Key performance indicators (KPI) – how to define KPIs, examples KPIs and many more

Key performance indicators (KPI) – how to define KPIs, examples KPIs and many more

September 22,2023 in Online Advertising Glossary | 0 Comments

In the realm of mobile marketing, key performance indicators (KPIs) are metrics utilized to evaluate the performance of a mobile application and the encompassing business ecosystem.

These crucial marketing KPIs encompass various in-app elements like user retention, monetization, and active user count. Additionally, external factors such as review scores and chart rankings, along with campaign indicators like click-through rates and campaign costs, play a pivotal role.

App KPI metrics can extend to impressions, clicks, installs, reattribution, sessions, and triggered events, all of which serve as fundamental components for subsequent calculations.

KPIs play a significant role in ensuring that your teams are working towards the overall objectives of the organization. Here are some of the primary reasons why key performance indicators are essential:

  1. Team alignment – whether assessing project success or employee performance, KPIs keep teams moving in the same direction.
  2. Health assessment – key performance indicators offer a realistic evaluation of your organization’s health, covering aspects like risk factors and financial indicators.
  3. Adaptation – KPIs provide clear insights into your achievements and setbacks, enabling you to focus more on what works and less on what doesn’t.
  4. Accountability – ensure that every team member adds value by using key performance indicators that help employees track their progress and assist managers in facilitating progress.

Types of KPIs

Key performance indicators come in various forms. While some measure monthly progress toward a goal, others have a longer-term perspective. The common thread among all KPIs is their connection to strategic objectives. Here’s an overview of some of the most common types of KPIs:

  1. Strategic KPIs – these overarching indicators monitor organizational goals. Executives typically rely on one or two strategic KPIs to assess the organization’s current status. Examples include return on investment, revenue, and market share.
  2. Operational KPIs – these KPIs usually measure performance over a shorter timeframe and focus on organizational processes and efficiencies. Examples include regional sales, monthly transportation costs, and cost per acquisition (CPA).
  3. Functional unit KPIs – many KPIs are specific to particular functions like finance or IT. IT may track metrics such as time to resolution or average uptime, while finance KPIs may include gross profit margin or return on assets. These functional KPIs can also be categorized as strategic or operational.
  4. Leading vs. Lagging KPIs – regardless of the type of KPI, it’s essential to distinguish between leading indicators and lagging indicators. Leading KPIs can help predict outcomes while lagging KPIs track what has already occurred. Organizations use a combination of both to ensure they monitor what matters most.

How to develop KPIs

With a vast amount of data available, it can be tempting to measure everything or, at the very least, the easiest things to measure. However, it’s crucial to ensure that you’re measuring only the key performance indicators (KPIs) that will help you achieve your business goals. The strategic focus is a vital aspect of defining KPIs. Here are some best practices for developing the right KPIs:

  1. Clarify KPI utilization – engage with individuals who will use the KPI report to understand their objectives and how they intend to use the information. This helps define relevant and valuable KPIs for business users.
  2. Align with strategic goals – ensure that your KPIs are directly related to your overall business objectives. Even if they are associated with specific business functions like HR or marketing, every KPI should directly support your overarching business goals.
  3. Create SMART KPIs – effective KPIs adhere to the SMART formula, which stands for specific, measurable, attainable, realistic, and time-bound. Examples include “Increase sales by 5% per quarter” or “Raise the Net Promoter Score by 25% over the next three years.”
  4. Maintain clarity – all members of the organization should comprehend your KPIs so they can take action based on them. This emphasizes the importance of data literacy. When people understand how to work with data, they can make decisions that drive positive outcomes.
  5. Plan for iteration – recognize that as your business and customer dynamics evolve, you may need to adjust your KPIs. Some KPIs may become irrelevant, or changes may be necessary based on performance. Ensure you have a plan in place to assess and modify KPIs as needed.
  6. Avoid KPI overload – the abundance of data and interactive data visualization in business intelligence can lead to the temptation to measure everything. However, remember that the essence of key performance indicators is to focus on the most critical objectives. Prevent KPI overload by concentrating on the most impactful measures.

