KPI stands for Key Performance Indicator, and it’s a term that’s used all over the world and in all sorts of different disciplines. Even though we’re going to talk about marketing specifically, it can help to remember that the concept is so useful that it goes way beyond that.
Done well, tracking your KPIs can help you to make sure that you’re taking steps in the right direction and that you’re not wasting your time (and money) on things that aren’t helping you to achieve your goals.
But we’re getting ahead of ourselves.
What is KPI in marketing?
When we talk about KPIs in marketing, we’re talking about the metrics that marketers use to make sure that their marketing activities are helping them in the way that they want them to help.
It’s important to note here that while achieving sales is arguably the most common goal for marketers, it’s not the only one. KPIs can also be used to track other goals, such as raising awareness or improving the sentiment that people feel towards a brand.
Common goals for marketers include:
- Sales: This goal is all about selling as many products (or generating as much sales revenue) as possible. This is perhaps the most common type of goal that we see.
- Awareness: Awareness is all about making sure as many people as possible have heard about a brand. This is slightly different to reach, which we’ll come to in a minute, because awareness is about whether or not people recognise your brand name as opposed to how many people your messages have reached.
- Sentiment: Tracking sentiment is all about looking at the way that a brand is perceived by people. Sentiment can be broken down into positive, negative or neutral, and sentiment analysis involves looking at what percentage each type of sentiment has.
- Reach: Reach is all about how many people have been exposed to your messaging, with a high reach meaning that a larger number of people have received your updates within their news feed.
- Engagement: Engagement is all about receiving likes and comments, and while it’s not necessarily an indication of sales, it can help to show whether people are responding to the content that you’re creating.
What are KPI metrics?
KPI metrics are the metrics that we track to determine whether we’re achieving our KPIs. These are typically chosen to specifically track whether marketing efforts are paying off, and so they’re normally closely linked to the marketing goals
Some of the most common KPI metrics include:
- Average Order Value (AOV): Average order value is a common ecommerce metric which tracks the average amount that people spend each time they order from the store.
- Conversion Rate: Conversion rate is a super useful metric that can track any kind of conversion, ranging from email signups to purchases and social media follows. It can be calculated by dividing the number of people who converted by the number of people who had the opportunity to convert by landing on a page, giving you an overall percentage. Here are some ways to increase your conversion rate.
- Overall Sales: Overall sales can be a useful metric to track because it tells you how many purchases people are making from your company. The downside to tracking this one is that it would count a 99 cent sale the same as it would count a $999 sale.
- Return on Investment: Return on investment (ROI) allows marketers to track whether their campaigns are paying for themselves. It’s measured by dividing the amount of money generated by the amount of money spent. Any figure of above one is a positive return on investment.
It’s important to note that there are different types of conversion, with some of the most common including:
- Clicks on advertisements
- Clicks on affiliate links
- Contact forms completed
- Discount codes applied
- Donations made
- Downloads completed
- Newsletter signups
- Phone call enquiries
- Products added to cart
- Successful purchases
There are also a number of metrics that are related to conversions. While the conversion rate and the return on investment are the most common to be tracked, marketers often look at supplementary metrics such as:
- Return on Ad Spend (ROAS): A specific type of return on investment (ROI) metric in which marketers measure the success of their advertising spend by dividing the amount of money generated from advertising traffic by the amount of money spent running those ads.
- Cost Per Conversion: Cost per conversion tracks how much it costs you to convert someone into a lead or a customer. It’s calculated by dividing the amount that you’ve spent in total by the number of conversions that you’ve received.
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Creating a KPI report typically involves establishing a goal, choosing KPI metrics to measure that goal and then reporting on those figures on a week-by-week or month-by-month basis. You’ll want to start out by taking benchmarks and then monitoring the change that you see from one report to another, factoring in seasonal impacts like the holiday shopping season. Alternatively, if your don’t want to do this by yourself, hiring a marketing agency or consultant can really help.
We’ve covered a lot of ground today, but there’s one more thing that it’s important to remember. Establishing and tracking KPIs is all well and good, but it won’t help much if you don’t take action based upon what you’ve learned.
In other words, if your KPIs show that your social media marketing efforts aren’t delivering a return on investment, that knowledge doesn’t help unless you then take action to either pause your efforts or to rethink them to try something new until you’re happy with your performance.
Need more help with establishing and tracking KPIs? We can help! Get in touch with us today to find out how we can help to pair you with the perfect agency for you.