what they are, how to define and examples – WAU
Performance indicators are also known as Key Performance Indicators, or KPIs. They refer to metrics used to verify the efficiency of a strategy, allowing to monitor the results obtained in projects or campaigns. KPIs serve as a guide that guides decisions in an informed and accurate way.
Commanding a team in search of satisfactory results for the company is not a simple task and the responsibilities and obligations are many. Therefore, there are management methodologies, such as OKR (Objectives and Key Results), that can facilitate this task. However, without the help of performance indicators, none of this will work.
After all, how can you accurately assess whether your marketing plan is really working or not? Or even if the strategies adopted to generate more leads, for example, are in fact efficient? All of these questions can only be answered by closely monitoring some metrics.
But how do you know which performance indicators should be monitored? Rest assured, because we have prepared this article to answer all your questions. For this, we will address:
Continue reading to check it out!
What are performance indicators?
Performance indicators, also known as KPIs (Key Performance Indicators), are metrics used to evaluate the effectiveness of a strategy, campaign or project, for example. In practice, it is a way to closely monitor the results that an action has managed to generate as a return to the business.
Displayed as numbers or percentages, there are numerous performance indicators, which can vary from the rejection rate of a page to the cost to acquire each lead. This information is directly related to your company’s objectives, since these metrics will indicate whether the actions are working or not.
These results can be used to assess the productivity, quality or capacity of a sector, a project or an isolated strategy. They are also used to indicate the strategic scenario, that is, which of the outlined objectives have been achieved or how much is missing. This positioning is essential to overcome strong competition and carry out strategic management.
At a time marked by strong competition for the attention and resources of – increasingly demanding – consumers, achieving making the most of your strategies is essential and indicators are the way to do it. Only by monitoring the performance of your actions and strategies over time is it possible to achieve goals and objectives.
Why is it important to monitor these indicators?
These are the indicators that will show, in practice, what each action is generating for your business. After all, how to prove to your superiors that the resources made available were, in fact, used efficiently? Or how to ask for a larger marketing budget without proving that a particular strategy is effective?
Questions like these are very common for those who occupy some management position, however, they can be easily answered with the use of performance indicators to measure results. Forget expressions like “I think” and “maybe”, since the metrics will present facts about the performance of the shares.
Whether to measure team productivity or to identify flaws in the Content Marketing strategy, all of this is only possible when looking at performance indicators. So, instead of wasting time guessing a possible cause, you will speed up problem identification and correction with effective strategies.
In addition, the indicators are important even for the work of managing people and engaging employees within your team. With data in hand, it’s simpler to understand what each person’s goals and responsibilities are, and, of course, the impact that each professional brings to the company, benefiting the organizational climate.
In summary, performance indicators can be applied in several ways: monitor the performance of a company or a team over a period of time, identify errors and correct actions and find opportunities or monitor productivity. Therefore, these metrics need to be closely observed by anyone who wants to succeed in the market.
How to define performance indicators in your strategy?
You already know how performance indicators are fundamental to the success of your strategy, but how do you choose the right metrics?
After all, each business has its peculiarity and what generates results for one may not work for another. Therefore, we have separated some topics that you should pay attention to in order to define the right KPIs.
What is your goal?
The first step is define your goal. This answer makes it much easier to determine which indicators you should be tracking. If you are looking for greater relevance and authority within the market segment, you need to monitor, for example, your market share or even the cost per lead (CPL).
After all, what is the point of monitoring the average ticket of your e-commerce if you are not looking, for example, to reduce costs? Of course, this is an important performance indicator, however, it is not essential for you to achieve the objective determined in your initial planning.
How can you measure it?
Another question that you must analyze is how to measure the defined indicator. That is, in practice, how is it possible to generate this data? It is important not only to be satisfied with the ease of doing a certain follow-up, but it is also vital that you have complete mastery, for example, of the calculation that must be done to arrive at the exact number.
In addition, it is necessary to set deadlines that are realistic according to the goals. Want an example? There is no point in monitoring your market share weekly, as this is a long-term goal. Regarding the number of leads generated with your Content Marketing strategy, the follow-up may be shorter.
These two questions must be answered so that you have, in fact, the ability to use such data to improve the work done by the team. Otherwise, you will only add more unnecessary headaches to your strategic planning.
What are the types of indicators? Discover 5 examples!
In order to better understand what performance indicators are, we have separated a list with the main ones and how each one can be useful for your business. Remember: be very careful with vanity metrics, which do not provide a complete picture of the performance of your actions and strategies.
1. Profitability index
To understand if the adopted strategy is proving efficient, considering the medium and long term, visualize the profitability of your business is a very important indicator.
By dividing the net profit in a given period by the total revenue of your company, you have the percentage of profit at hand and can assess your financial health.
2. Market Share
Understand the size of your company within the market it is important to assess, in the long run, the effect of the actions and strategies adopted. The cool thing is that it can be used in different ways, considering the sales volume, the billing or even the number of customers to better understand this scenario.
The calculation to find out the percentage of your market share is done by dividing your company’s turnover by the total turnover of the segment, multiplying the result by 100. This percentage will indicate if your actions are contributing to the growth of your business or not.
3. Sales conversion
The conversion rate is an excellent measure of the efficiency of your sales team, as it shows how many customers were won from the total contacts made. By dividing the number of contracts closed by the number of customers contacted and multiplying the result by 100, you have the percentage that indicates the effectiveness of your conversion work.
Another way to evaluate the efficiency of your actions is to monitor your ROI, also known as Return on Investment, which shows how much you are getting from a stock, campaign or strategy, for example. It’s an excellent way to understand which investments were indeed efficient and which should be optimized.
5. Average Ticket
The average ticket is one of the most common and important indicators in any business. Regardless of size or objective, it is always important to look how much, on average, each customer spends on each purchase. This metric is interesting because it can also be used, for example, to assess the productivity of salespeople.
The account is very simple: just divide the total number of sales in a period by the number of customers or, as in the example above, by the total number of salespeople on your team.
Therefore, if you want to get the most out of your team and the resources available for your area, keeping an eye on the performance indicators is a mandatory task.
From these metrics, you can identify what is really working and what needs adjustments to result in better and better numbers.
However, despite the importance of performance indicators for the success of any strategy, not everyone knows how to generate this data.
Therefore, we have prepared content that shows how the data generated by your marketing strategy can enhance your results. Access the Marketing Indicators and OKRs ebook!
We are a family owned and operated business.