to look at to determine the overall health of your company, the more difficult it becomes. They don’t have to tell you what’s wrong when things are wrong, that’s what analysis is for.

A good rule of thumb is to keep it to 5 or fewer.

In Conclusion

KPIs are the metrics that you use to answer the question, “how is the business doing?” They should be readily available and easy to understand and explain.

Most Overrated Web Metrics

The time for companies to start leveraging the massive amounts of data available to them to grow their business has come. It came years ago. The problem is that some companies who were quick to acknowledge this new age of data analysis are still wasting their time with vanity metrics that don’t answer the questions that matter.

When we talk about that in terms of website metrics, we’re talking about the numbers and percentages that are easy to track. We pick them because of their ease. Google Analytics puts them front and center for us to see. And we know how to influence them. So we can show our teams and our bosses that things are moving in the right direction.

But is it helping the business? Are they tied to larger marketing or company goals and targets?

Here are some of the most overrated web metrics still commonly used today:

  1. Bounce Rate – while many might argue that bounce rate is a critical measure of whether people are finding what they expect to when they visited your site, the point here is that this metric alone tells you very little. For example, if you spend more money on advertising to drive paid traffic to your site, you should expect bounce rate to go up. Bounce rate will vary from source to source, device to device, among different geographic locations and demographic profiles. Measuring bounce rate in a silo tells you almost nothing about your overall performance.
     
  2. Visits – website traffic used to be the ultimate metric. We would all brag about how much traffic we drove, how fast it was growing, etc. Part of the reason for that is because it was one of the first real metrics we ever paid attention to. But the time has passed for visits as a primary metric. Companies have proven time and time again that they can improve their business without growing traffic. And companies that focus solely on attracting more and more eyes on their website have failed to pay attention to conversion rates and other metrics that might help them decipher good traffic vs. bad traffic.
     
  3. Time on Site – this one sits adjacent to bounce rate. While you might argue that sites that rely on advertising dollars are looking at time on site and other “stickiness” metrics because they need to sell ads, I would argue that time on site is worthless. There are too many things that influence how long someone spends on your site. If I find what I’m looking for quickly, isn’t that better than struggling on the site for 4 extra minutes and getting frustrated?

Remember, when choosing what metrics to measure, start with your business goals in mind. Find the metrics that tell you whether or not you are moving towards those goals and ignore everything else.