KPIs – What? Why? How?

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FIR On Strategy with Andrea VascellariThis is part of a series of posts that explores the “Adaptive Digital Strategy Framework”, an operative guide that I created to plan, execute and manage online strategy programs more effectively and efficiently. Each of post of this series comes with an audio podcast in which you will find the audio version of the post with additional audio commentary about the discussed topics. The name of the podcast is “FIR On Strategy with Andrea Vascellari”.

What are KPIs?

A KPI (Key Performance Indicator) is a type of performance measurement. You may use KPIs to evaluate the success of your organization or more specifically the success of a project.

These indicators help you understand whether you are making progress towards the achievement of your objectives. This is why it’s vital that you have a good understanding of what you are trying to achieve with your initiative. If you need help to define your objectives, check out episode #15 of “FIR on Strategy”.

Most organizations set strategic objectives they desire to achieve. One way to measure the progress toward achieving these objectives is to use KPIs.

For example, an organization has a goal to reduce from 30% to 20% the people that are leaving when visiting their website. In order to know whether it’s achieving its objective, the organization defines a KPI called bounce rate. The bounce rate KPI measures the percentage of visitors who enter the page and “bounce” (leave the page) rather than continue viewing the content of the page on which they landed or visiting other pages within the same website.

By monitoring and analyzing this KPI the organization can measure the percentage before and after implementing any website improvements. Without implementing the KPI, the organization would not have precise data to know if it has achieved its objective.

Why are KPIs so important?

When things are going well, money is coming in and customers are happy, people tend to pay less attention to details. So it’s not always easy to have a “realistic” view of how an organization or a project is doing if we don’t pay attention to performance indicators that monitor our real progress towards the achievement of our objectives.

KPIs tell us the real status of an organization and the projects it’s running. They give us an immediate snapshot of the overall performance. Having your KPIs set up properly help us understand immediately if we are meeting, or not, our expectations and whether or not we need to make changes.

Any organization, large or small, should measure and track the KPIs that are critical to the success of its initiatives. Real-time data concerning the health of a business is extremely important because it provides essential decision-making information, especially in today’s competitive business environment.

How should you choose your KPIs?

KPIs define a set of values used to measure against. The problem is that there are many sets of values that we can choose to measure. There are quantitative and qualitative KPIs, leading, lagging, input, output, process, financial and directional indicators, just to mention a few.

There are a lot of things that we can measure but this doesn’t mean that they are all key to the organization’s success. When we select KPIs, it’s actually important to limit them to those factors that are essential for the organization to reach its objectives. Another advantage to keep a small number of indicators is that it helps to keep everyone focused on achieving the same KPIs.

Keep in mind: This doesn’t mean that an organization will have in total only three or four KPIs. Rather there will be three or four KPIs for the overall objectives of the organization and then all the units, within it, will have additional KPIs that support the overall objectives of the organization.
For example, if “Increased Customer Satisfaction” is one of the organization’s KPIs, that same indicator will be looked at differently in different departments. The Technical Department that create the product sold by the organization may have as a KPI the “Number of units rejected by quality inspection”, when the Customer Support Department may have a KPI of “Minutes a customer is on hold before a representative answers”. Success by the different departments in meeting their KPIs help the organization meet its overall KPIs.

Same goes with individual projects, each one of them needs to have its own KPIs. Also in this case the KPIs must be in synergy with the defined objectives.

So if we look specifically at digital projects, where do we start from? There are so many KPIs, which one should we choose?

Do you remember when in episode #11 of “FIR on Strategy” – Context Analysis – I asked you to define the nature of your project choosing whether you aimed at increasing awareness, sales/conversions or loyalty? Great. So let’s start from there then.

Funnel Groups

Based on the nature of your project you can choose the relative KPIs. In this example (graph above) the focus of my project is on increasing awareness. Would it make sense to choose “Conversion rate” or “Customer satisfaction” as KPIs? The answer is no.

See, narrowing the focus of our project on a specific stage of the funnel makes it easier for us to define also the right KPIs that we need to measure the success of our initiative.

Again, like I said there are so many different KPIs you can choose, but I want to close this post/episode by giving you a few options to consider for the various stages. This is not a comprehensive list by any means, but it’s something you can use to start off on the right foot.


Over To You

This is based on my experience, what would you adjust based on yours? What do you think about it? Is something missing? Looking at the sector you are working in, would you approach this differently? Let me know in the comments.

Andrea @vascellari
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