We get this question a lot from our clients, and it usually isn’t an easy one to answer. There is so much data available to us these days. As we increase the number of platforms and systems we are using, they each have their own way of measuring success. So how do you choose what to track?
The primary KPI you need to track is whatever metric is tied to your main business goal. If you are eCommerce, it is revenue. If you are B2B, maybe it is number of form fills. Whatever this metric is, keep it on the forefront of your mind.
Metrics by Channel, Funnel or Both?
There are 2 schools of thought on how to bucket your KPIs – by channel or by funnel stage. Which one you choose is largely dependent on how you run your business. I prefer looking at them by channel, but that is just my preference. For this example, these are the channels we will consider:
If you are looking at funnel KPIs, you may have something like:
- Top of funnel (Reach)
- Middle of funnel (Act)
- Bottom of funnel (Convert)
- Customer Retention (Engagement)
Leading Indicators vs. Key Performance Indicators
Within each of those buckets, identify at least 2 metrics to track. One should be a leading indicator and the other should be a KPI. You can have more KPIs within a channel if needed….but don’t have more than 2 or 3 at most.
A Leading Indicator is a measure that:
- you can’t directly or easily impact
- you can’t make a business decision when looking at the number in isolation (can you answer “So what?”)
- is too removed from your main KPI
A KPI is a measure that:
- helps you make a business decision about how to reach the primary KPI identified above
- is action oriented
- informs you and helps you make decisions about the next steps to take
Create A KPI Dashboard
There are many tools and ways to create and display a dashboard. I am just using a chart for ease of display. So let’s say you are an eCommerce store. Your primary KPI is likely revenue.
|Primary KPI||KPI- Actual||KPI Target|
If you monitor your business by acquisition channel, I would create the following chart. Only include the channels that are impactful to your business. If you don’t do much email marketing, there is no need to track it on a dashboard. Make sure you are clear on the purpose of each channel as it relates to your business.
|Channel||Leading Indicator||KPI- Actual||KPI Target|
When I think of all of the channels, I consider the following as the main purpose of each:
- Organic – reach new users
- Direct – brand awareness
- Social – engage with prospects and customers
- Paid – reach new users, expand into competitive markets
- Referral – reach new users
- Email – engage with existing users
If a channel takes on a new role in your sales strategy, be sure to go through this process again and update your KPIs.
Choose the right metrics
Let’s use Organic as an example. As indicated above, the goal of this channel is to reach new users and generate sales. A good option for leading indicator in this case is # New Users. It isn’t a metric that I can have direct/easy impact on. It also isn’t actionable. If someone says I have 50,000 new users, so what? If I look at the number in isolation, can I make any business decision on it? Likely not.
|Organic||# New Users|
As I mentioned before, a KPI should be actionable. What other measures related to my leading indicator that are closer to my primary KPI can have an impact on? In the case of Organic, I like to look at bounce rate. I can impact bounce rate by doing AB testing, content optimization, etc. While bounce rate doesn’t directly affect revenue, you can’t sell anything to people that don’t stick around the site! You could certainly make an argument for making conversion rate a 2nd KPI for Organic traffic if you choose.
|Organic||# New Users||Bounce Rate|
So continue to do this for all of the channels that are relevant for your business.
Based on that, I selected the following leading indicators for a typical eCommerce site.
|Organic||# New Users||Bounce Rate|
The key here is to make sure that your KPIs are measuring actions that your users are taking, can help you decide what to do next, and you can quickly understand the state of your business with a quick view of the dashboard.