Sometimes there’s not much difference between success and failure. However, for your company to measure the impact of its actions, it needs KPIs. But what are KPIs, and which ones are truly important for you? In this FAQ article, we’ll show you what these three magic letters mean and explore 10 questions related to them.
Key Takeaway – The most important things in brief:
- Definition and meaning: KPIs are performance indicators used to measure, control, and evaluate various activities in companies in order to monitor and control their efficiency and success.
- Application examples: In online marketing, KPIs are used to measure the performance of advertisements, newsletters, or social media campaigns, for example, based on leads, conversion rate, or generated traffic.
- Customization and selection: KPIs must be tailored to a company’s specific goals and strategies. Choosing the right KPIs depends on the company’s individual goals and the measures used.
1. KPI: Definition and Scope
Key Performance Indicators – or KPIs for short – are performance indicators that are used to measure, control, and evaluate activities in various areas.
In online marketing, for example, you gain important insights into whether your ads, newsletters, or social media campaigns are generating the desired number of leads, conversion rates, or traffic. The collected data allows you to continuously adjust your (advertising) activities toward your goals.
As a conversion optimization agency, we are happy to help, support, and advise you on your project.
2. What are KPIs? – a simple explanation
Essentially, you and your company will target specific goals; using KPIs, you then measure and demonstrate how effectively your employees, processes, or activities have performed so far. Or, figuratively speaking, KPIs serve as your company’s navigation system, giving you an overview of your current situation. They convey whether you’re still on the home stretch toward success or whether measures need to be taken to get your activities back on track.
3. What are important KPIs?
Whether in sales, marketing, or human resources, KPIs are used to measure success in all areas and are therefore just as diverse. Key performance indicators that you might encounter in various departments include the following:
- Products sold in a specific region ( Local SEO )
- Traffic that is directed to your website via your TikTok advertising
- Return rate of a specific product
- Number of followers gained in the last month
- Sales generated by a newly launched product in a specific period
- Takeover rate after probationary period/training
4. What are KPIs used for?
Key performance indicators are essential for your company for several reasons. To understand this, ask yourself the following question: If you don’t measure your activities, how will you know whether your measures will ultimately be successful or ultimately fail? This is precisely where performance indicators come in. KPIs show how close or far you are from achieving your desired goal. This makes it clear how successful or unsuccessful the previous performance of your employees, processes, advertisements —or whatever you want to measure—has been.
5. Which KPIs are important for my objectives?
KPIs should always be selected based on the company’s defined goals, developed measures, pursued strategies, and other individual requirements. Therefore, a general answer as to which key performance indicators should be used is not possible. They must always be selected and adapted to your company’s individual needs.
This becomes especially clear when you look at practical examples: For a blogger, the number of clicks on their posts might be crucial, whereas for an online retailer, the conversion rate might be crucial. Even within a department, different departments will track different KPIs. While keyword ranking, among other things, is a key performance indicator for search engine optimization (SEO), search engine advertising (SEA) primarily revolves around the costs incurred when a click on the corresponding ad occurs.
6. How do I choose the right KPIs?
There are numerous KPIs, so deciding which ones are best isn’t necessarily a quick one. Simply measuring randomly won’t yield much added value, apart from a pile of useless data. Therefore, you should first consider what goals you actually want to achieve with your chosen measures.
As an online shop, you may have added a new product to your range and now want to test how it impacts your customers through a newsletter. A useful performance indicator in this case would be the click-through rate, which tells you how often your customers ultimately clicked on the product in the newsletter. It is therefore a first meaningful indicator of the product’s appeal. Other KPIs, such as the open rate, may also be useful for drawing further conclusions.
You can safely ignore other key performance indicators that aren’t related to this product or the advertising campaign, because you should always keep in mind: quality over quantity. Otherwise, you’ll end up with a pile of useless data again.
Ask yourself these questions to create KPIs
- What is our goal?
- Why is this important?
- How is progress measured?
- What options are there for influencing the situation?
- Who is responsible for the outcome?
- How do I know when I have achieved this goal?
- How is progress towards the goal monitored?
Characteristics of KPIs
Strategic
It is important that you can identify with the goals and vision of your company.
Simple
KPIs should be both easy to measure and easy to understand. You should know how to record and calculate KPIs. This allows you to contribute your own ideas and innovations.
