KPI (Key Performance Indicator)

What is the KPI?

A key performance indicator (KPI) is a measurable quantity that reflects the progress of a company, a department or a project in relation to important goals and strategic objectives. KPIs help to evaluate the efficiency and effectiveness of certain processes and to measure success.

For companies, KPIs are indispensable instruments for making strategic goals measurable and comprehensible. They provide clear orientation by showing progress and deviations from targets. KPIs help companies to deploy resources in a targeted manner and ensure that all departments are working towards common corporate goals.

KPIs promote transparency and comparability of performance, which strengthens employee motivation and enables continuous improvement of processes. In addition, KPIs facilitate benchmarking against competitors and provide a data-based decision-making tool for targeted expansion of market positions and securing competitive advantages.

Why are KPIs so important?

The Key Performance Indicator is used to check and control the performance of a company. With the help of these key figures, your company can analyze and adjust certain processes and measures. Depending on the company and the industry, different KPIs are used to check performance. For controlling, for example, sales and revenue figures are of high importance. In sales, for instance, the number of leads received is interesting. Thus, a company defines different KPIs for the different departments.

Types of KPIs

KPIs fall into different categories, each covering specific areas of the business. The following table provides an overview of the different types of KPIs, and highlights typical examples for each category to illustrate their practical use in different areas of the business.

Examples of KPIs in online marketing

As already mentioned, for various departments, different Key Performance Indicators are of importance. The online marketing department places a lot of emphasis on the flow of visitors, i.e. traffic. However, to also keep an eye on performance and costs, the following KPIs are commonly used:

• Traffic (both organic and paid)
• Impressions
• Inquiries via contact form
• Newsletter subscriptions
• CPC (cost per click)
• CPL (cost per lead)
• Conversion rate
• Leads
• Dwell time
• Bounce rate

How do you set the right KPIs?

Selecting the right KPIs is crucially important. Setting the wrong indicators can lead to misinterpretation of data, wasted resources or even wrong business decisions. Here are some steps and considerations that can help you define the best KPIs for your company or project:

1. Understand your goals: Before you set KPIs, you need to have clear business or project goals. Do you want to increase sales, improve customer satisfaction or increase the efficiency of a process? Your KPIs should be directly linked to these goals.
2. Make it specific: A KPI should be as specific as possible. Instead of a general KPI like ‘increase sales’, you could use ‘increase sales in the online store by 15% in the next quarter’.
3. Measurability: The KPI must provide measurable data. Tools and systems should be in place to collect and analyse this data. For example, a CRM system can be used for customer data or Google Analytics for website statistics.
4. Relevance: Not all measurable data is necessarily relevant. It is crucial to select KPIs that actually have an impact on the business or project.
5. Adaptability: The business world is constantly changing. It therefore makes sense to regularly review and adjust KPIs to ensure that they remain relevant and useful.
6. Comparability: KPIs should be designed in such a way that they can be compared over time or against industry standards. This can help to measure progress or identify where improvements are needed.
7. Realism: Set KPIs that are challenging but still achievable. Unrealistic KPIs can harm the team by causing disappointment or frustration.
8. Involving all stakeholders: When setting KPIs, it is advisable to involve all relevant stakeholders. This can help to gain a comprehensive understanding of the objectives and challenges and ensure that the KPIs are owned and supported by everyone.

Setting the right KPIs requires both strategic thinking and a deep understanding of the business or project. By carefully selecting and regularly reviewing the KPIs, you can ensure that you are always on the right track and effectively pursuing your goals.

Conclusion

For KPIs to be effective, they must be actionable. This means that the key performance indicators must be clearly defined. An evaluation of the KPIs must take place after a predefined period (e.g. weekly or monthly). In this way, the specified key performance indicators are achieved more quickly and efficiently. Through a targeted analysis and comparison with data from the past, a strategy is then revised or newly developed in order to successfully complete the campaigns.