KPIs: what are they? + how do you determine them?

Introduction

Setting Kpi's? Measure what you MUST know. Based on what outcome measures is success determined? A seemingly simple question that leads to a not too convincing answer at many companies.

That's why it's good to have the conversation about it. After all, if revenue growth is the most important KPI then you take a completely different approach than if it's gross profit. In this article we explain what kpi's are, what you use them for and what mistakes you should definitely not make.

What are kpi's?

Kpi's, in Dutch critical performance indicators or in English Key Performance Indicators are variables to measure the strategic success of a company.

This can be done at the organizational level, at the team level and even at the individual level. KPIs make progress measurable and concrete. This makes it clear where things are going well and where they are not (yet).

Setting Kpi's

The process begins with making the organization's strategic goals clear. Without clear goals, KPIs are no more than isolated numbers without meaning. The management must therefore first clarify what they want the organization to achieve in the short and long term, such as revenue growth, customer satisfaction or more efficient processes.

The next step is to identify critical success factors: those activities or outcomes that contribute most to achieving the established goals. For example, if customer satisfaction is a strategic goal, factors such as response times, complaint handling or satisfaction scores may be critical.

Once the critical success factors are clear, select specific and measurable KPIs. It is essential to make KPIs SMART (Specific, Measurable, Acceptable, Relevant and Time-bound) so that they are clear and actionable. Examples include the percentage of customer inquiries answered within 24 hours or the number of repeat purchases per customer per quarter.

The selection is followed by validation and implementation. In this phase, one checks whether the KPIs are actually feasible and practically measurable. It is also determined how and how often they are measured and reported. Here, transparency and clear communication towards employees are crucial.

Common mistakes

1. A common mistake is choosing too many KPIs. As a result, you lose track and it becomes unclear what is really important. Organizations that focus on a limited number of KPIs that directly align with their strategic objectives typically achieve better results.
2. Formulating unclear or non-measurable KPIs. When KPIs are vague or not easily measured, this leads to ambiguity. Clear, concrete and measurable KPIs are essential for results-oriented work.
3. Using KPIs that do not align well with the organization's strategic goals. This allows employees to focus on performance that contributes little or nothing to achieving real organizational goals, leading to wasted resources and energy.
4. Ignoring context and qualitative factors when assessing KPIs can be problematic. Organizations that rely solely on numbers and statistics risk losing sight of important aspects such as customer satisfaction, innovativeness or employee motivation.
5. An overemphasis on short-term KPIs can lead to long-term goals becoming secondary, which can ultimately be at the expense of sustainable growth and development of the organization. Therefore, it is important to always maintain a good balance between short-term and long-term goals when deploying KPIs.

Kpi's in online marketing

Here are some examples of kpi's we often use in online marketing projects:

• SEA: return on ad spend (ROAS), cost per acquisition (CPA), number of conversions.
• SEO: number of top 3 positions, organic traffic growth, conversions from organic traffic.
• CRO: conversion rate, number of conversions.

Need help choosing the right kpi's for your online marketing dashboard? Feel free to contact us.