5 KPI Best Practices: Learn to Measure What Matters

Great business owners are separated from good ones by the decisions they make. Tony Robbins says it well, “One reason so few of us achieve what we truly want is that we never direct our focus; we never concentrate our power. Most people dabble their way through life, never deciding to master anything in particular.” If we want to make decisions that grow our businesses and help us achieve our goals, then we need to focus and concentrate on what really matters. This is where digital marketing KPIs come in.

What is a KPI?

KPI stands for Key Performance Indicators. They are the key metrics or data points that a business or organization uses to determine whether or not they are headed in the right direction.

Now, not all metrics are KPIs. While you may track a number of performance indicators, only those that are key to the goals of the organization should be considered key performance indicators.

The goal of KPIs is to help you focus on what matters. There is so much data out there it’s easy to be overwhelmed by it all. Most business owners or entrepreneurs I speak with collect data like website visits or email metrics, but very few do anything with the information. The main reason for their lack of action is not knowing where to start.

I want to share some best practices to help you determine what your KPIs should be and how you can use this information to make better decisions for your business.

KPIs are Not Universal

One important thing to remember is that KPIs are not universal. What may be a key performance indicator for one business, may matter very little to another.

For example, if you are blogging to drive more visitors to your website and that traffic has a direct impact on your business, then blog traffic is probably a KPI.

If you are using your blog to educate your current base, it’s still important to track engagement, but it’s probably not a KPI.

It can be tempting to Google “Best KPIs for a Business,” but the answers you get won’t necessarily be right for you. Remember, a KPI is a metric that is key in helping you determine if your business is headed in the right direction. As the business owner or department lead, that is not something you can delegate. You have to set the direction yourself.

Best Practices for Determining Your KPIs

While copying someone else’s KPIs is a bad idea, there are a few best practices that will help make sure the metrics you choose are best for your business. Here are a few best practices when determining your KPIs

Define Your Business’s Core Objectives

This first best practice is absolutely crucial. Before you can begin to think about metrics and dimensions, you need to know what you want to accomplish. Defining your business’s core objects will act as a compass for the rest of the process.

Most businesses large and small have a number of objectives and are typically broken down by department. While not all companies have defined departments, they still have to deal with “departmental issues.” Here is a list of common departments.

• Production
• Research and Development (often abbreviated to R&D)
• Purchasing
• Marketing (including the selling function)
• Human Resource Management
• Accounting and Finance.

I recommend that you go through each one of these and define the core objective(s) related to that part of your business. This will help you see where to focus and determine if there is any overlap in your objectives.

Define What Needs to be Measured

After you’ve written out what your objectives are, it’s time to break down what needs to be measured. These are all the metrics and dimensions that you will need to track. Just so we are speaking the same language, I want to give you a quick reminder on what metrics and dimensions are.

• Metric: Measurable values of that attribute.
• Dimension: A descriptive attribute that can be ascribed values.

So let’s say that you run an e-commerce business and user behavior is important to increasing sales. You’ve decided that you need to track user engagement on your website. Here are some potential dimension and metrics you’ll need.

The reason you want to define metric and dimension now is that it keeps you focused on your goals. It’s easy to start adding more and more data points because they “feel good” but that only leads to data overload.

Now, if you don’t know your metric and dimensions, it’s all good. Write down what you think you need to measure. For instance, let’s say you’re that same e-commerce entrepreneur and you are not analytics savvy. Your metrics and dimensions may look more like this.

Defining what you want to track using everyday language is totally fine. After this process you can team up with someone who is more knowledgeable in analytics to help you set up your tracking. The goal at this point is to start defining what you think you need.

Narrow Your List

At this point, you have a list of departments, goals or objectives and some dimensions and metrics. Depending on how detailed you got, you probably have a long list. Now it’s time to start focusing on your list.

You should only have 5 to 7 KPIs. Remember, these are key performance indicators. This doesn’t mean you can’t track all the areas you wrote down; they just can’t all be key.

