If you’ve a business selling products or services online, you’re probably already thinking about KPIs (key performance indicators) on your web and other digital channels. For many businesses, the most important KPI is simply sales or margin. But, how do you know if you are doing things right and getting the results you should? To figure it out, every enterprise should establish metrics, or KPIs that are central to their function, strategy and more importantly, business objectives.
Internet allows us to measure a tonne of things. But metrics must be useful when it comes to evaluating business results. Here are some considerations to inform the definition of KPIs: the SMART criteria which help to determine business objectives and in turn, can assist in deciding which specific KPIs are relevant for your business.
What is your objective? Is it Specific enough? For example, if you run an online fashion boutique, perhaps your objective is “to sell more of the products that have the highest profit margins”. It’s a specific objective that doesn’t have a lot of wiggle room. It can be qualified more with a specific numeric target to hit.
Now that you’ve got an objective, is it Measurable? In the case of our online fashion store, it is totally measureable. We can configure our analytics to track and report on the sale of these high-margin products and see the resulting income. An example of a less measurable business objective would be “to become the best online store in Europe.” What exactly does that mean? Best according to whom?
You’ve chosen a measurable objective, but is it Achievable? We pour our blood, sweat, tears and of course money into our business. Sometimes it’s difficult to take a step back and look at it with cool objectivity. Knowing your previous results, availability of stock or personnel, or the existing demand for your products, ask yourself: is the objective you’ve outlined reasonable and achievable? A few manage this achievement, most do not. It’s important to maintain a dose of realism in order to develop KPIs that work to an objective that is sane and sensible.
Is the objective Relevant to your business? Something we frequently run into is a business that has various objectives that jockey for attention, resources, money and talent. Many times, at least one of these business objectives can be tossed out because it’s not especially relevant to the business mission. Say my online fashion boutique has an objective that is to get more people to share and comment on our social media posts, but most people who mention the business online are complaining about our slow shipping times. Probably my business would be better served by an objective to reduce shipping times so that future comments are more positive. In this case, the objective of having greater engagement in social media is not relevant to my real business situation. What’s relevant is improving the logistics chain so that future clients are happy with the service and reflect that in social media.
How much Time is needed to achieve your objective? This one goes hand-in-hand with having realistic expectations. Imagine it’s New Year’s: if we make big resolutions, we’ve got to give ourselves some slack, enough time so we can achieve those big goals. If we give ourselves too much time however, we get into a dynamic of “oh, I’ll deal with it tomorrow. There is still time”. If we don’t give ourselves enough time, we’ll enter into a cycle of panic and frustration. By charting previous performance and results of your online business, it’s possible to realistically estimate the time needed to achieve the desired objective.
Now, about defining those KPIs. Since we now have logical business objectives, we can set about establishing KPI metrics. To do this, we must examine if the KPIs support the critical objectives in your business. Here is a short example of the types of questions and answers that might come up in the case of an online store.
What is the result I am after?
“I want more web traffic and more billing.”
Why is this result so key to you or your business?
“Because the traffic shows awareness of my brand on the part of consumers, and the sales constistute my income.”
What exactly are you going to measure (KPIs)?
“I am going to look at web traffic, bounce rate, sales and income in Analytics. Later, I’ll look at return rates because that affects my earnings too.”
What can you do to improve these metrics?
“I can invest in Google Adwords campaigns to send traffic to my web and to my most popular product mages. I can study why certain pages have a really high bounce rate and improve that. I can procure more products that are similar to my best-sellers. I can modify the returns form so that people have to explain the reason for the return. This will help me to figure out how I can reduce the number of returns.”
How are you going to monitor your progress? When will you know you are done?
“As a business we’ve established we want to increase billing 20% this year. So I’ll look at my analytics dashboard every week and do a deep-dive ones a month to see what can be how it is going and what can be improved. Halfway through the year, we’ll meet to determine if we are on the right track to achieve the business goal, and if we need to make any adjustments to implicate more business units or other changes to the programme.”
If you need help to define KPIs for your online business, All Around can assist! We have ample experience in translating business objectives into concrete metrics online. Together we can grow your business.
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