What’s the correct way to create and analyze KPIs?
In the business world, good opportunities arise from correct decisions. Some need to be taken advantage of quickly, which can cause apprehension on the part of entrepreneurs. The best way to make more efficient choices is to create and analyze KPIs.
How to create and analyze KPIs
KPI stands for key performance indicator. These are metrics that business leaders use to analyze the efficiency of a given process.
For example, a company invests $ 50 thousand in a television commercial. Its objective is to encourage television viewers to visit and register on the company’s website, thereby generating leads. Determining an ideal number of leads to be achieved is a way to create and analyze a KPI in this case.
If the company determines that the number of leads should be 100 thousand and just 20 thousand have been created, this will help the marketing department verify whether the strategy has been successful or not.
Examples of KPIs
One tip in terms of creating and analyzing KPIs is to work with data that’s easy to understand. This data should be easy to collect. Here are some examples of KPIs:
- Generation of leads;
- Website views;
- Newsletter subscriptions.
This way the company will have access, in a rapid manner, to data which can easily be understood. This practicality ensures that changes in strategy can be made quickly and safely. If the business has a low number of website views, this reveals that the page is not being successful, and that it should be modified.
The ideal is that a company shouldn’t use too many KPIs because one metric can contradict another. The number of leads may be high, however, sales may be falling, for example. In this case, the company should place emphasis on the result that gives the best idea of how well the venture’s adopted strategy is doing.
Another important point in creating and analyzing KPIs is to remember that these numbers should be understood by all of the company’s departments – normally they shouldn’t be specific to, or the exclusive use of just one department.
KPIs improve processes
In this article we’ve used the example of using KPIs to examine leads or sales. However, they can be used in any other business processes — not just sales or marketing, and can help improve quality and avoid rework, for example.
A good indicator of the quality of your sales department is to analyze the rate of complaints that your customer service department receives, for example. A way to reduce these complaints is to improve your team’s training.
KPIs also help identify the efficiency of investments, serving to determine the ROI.
Normally the answers to your company’s questions are in your business itself. That’s why it’s important to create and analyze KPIs. Don’t ignore your greatest source of information about your venture: your internal process metrics.