How to setup KPI strategies

If your key performance indicators (KPIs) aren’t delivering the expected results, it’s time to refine your approach. Here are three actions you can take to ensure that people throughout the organization understand the significance of your KPIs and how to utilize them for data-driven decision-making that influences your business:

  1. Choose the most relevant KPIs – to ensure you measure what truly matters, it’s essential to include a mix of leading and lagging indicators. Lagging indicators help assess results over a specific timeframe, such as sales over the past 30 days. Leading indicators enable you to anticipate potential outcomes based on data, empowering you to make adjustments for improved results.
  2. Foster a KPI-focused culture – key performance indicators hold little value if individuals don’t comprehend their significance or how to utilize them (including understanding the KPI acronym). Enhance data literacy across your organization to ensure that everyone collaborates toward strategic objectives. Educate your employees, assign them relevant KPIs, and utilize a top-tier business intelligence platform to ensure everyone makes decisions that drive your business forward.
  3. Continuously improve – keep your key performance indicators up-to-date by revising them in response to shifts in the market, customer preferences, and organizational dynamics. Regularly convene to review KPIs, thoroughly assess performance to identify areas for adjustment, and communicate any modifications to keep teams well-informed and aligned.

Examples of key performance indicators (KPIs)

Each department within a business employs distinct key performance indicators (KPIs) to monitor their progress. Numerous organizations utilize KPI dashboards to provide a centralized platform for visualizing, evaluating, and analyzing their performance metrics. Here are some KPI examples categorized by department, along with a dashboard representation for each:

  1. Finance
  2. Sales
  3. Marketing
  4. Information Technology (IT)
  5. Customer Service

Examples of finance KPIs

Finance managers have various options to monitor financial progress, encompassing expenses, revenue, margins, and cash management. Here are some examples of key performance indicators (KPIs) that can assist in tracking financial performance:

  1. Gross profit margin (and %)
  2. Operating profit margin (and %)
  3. Net profit margin (and %)
  4. Operating expense ratio

Examples of sales KPIs

To ensure your sales teams meet their targets, it’s crucial to track and regularly assess sales-related KPIs, including those related to leads, opportunities, closed sales, and volume. Here are examples of KPIs for sales teams:

  1. New inbound leads
  2. New qualified opportunities
  3. Total pipeline value
  4. Sales volume by location
  5. Average order value

Examples of marketing KPIs

Effectively manage marketing spend, conversion rates, and other indicators of marketing success by defining KPIs that align with your organization’s strategic goals. Here are some marketing KPIs to consider:

  1. Marketing qualified leads (MQLs)
  2. Sales qualified leads (SQLs)
  3. Conversion rates (for specific goals)
  4. Social program return on investment (ROI) (by platform)
  5. Return on ad spend (ROAS)

Examples of IT KPIs

KPIs can help maintain accountability and provide early warnings about potential issues, from support tickets to server downtime. IT teams can set targets for KPIs such as:

  1. Total support tickets
  2. Open support tickets
  3. Ticket resolution time
  4. Security-related downtime
  5. IT costs vs. revenue
  6. Reopened tickets

Examples of customer service KPIs

Customer service leaders need to monitor progress related to customers, employees, and finances. KPIs should cover both short- and long-term targets, including support response times and customer satisfaction. Here are some customer service KPIs:

  1. First contact resolution rate
  2. Average response time
  3. Most active support agents
  4. Cost per conversation
  5. Customer effort score

Key information about the term “key performance indicators (KPIs)” to remember

  • KPI stands for key performance indicators.
  • KPIs are targets used to measure progress toward strategic objectives, crucial for business success.
  • KPIs can be strategic (e.g., revenue growth rate, net profit margin) or operational (e.g., order fulfillment time, time to market) and are specific to various business units.
  • Consider factors like usage, alignment with strategic goals, SMART criteria (specific, measurable, attainable, time-bound), clarity, adaptability, and focus on measuring the most important aspects.
  • Develop high-performing KPIs by balancing leading and lagging indicators, fostering a data-driven culture, and regularly reviewing and adapting KPIs to changing circumstances.

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