Actionable:
You should understand how you can influence key performance indicators. An effective KPI drives decisions without raising further questions.
Cascading
KPIs extend from the very top down to you as an individual. This spreads the strategic corporate goals throughout the company. This creates clear responsibilities, generates synergies between departments, and enables effective communication at all levels.
Easily measurable:
Key performance indicators must be measurable—but that doesn’t necessarily mean they have to be quantity-based (like the number of products sold per month). Qualitative KPIs like customer satisfaction or employee engagement are also surveyed. It’s important that KPIs are always based on solid goals, based on your company’s vision.
Evaluate on time.
KPI results are presented in reports. The right frequency is crucial. Too many reports could overwhelm you, while too few could lead to trends being missed or you getting off track.
Visibility:
Visibility throughout the organization is also crucial for effective KPIs. Just as with cascading KPIs, general awareness of goals and metrics boosts your commitment and effort.
7. KPIs in online marketing: What can I measure?
A key advantage of online marketing is the ability to track and measure almost everything. Here, too, KPIs vary in relevance across different areas—from social media to SEA to employer branding. In social media marketing, for example, you’re more likely to find the number of new followers per month for your newly launched Instagram ad or the rate of shares on Facebook as metrics. In search engine advertising, you’re more likely to find CPC, i.e., the cost per click on your ad, or CPA, i.e., the cost of a desired action.
8. How can I measure KPIs?
One of the most popular tools for tracking KPIs is Google Analytics. By simply integrating a tracking code into your website’s HTML code, this web analytics tool allows you to collect vast amounts of data and analyze your website in the process. Data collection begins when you implement the tracking code on your website.
9. What is a KPI dashboard?
And how can you present your company’s key performance indicators without immediately throwing in the towel with all the numerical confusion? With the help of KPI dashboards . If your KPIs are your navigation device, then the corresponding KPI dashboard is your onboard computer. All important information is bundled in one place – but at the same time, it’s visualized in such a structured way that you get a direct overview of the measures you’ve developed and their current progress.
What makes a good KPI dashboard?
A good KPI dashboard is characterized by the fact that it shows you all the key metrics and information you need at a glance. It’s designed to be clear and easy to understand, so you can quickly understand the performance of your project or company.
Good KPI dashboards are characterized by the following features:
- Clarity: A good KPI dashboard impresses with its clear structure and intuitive layout, which makes it easy to grasp the most important information at a glance.
- Relevant KPIs: It shows only those metrics that are directly related to your goals and strategic decisions to enable a targeted assessment of performance.
- Regular updates: Through continuous updates, the dashboard ensures that you always have access to current and accurate data so you can take timely action.
- Visualizations: Graphs and charts illustrate complex data and trends, allowing for faster and easier interpretation.
- Time series: Using historical data, you can analyze developments over different periods of time and respond to changes.
- Customizability: The dashboard can be adapted to your individual needs by adding, removing, or rearranging KPIs.
- Link to goals: The selected KPIs are directly linked to your company’s strategic goals to capture progress at a glance.
- Easy navigation: The clear user interface allows effortless navigation between different KPIs and views.
- Efficiency: By centrally displaying relevant information, the dashboard saves time and makes it easier to focus on key action steps.
10. What KPI dashboard tools are available?
- Geckoboard offers you the possibility to display data from over 60 web services in real time.
- Thanks to its optimized mobile version, Tableau is particularly suitable for use on mobile devices.
- Klipfolio is an online dashboard platform that also gives you insight into your data in real time.
- SimpleKPI focuses primarily on keeping the design process of your KPI dashboard as simple as possible.
Conclusion: KPIs – the companions to the success of your activities
By now, you should know that there’s a lot behind those three magic letters. KPIs not only reveal the success or failure of your activities, but they also help you determine your status quo and help you get erroneous measures back on track.
For this reason, you’ll encounter them in almost every area and department, which, conversely, also means that you can’t simply randomly select a few performance indicators to achieve your desired success. Instead, it’s now up to you to identify your goals and the KPIs needed to achieve them, paving the way for your measures to safely reach your desired goal.
This should answer the question “What are KPIs?” For more news and information, please subscribe to our newsletter. Want to delve deeper into the topic of online marketing? Then our online marketing seminar is just right for you.