What is key performance indicators (KPIs)?
What is key performance indicators (KPI)?
KPI is a common abbreviation of key performance indicator or a metric for judging the achievement of goals.
Types of key performance indicators (KPIs)
KPIs vary widely across industries but often fall into similar categories such as financial, customer satisfaction, production efficiency, or growth-based metrics.
Basics of using KPIs
Key performance indicators can be valuable metrics for setting, monitoring, and achieving short and long-term goals. To create a relevant KPI, start by identifying a broad goal such as increasing customer satisfaction, or reducing response times, decide on a way to measure that goal’s achievement, and then narrow the goal down to a specific KPI that follows the SMART guideline of specific, measurable, achievable, relevant, and time-bound.
How to define a KPI
In order to define a KPI, it’s important to first identify a goal, and then ask “How will I know when I have accomplished it?” For example, if a brand is focused on expanding their customer base, they would focus on discovery and brand awareness campaigns. In order to know if those campaigns are working, they would look at new customer metrics such as, how many new visitors are coming to their site the number of app downloads, and the percentage of new users who make a purchase, making any of these metrics a good choice for a KPI.
How to write a KPI
Key performance indicators should be written based on the goals one wishes to measure and achieve. Following the SMART acronym is a strong guideline for defining valuable KPIs.
- Specific: Be as specific as possible about your KPI target
- Measurable: Make sure you have a way to measure your starting point, progress, and goal
- Achievable: Set a goal that can reasonably be accomplished within given parameters
- Relevant: Consider how the KPI target supports your organization's long and short-term goals
- Time-bound: Create a timeline for evaluating your process
How to measure a KPI?
Different KPIs are measured in different ways according to the metric being evaluated. When evaluating progress, one may look at increases, decreases, or relative changes to KPI metrics.
How to report on KPIs?
A KPI (key performance indicator) report should include a clear understanding of the goal you want to achieve and why the KPI is relevant to the goal. The report should include an overview of how the KPI has changed over time, and point out key points where certain efforts toward the goal may have affected the KPI.
How to use KPI software?
KPIs are evaluated through data analysis programs such as Google Analytics, and each software will have its own method of operation.
Why are KPIs important?
Well-defined KPIs, or key performance indicators, are important because they measure whether or not progress has been made toward a company's goals. For example, if a company sets a goal to acquire 2K new customers in Q2, the number of new customers acquired throughout the quarter would be a key performance indicator.
What are the best KPIs?
There is no universal best KPI, as each key performance indicator must be matched to a corresponding goal in order to be valuable.
Limitations of using key performance indicators (KPIs)
Key performance indicators are a valuable way to assess the progress or completion of a stated goal but it is impossible for anyone KPI to give a complete picture of successes or shortcomings. If one focuses exclusively on identified KPIs, one may miss out on other successes worth noting, unexpected consequences (positive or negative) of campaigns and initiatives, or ways in which focus on adjusting one KPI has compromised another.