The KPI is one of the key performance indicators. It is an important part of the data companies need to track progress against their marketing and business goals. How do you measure your company's marketing efforts? And how do you know they're effective?
The KPI allows you to understand what works and what doesn't in marketing. Which makes the company's marketing activities lead to the achievement of spectacular successes or disgraceful failures. This knowledge should be an indispensable part of the development strategy of any company operating in the 21st century. As long as it actually wants to achieve its goals.
KPI - Definition
Essentially, a KPI is simply a measurable component that can be used to demonstrate the effectiveness with which a company achieves its business goals. Companies use KPIs at multiple levels. They can focus on the overall performance of the company or on the processes in its individual cells, such as sales, marketing, HR, etc. Organizations use KPIs in their marketing activities, including to determine if they are spending the budget in the right areas.
An organization's KPIs are not the same as its goals. For example, the goal of a clothing company may be to increase brand awareness among a specific age group so that the next one becomes its customers target group. In turn, KPIs can include things like website traffic, the number of social media followers or their online engagement.
Examples of KPIs in marketing
Regardless of the type of KPIs you choose for your business, the number each expresses should be important. Why? Because it allows you to focus on specific development goals and make sure that the company is gradually moving in the direction of the adopted vision. Some of the examples of KPIs used in marketing are:
- number of new customers acquired,
- customer loss rates,
- the cost of acquiring a new customer (which can be up to 7 times more than maintaining the current one)
- Customer Lifetime Value,
- customer retention rate,
- return on advertising expenses,
- brand awareness indicators.
KPIs can help companies stay on track and choose the marketing campaigns that are relevant to achieving it.
What marketing goals do you want to achieve?
We will show you the best way to implement them.
KPI in practical terms
Ultimately, the best way to evaluate your marketing efforts is to measure their impact on sales revenue growth. The KPI, expressed in sales growth, is of key importance for the long-term health of the company. Not only is it a good indicator of strategic planning, it also allows you to identify upward trends.
Running a business is simple math. The more potential customers a company gets, the more opportunities it has to sell. In turn, the more opportunities to sell, the greater the chances of increasing sales. The awareness of the value of KPIs related to acquiring leads cannot be overestimated. The importance of potential customers to the marketing and sales department is comparable to the role that gasoline plays in a car - they are the driving force.
Another KPI that is of great importance in marketing, although not everyone is aware of it, is the response time of the sales team. In practice, the data in the category looks interesting B2B marketing. A survey of 2,241 American companies showed that the average B2B company response time to a question from their potential customers was 42 hours. Such a long reaction time is a serious problem. Especially since another study showed that the chances of a successful contact with a potential customer are 100 times greater when someone from the company contacts them within 5 minutes than within 30. The question is how quickly your sales team reacts to potential customers. customers, and how quickly your competitors' team does it. By measuring this KPI, your response times can be improved.
KPI indicator - which one to choose?
To determine what your marketing KPIs should be for your business, you can start by asking yourself a few simple questions, such as:
- what are the end goals? What does the company hope to achieve by improving specific KPIs?
- Why is the selected result important for the brand?
- what will a business need to do to measure progress in meeting KPIs?
- how will it define if it has achieved its goals?
KPIs measure progress in achieving goals directly or indirectly. They can be defined in the following categories:
- time: how long does it take to reach the goal?
- cost: are we using our resources efficiently?
- quality: does the result meet the requirements?
- customer service: do we meet the expectations of our customers?
- Growth: Is the growth rate appropriate or is our market share increasing accordingly?
- finances: are our revenues and profits growing?
Defining a set of marketing KPIs for your business can be difficult. The most important word to focus on is 'key outcome' as each KPI should be directly related to a key business outcome. While it's worth paying attention to industry trends and standards, it's important to remember that not all businesses need to use the same KPIs as their competitors. Instead, a brand's KPIs should be clearly linked to its marketing campaigns.
Benefits of using KPIs
The KPI, if its application is not limited to the measurement itself, but is further analyzed, gives the company many advantages. These include:
- transparent overview of the development of the situation in the organization,
- the results are regularly and continuously assessed,
- strategic goals are related to key processes supporting their achievement,
- monitoring what is important for the company at the moment,
- gives the opportunity to measure not only financial results.
The use of KPIs allows not only to monitor the current status indicated by a given KPI. By taking appropriate measurements, you can also analyze information from the past. This allows you to understand the reasons that influenced the current state and plan appropriate actions for the future.