Go over the list and look at the ones that impact your business as a whole. Which ones will make or break you? Which ones impact your bottom line. These are the ones that you want to focus on the most and make sure that you are regularly monitoring.

Using KPIs to Track Progress

Data visualization is a very hot business right now because we have a ton of data and need a quick way to process everything. Since we can process images way faster than text, data visualization has become extremely popular.

While there are many tools that can help you visualize your data, not all businesses need to spend 20k a year on BI software. Thankfully, Google has created a great free tool call Data Studio that can help you visualize your data for free.

While I won’t go into detail about Data Studio (You can check out a video on Data Studio here), I do want to show how a KPI dashboard can help you make better decisions.

Again, so we are on the same page, a data dashboard is an information management tool that visually tracks, analyzes and displays key performance indicators (KPI), metrics and key data points to monitor the health of a business, department or specific process. (source)

We use dashboards to track the KPIs on each campaign which we work. Using Google Data Studio, we’ve created dashboards that allow us to see if we are on track without having to do a ton of digging. Dashboards are not supposed to be a comprehension analysis tool. They are meant to deliver important information fast.

Using this dashboard our team can quickly see if we are hitting our goals for our clients. You’ll notice that we have some trend data and arrows that show our progress. On this example, they are “green” and pointing up. Again, the goal here is to be able to assess progress quickly. If we were not doing well, they would be “red” and be pointing down.

After reviewing our dashboard, we can then spend time later digging deeper and finding out if what we are doing is working (or not working). This helps us focus on the main objectives and deliver business results.

Data analysis is no longer just for the big enterprise businesses. Today anyone can track their progress and create KPI dashboards to help them stir their business in the right direction. While this is available to nearly all companies, very few take advantage of it. If you want to see your business grow, defining your KPIs is an essential first step. Using them to make better decisions is what separates the good from the great!

Here are the top five that I highly recommend that all business owners focus on.

• Choose KPIs that align with your business objectives.
• Make sure that you have KPIs that are attainable.
• Make sure that you have accurate data for your KPIs.
• Select KPIs that are actionable
• Limit the number of KPIs to five to seven

Choose KPIs that Align with Your Business Objectives

Choosing KPIs that are aligned with your business objective means knowing where you want to go first. You have to understand where you’re headed. Otherwise, you’re not going to be able to align KPIs in that direction. Here are some tips for aligning your KPIs.

You want to select KPIs for different levels of management. Now, not all businesses may have this, but again, executives are interested in different things than a day-to-day manager is looking for, so you’ve got to understand who these KPIs are for, making sure that you select the right ones for the different level management, and they also need to conform both top-down, the executives down, and also bottom-up, so the people doing the work day in and day out, to know if they’re headed in the right direction.

It’s extremely important that you look at both sides of the coin. Don’t measure something just because somebody else is. If it’s not key to your business, you should not be focusing on it. You want to focus your digital marketing strategy on the things that drive value and that are aligned and attached to the overall success or failure of your company.

Make Your KPIs Attainable

So number two is to make sure your KPIs are attainable. We live in a world where we think of people who are overnight successes. The reality is most of these overnight successes, you’ve heard this line probably before, took years and years and years and years to gain their status.

What happens is we see these big companies, and they do these moon shots, or they do these hard-reaching KPIs where they’re going out there and doing what we call a stretch goal. Well, stretch goals are great because they do stretch us, but stretch goals should not be part of your KPIs.

Key performance indicators are associated with business goals. They are the things you want to make sure you can achieve. Your digital marketing campaigns and marketing goals should guide your business in the right direction. KPIs help to make sure that you have some momentum when your business goals are attainable.

Some questions to ask when developing these KPIs are what data points do we need to measure? Where are you going to get this information so you know that it’s attainable? What technologies and processes do we need to implement to access them on a regular basis? Because you want to be able to see them. You want to be able to know if you’re headed in the right direction.

Consider what technologies and process you need to surface KPIs to relevant stakeholders. Does the executive suite need a dashboard or some sort of reporting tool that’s going to allow them to see if we’re hitting those KPIs, how much will this cost, and where are the potential returns?

