Key Performance Indicators (KPIs) are very important when it comes to strategic decision-making within a business. These data-driven business goals and value metrics can help your business think more laterally about its strategic decisions and reach crucial goals with more precision and efficiency.
Not sure how to use KPIs to make data-driven decisions? We’re here to help. Our mission is to guide you on how to measure success using KPIs and explain what makes them so fundamental to strategic decision-making in the business world.
Understanding KPIs
Key Performance Indicators are measurable values used to track progress toward specific company goals. Compared to metrics and business goals, KPIs are directly informed by data analysis. Metrics, on the other hand, can be any sort of data collected as a routine process.
Some examples of KPIs include:
• Page views
• Conversion rate
• Cost per lead
• Goal completion rate
• Leads
• Customer acquisition cost
• Bounce rate
Data is the fuel that drives businesses. We use data to inform just about every decision we make – from what colour palettes consumers prefer this season to which platform results in the highest engagement level. We need data in order to make the most successful decisions possible.
Importance of KPIs in a Business
KPIs can play a major role in helping your business set and achieve important goals. The information provided by data analytics combined with the targeted goal setting of a strong KPI is a recipe for success that many powerful companies have used in the age of contemporary business strategies.
Take Nike’s Case Study in digital marketing, for example.
By using KPIs and data analytics to inform their marketing decisions, the iconic sportswear brand was able to increase its ROI by 20% and experience a 10% increase in consumer engagement.
Using KPIs helps bring clarity and substance to digital marketing campaigns. By monitoring the right KPIs, you can determine the success of marketing efforts in advance and in real time and make adjustments as needed. This results in much sharper, harder-hitting campaigns that yield more successful results.
KPIs can also assist in identifying opportunities for growth. By shedding light on the parts of your campaigns that need improvement, it can become easier to recognise the strengths and advantages of your strategy.
Identifying the Right KPIs for Your Business
The KPIs your business needs most will depend on your individual needs and objectives. To identify the right KPIs for your business, a procedure needs to be followed.
• Understanding business objectives – What is your business aiming to achieve? Knowing where your goals are can help you choose KPIs that align with your business goals and brand aspirations.
• Identifying critical business processes – What business processes does your company rely on to move forward?
• Setting performance standards – Try to find a balance between bold and realistic when choosing your KPIs. Set performance standards that reflect your capacity and ambition for growth.
• Measuring actual performance – Once you have selected and set your business’s KPIs, all that is left to do is measure them over time. You can do this by using a high-functioning data analytics software program that allows you to monitor performance behaviour across different areas.
Using KPIs for Strategic Decision-Making
KPIs are good for much more than just goal-setting and objective clarification. They can play an integral role in the process of making strategic, data-backed decisions.
When you have access to data analytics programs that highlight which parts of your campaign strategies work and which don’t, it can help guide your business to make more effective business decisions. The information that data provides can give you the foresight and understanding needed for success.
Some of the main areas of strategy that KPIs can assist with include:
• Budget allocation – Where are your funds best put to use right now? Budget allocation is an important part of strategic decision-making, and KPIs can help you approach it with the most realistic and profit-driven mindset possible.
• Marketing strategy – Is your current marketing strategy working for you? If so, what is driving it forward? If not, what needs to be changed? This kind of data is essential for being strategic.
• Client management – What is your client retention rate? How much value do you derive from loyal customers? Is your client management system lacking support? Using a data analytics program with clear client KPIs can help you understand more about what your clients need.
Challenges in Implementing KPIs and How to Overcome Them
Despite their value, KPIs are not always easy to set or implement. Just like with any productivity strategy, there are aspects of implementing KPIs that can be challenging at times, such as:
• Data collection and analysis – Combing through large quantities of data does require some skill, time, and effort. The people on your business’s team who are in charge of data analysis may find the information very technical at times, but that can be rectified with some basic training.
• Setting realistic targets – Overly ambitious KPI goals can be just as detrimental as unambitious ones. Set KPIs around performance areas you know you can realistically achieve.
• Ensuring alignment with business objectives – To achieve a sustainable level of business success, a holistic view of business objectives must be obtained. This can be achieved through developing strong business values and regularly assessing the relationship between your KPIs and future business goals.
Successfully Measure Your Success
KPIs are the data-driven benchmarks businesses use to measure progress and monitor performance while exploring new strategies for marketing success.
But knowing how, when, and where to implement them is crucial. By identifying the right KPIs for your agency, using a strong data analytics system, and making sure your KPIs are in alignment with business objectives, you can become a more competitive and success-oriented company.
If you found this article useful, leave a comment below about your experience with KPIs and which method of implementation you would like to try next. Agencies that learn together, grow together.