The notion of Key Performance Indicators, or KPIs is by no means new in the business management world. With the growth of online businesses and the rise of real-time data collection the importance of structuring, sorting and filtering the increasing amount of internal data has increased as well.
However, most business do not really have insights into what KPIs are relevant for them and work with a standard set of metrics without adjusting it to the nature of their business. Here are some simple steps on how to build your personal system of KPIs.
Look at your business more closely. Two simple ways of doing it are designing a sales funnel for your business (that is the size of the target market, the number of leads at each stage of the buying process and how they are managed by your business system); or looking at the customer journey (at the stages a potential customer would go through in your system: from the lead to the buyer, including post-buying behaviour). The major difference between two approaches is that the fist one is more internally driven whereas the second one is externally driven or customer based.
By looking at how your marketing and sales funnel narrows through different stages you can work out relevant KPIs that will help to monitor the numbers in the funnel. Some examples are in the table below.
|Total size of the target market||Size of the segment you hope to reach with marketing campaigns|
|Number of customers who would visit the shop||Number of customers who would start the buying process|
|Number of customers who would make the purchase||Number of customers who would rebuy|
Using the second, customer oriented approach you would analyse where your customers are coming from, when they mostly visit the page, and how they navigate through your shop and make their purchase decisions. This approach allows you to develop a series of “soft” or qualitative indicators that will likely be helpful in adjusting and analyzing the data you would derive using the first approach.
|Hard facts about the customer: age, gender, location||Soft facts about the customer: interests, hobbies|
|Buying situation: home, work, time of the day||Buying behavior: time spent on site, number of revisits|
|Shopping basket: size, contents||After purchase: feedback, cross-selling, rebuys|
After you have a list of metrics that measure your business, decide on the most relevant indicators or KPIs that will be looked upon in the first place.
Design a dashboard for your KPIs that shows a snapshot of data you look at in the first place, as well as the development of indicators over time. In designing the dashboard you should consider the past data (e.g. average over the past month/year), the present data (think of how often you will update it: hourly, daily, weekly, etc), and the future data, i.e try to work out a system of variables in your system and incorporate this data into plotting a trend for KPIs.
Develop the data collection and management system that would meet your needs. Think of the tools you use (you could acquire a ready-made solution for data management, or design and program your own unique system, which will often be costly but will allow for the necessary flexibility and help to prevent data leakages). You should have basically two systems in place – one for collecting operational, daily data, and the other one for evaluating marketing or sales campaigns that only take place at certain intervals. Do not let both data flows melt into one in your system, otherwise you will have difficulty explaining the changes in KPIs over time.
Set the targets in your KPIs based on company business goals, historical values, industry average or benchmarking. Evaluate the incoming numbers at regular intervals, check them against the goals and predicted values you had set in your system, and if necessary, adjust those goals after more data has flown into the system.
Also, do not collect data just for the sake of collecting data. Your KPIs should actually be involved into your decisions, whether on operational or strategic level or at least give you valuable insights into your business and how it functions over time or under different conditions.