What are KPIs?
According to Abbreviationfinder, KPI stands for Key Performance Indicator and describes key figures that evaluate the effectiveness of a company’s activities. KPIs are key influencing factors (critical success factors) and are indicators that can be used to evaluate the performance of measures .
KPIs can be used in different areas and departments of a company, be it in production, sales , human resources and of course marketing . Depending on the area, the KPIs also vary, as these can be selected and defined as required.
How do I find the right KPIs?
The company should ask itself the following questions so that the appropriate indicators can be determined:
- For which process is the key figure required?
- What are the different steps in the process?
- Is there a target in the area? If yes, which?
- How / how can performance or activity be best measured?
- Which key figure best expresses this performance?
A KPI can only be defined when the company is clear about what is to be measured. Two different models can also be used to define the key performance indicators in order to obtain KPIs that are as meaningful as possible.
The key performance indicator can be built according to the SMARTER model. SMARTER is an acronym that stands for specific, measurable, attainable, relevant, time- bound, evaluate, reevaluate. Translated, this means that KPIs are specific, measurable, achievable, relevant and time-bound and that the indicators should be evaluated and re-evaluated. With the SMARTER model it can be ensured that the key figures are clearly defined and easily measurable and can ultimately be checked and checked.
The 6 As can be used as a further option: aligned, attainable, acute, accurate, actionable, alive. Speak, aligned, reachable, informative, accurate, actionable and alive. The two models mentioned are similar in their principle, the KPIs should also be realistically defined for the 6 As and precise statements can be made based on the key figures.
Examples of KPIs in marketing
Key performance indicators are also a valuable opportunity in marketing to track measures and determine how well they are working. Some examples of relevant KPIs in marketing are:
- Cost per click (CPC) or per lead (CPL)
- Number of followers on social media channels
- Number of registrations for the newsletter
- Return on Investment (ROI)
- Order value
The most important KPIs in online marketing
Impressions – overlays
The impressions measure how often an ad was shown. Each insertion counts as an impression, regardless of whether it was always played to the same person.
Cost per Click (CPC) – cost per click
The CPC is used to measure how much a click actually cost. This KPI is an important metric, especially for Google Ads, in order to be able to optimize campaigns.
Click Through Rate (CTR)
The click rate is always in relation to the impressions. It shows how many clicks were achieved in relation to the advertisements. For example, if an advertisement was shown 1,000 times and 100 clicks were achieved, the CTR is 10%.
Cost per Mille (CPM) – thousand contact price (CPM)
The CPM shows how much 1,000 advertisements cost. Since an advertisement is usually relatively cheap, it is extrapolated to 1,000. If the CPM is 10 francs, then each ad insertion cost 1 centime.
Cost per lead (CPL) – cost per lead
The CPL indicates how much a lead (interested customer ) cost in total. For example, if we spent 1,000 francs on social media marketing and were able to generate 10 leads , then the CPL would be 100 francs.
Cost per Acquisition (CPA) – cost per acquisition
The CPA indicates how much a paying customer cost us in total to make a purchase. For example, if we spent 1,000 francs on social media marketing and 5 customers made a purchase through this campaign , the CPA would be 200 francs.
Return on Ad Spend (ROAS) – Return on ad spend
In online marketing, the ROAS is one of the most important optimization indicators, because it indicates how much return we have achieved with one advertising franc. Let’s assume you spend 1,000 francs on social media marketing and generate 10,000 francs in sales with it , then the ROAS is 10. You have then earned 10 francs for every advertising franc used.
How are KPIs used in online marketing?
In marketing, key performance indicators can be used on a wide variety of platforms to check the effectiveness of activities.
On social media – Facebook, Twitter, Instagram, LinkedIn and Co. – in addition to the number of followers, the views, likes and comments on posts are also relevant. Depending on the platform, shares, reposts and retweets are also a way of tracking the performance of a post. Calculating the engagement rate, for example on Instagram, can also be informative. This is how you determine in percent how much is interacted with the posted contributions.
Of course, ads are also posted on social media and Google. The individual platforms usually offer an Ads Manager (e.g. the Business Manager from Facebook) with which advertising can be switched and tracked. The performance of the ads can be tracked more precisely with Google Analytics , where you can track key figures such as website visits, clicks, leads and length of stay. Google Analytics is therefore a very central tool in marketing for tracking the defined key performance indicators.
Precisely because the KPIs are so valuable for checking measures, it is important to have an overview of them. A KPI dashboard, a performance management tool , can be set up for this purpose. The required key figures can be visualized on such a dashboard so that the company can see the most important data and developments at a glance.
The dashboard provides data in real time so that you are always up to date. The goal of a KPI dashboard is to present data in a comprehensible and clear manner. The graphics and diagrams should therefore be kept rather simple and meaningful.
Conclusion on KPIs
Using key performance indicators, companies can check whether and how their measures and activities are taking effect. KPIs can be used in various departments of a company for evaluations and, ultimately, adjustments and improvements. In order to formulate meaningful KPIs, it is central for companies to define the area where the key performance indicator is to be used and to define the KPI accordingly. If the KPIs are sensibly selected and the key figures are evaluated, a company can draw valuable conclusions for future activities.