Again, your KPIs have to be attached to your business goals. They need to be achievable, and they need to provide some ROI. They need to be able to help make sure that the business is going in the right direction and that there’s a return on your investment in time and energy.

Make Sure You Have Accurate KPIs

Number three, make sure you have accurate KPIs. You don’t want to pull things out of thin air. You don’t want to make up numbers. You also want to make sure you have clean data so that you know that you’re headed in the right direction. Again, some questions to ask here. Do KPIs include all relevant information? Let’s say you’re looking at your customer lifetime value. You’ll need quantifiable metrics that may include the cost per acquisition of sales qualified leads, customer journey, and length of retention.

You may have some customer information in your marketing tools and maybe some in your CRM and your sales tools. You may have some in old Excel formatted files, and in order to understand, you’re going to need access to all three sources of information. Without that, your KPIs are going to be incorrect. If you’re only reporting off of one tool or one database when in reality your customer information is spread out across many different sources, your KPIs aren’t accurate.

Accurate KPIs reflect your business performance. If you’re not pulling from the right sources, if you don’t have all the information, then they’re not necessarily going to be reflecting the true performance of your business, and they’re not going to help you predict or forecast forward. In order to set the correct KPIs for marketing, you need an accurate accounting of your recurrent growth.

A lot of the time, we get into a tool like Google Analytics that has a great reporting element to it, but we need to know what we’re looking at. Other tools have really good reports and dashboards based on their own setup. Hubspot has great dashboarding tools, but let’s say you’re not using your CRM. Maybe you’re using Salesforce. Unless you sync both of those data sources together and you begin to aggregate your customer data and your sales data across both platforms, you’re not going to see the full picture. It’s not going to reflect the truth, so to speak, of what the business is going after.

There are important questions to ask when you’re looking at the accuracy of your data.

• What time period are you measuring?
• Are you dividing organic search traffic from referral traffic?
• Are your generation efforts and calls to action driving qualified traffic?

If you’re looking for a new KPI dashboard, check out a few we’ve used and recommend here. (link blog post)

Select KPIs that are Actionable

Number four, select KPIs that are actionable. So you want to have good KPIs in the sense that they’re attainable, based on a business, and accurate. We also want to make sure that they can take action on those goals. Make sure that you can move forward. Question what you learned. Are you learning anything from these KPIs?

Once you have a clear picture, it’s time to consider what actions you can take based on what you’ve learned. Are these going to help you make better business decisions, or are they going to make you feel good? A feel-good KPI is something I would call a vanity metric. An actionable metric is something that helps you learn, but it also helps you grow and helps me steer the ship in the right direction.

In the action step, you’ll look at future advertising efforts as well as organic growth strategies.

Limit the Number of Your KPIs

Lastly, you want to limit the number of your KPIs, and you want to limit them to five to seven. Many dashboards have seven to 10 to 15 different metrics on them. The problem is you have too much information, and you’ll get what we like to say, analysis paralysis.

When you have too much to focus on, your default becomes to ignore it. That’s the way the human brain works. We can’t focus on more than one thing at a time. When it comes to KPIs, when you have too many of them, it really stretches what our brain can handle, and it doesn’t allow us to obtain the knowledge that we need from the data that we have.

You want to limit the selections of KPIs, and you want to think hard and long about what is key to your business success. These metrics have to be critical to success. Make sure you choose quantifiable measures and different types of metrics. If you only focus on informational search intent metrics, you may miss the reason your retention rate is low, or you may not even realize it’s impacting your bottom dollar at all!

Again, the fewer KPIs you have, the more you’ll focus on them. Additionally, your actionable KPIs will help focus on how you optimize your content. If you have too many of them, it can be extremely costly because it’s going to take you more time and effort to make sure that they’re up to snuff, and that they’re continually being tweaked and headed in the right direction. When you have too many things to focus on, you’re adding more work that you’re not going to see a return on investment for.