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What is KPI?

KPI or Key Performance Indicator is a parameter necessary in the work of every marketing specialist. It shows how effective is the work of a given specialist, and often the entire team. A modern approach to marketing should assume that a single marketing manager or a specialist is not responsible for meeting the KPI’s requirements. It’s the responsibility of the entire team.

In a short perspective, KPI helps to establish if the strategy you took is working. It can be an online strategy, sales strategy, page views, or even the relations of the sales volume to product availability. In fact, everything is measurable, you can pick anything and put it under a microscope. The most important thing is not to go overboard. KPI should shine a light on what is the most important – the company’s mission and vision.

In the long run, KPI is nothing more than short-term market feedback about how current actions benefit the long-term company’s vision. If there’s a rift between a long-term strategy and what are the short-term goals and how are they obtained, a client or a business partner will see it and will often break the relation with such an organization. He will not buy it.

Usually, it’s not a conscious decision, since the client, unless his heavily emotionally involved with the brand, doesn’t know the goals. What he sees is a discrepancy between declared value for the client, and what is happening. This can have an impact on very practical, day-to-day operations. KPI can and will drop radically.

Here are a few real examples of often-used KPIs:

  • Increased web traffic by 15%
  • Decreased number of abandoned shopping carts by 20%
  • The increased average value of an order by 10%
  • Increased webpage browsing time by 20%
  • Increased number of business inquiries by 30%
  • The average cost of a lead coming from a webpage
  • A number of a newsletter signups
  • A number of newsletter signing outs

How you can establish KPIs?

Don’t put barriers in front of yourself in this first phase, don’t limit yourself. It’s about putting on paper everything that comes to mind. It’s about having a complete view of the situation and different perspectives. It would be best if every single person on the team has prepared some KPIs.

In the second phase, you should limit yourself. A measurement of the wide spectrum of KPIs doesn’t make sense. Key performance indicators are here to help you and your team, so taking all of them into consideration would be absurd. When you’re finished with the brainstorming, advance to the selection phase. Pick and choose these KPIs that reflect your challenges and goals. Again – it would be best if every person on the team would describe your challenges and goals from a slightly different perspective. That way the KPIs will complement each other.

Key performance indicators are usually built this way:

  • You take into account the goals and actions of a certain department in the company
  • You take into account the specified fields and activities of this department
  • You consider specific projects
  • Or marketing campaigns
  • Or even single challenges, based on what has been mentioned above

In bigger and more complicated organizations, the problem can lie in the size alone. If your company has few branches on several continents, has a big and complicated webpage, offers a lot of products, then a simple „increased sales volume by 20% in the next quarter” is not going to cut it. What does it mean „increased sales volume” anyway? In what department, in what product category, from which customer’s journey? Before the promotion of after? In the online store or physical retail? Questions, questions… The only way you can measure the results and generate sane recommendations for the future strategy is the implementation of precisely defined goals.

Why KPIs are important and why you need them?

KPIs are important not only for short-term and long-term strategies. They shine a light on challenges and let you understand them. They also show how effective the single department is and how effective an employee can be. But that’s not all.

Key performance indicators are necessary for managers. They let them evaluate the work of the department and the entire company as well. The picture of the company seen by people „in trenches” is very important for the entire organization. The bird’s eye view is also necessary. The only way to run an effective organization is to combine both of these views. They will tell you what actions to take next and how they should be designed.

Jarosław Ściślak

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