Member Article

KPIs and Business Intelligence: What and Why to Measure

To really understand where you are succeeding and where you are falling short, you have to measure the right things. For example, if your goal is to increase sales in the Minneapolis store by 5% in the year 2015, you couldn’t determine success by establishing a KPI to measure the number of shopping bags you have on hand in the store. Do we care about the number of sales people on staff at a certain time of day, and whether that affects our sales? Do we want to look at the store hours for a particular day of the week to determine whether extended hours in a certain season or on a certain day may result in more sales? Should we look at the impact of sales rep training on closed sales?

In like manner, if you want to establish metrics to evaluate the effectiveness of your internet marketing program you’ll probably have to look at your program from various perspectives. That is true of nearly every initiative in your company and that is where many businesses go awry. They assume that they can establish one metric for each goal when, in fact your business is more complex than that and your goals usually have more than one factor or aspect that will determine success.

Let’s consider the KPIs for an internet marketing program. We can’t just say that we want to increase sales. We have to decide how we will determine success. Will we include site visits, visits per page, the click to conversion ratio, the number of email and newsletter ‘unsubscribe’ requests, the click through rates for visitors coming to the website from a social media site, etc. These factors might tell us which internet marketing techniques are driving traffic to our site, but do they tell us whether this traffic is coming from our target audience, or what percentage of the traffic from each source is actually resulting in a purchase? Do they measure the time of day, the day of the week, or the season in which these sales conversions are most likely?

Of course, every business, industry, location and team is different and you have to look carefully at your own business to determine what is relevant. The most important thing to ask yourself when you establish KPIs is, ‘how does this measurement correlate to our success?’ If I measure this particular thing, does the resulting number or data point give me any insight into how well we are doing, how much money we are making, and whether this task, activity or goal is actually having an effect on the overall performance of the business?

There is one final point to consider when establishing Key Performance Indicators (KPIs) and an integrated business intelligence approach to decision-making. Enterprise culture and communication is important. There are industry standard, and business function-specific business intelligence tools with KPI modules, but these solutions still have to be tailored to the individual organization, and to their targets, and the minimums and maximums to be defined and then gradually moved to the teams for adoption. In order to get a true picture of KPIs and business intelligence, the enterprise must integrate data from disparate data sources and systems and that takes careful planning and implementation.

Throughout this process, the business must be committed to building a performance driven culture, and to streamlining and improving communication, and, in all likelihood, the process of getting to the desired state will be an iterative process. It may seem like the enterprise is taking the long way around. But, the business team must focus on building for the long-term, and to achieving solid results and a culture that supports clear, concise, objective decision-making and full commitment to business success at every level.

If a business is committed to performance-driven management, it must link its goals to its processes and create key performance indicators that objectively measure performance and keep the company on track. Whether your goal is to create a successful eCommerce site, increase customer satisfaction by 15% or reduce expenses, you must have a good understanding of what you mean by the word ‘success’.

‘Key Performance Indicators’ or KPIs as we say, are very important to the enterprise and nearly every company is talking about them, these days. But, there are still a lot of businesses that don’t know how to define the right KPIs to get a good picture of success.

To really understand where you are succeeding and where you are falling short, you have to measure the right things. For example, if your goal is to increase sales in the Minneapolis store by 5% in the year 2015, you couldn’t determine success by establishing a KPI to measure the number of shopping bags you have on hand in the store. Do we care about the number of sales people on staff at a certain time of day, and whether that affects our sales? Do we want to look at the store hours for a particular day of the week to determine whether extended hours in a certain season or on a certain day may result in more sales? Should we look at the impact of sales rep training on closed sales?

In like manner, if you want to establish metrics to evaluate the effectiveness of your internet marketing program you’ll probably have to look at your program from various perspectives. That is true of nearly every initiative in your company and that is where many businesses go awry. They assume that they can establish one metric for each goal when, in fact your business is more complex than that and your goals usually have more than one factor or aspect that will determine success.

Let’s consider the KPIs for an internet marketing program. We can’t just say that we want to increase sales. We have to decide how we will determine success. Will we include site visits, visits per page, the click to conversion ratio, the number of email and newsletter ‘unsubscribe’ requests, the click through rates for visitors coming to the website from a social media site, etc. These factors might tell us which internet marketing techniques are driving traffic to our site, but do they tell us whether this traffic is coming from our target audience, or what percentage of the traffic from each source is actually resulting in a purchase? Do they measure the time of day, the day of the week, or the season in which these sales conversions are most likely?

Of course, every business, industry, location and team is different and you have to look carefully at your own business to determine what is relevant. The most important thing to ask yourself when you establish KPIs is, ‘how does this measurement correlate to our success?’ If I measure this particular thing, does the resulting number or data point give me any insight into how well we are doing, how much money we are making, and whether this task, activity or goal is actually having an effect on the overall performance of the business?

There is one final point to consider when establishing Key Performance Indicators (KPIs) and an integrated business intelligence approach to decision-making. Enterprise culture and communication is important. There are industry standard, and business function-specific business intelligence tools with KPI modules, but these solutions still have to be tailored to the individual organization, and to their targets, and the minimums and maximums to be defined and then gradually moved to the teams for adoption. In order to get a true picture of KPIs and business intelligence, the enterprise must integrate data from disparate data sources and systems and that takes careful planning and implementation.

Throughout this process, the business must be committed to building a performance driven culture, and to streamlining and improving communication, and, in all likelihood, the process of getting to the desired state will be an iterative process. It may seem like the enterprise is taking the long way around. But, the business team must focus on building for the long-term, and to achieving solid results and a culture that supports clear, concise, objective decision-making and full commitment to business success at every level.

If a business is committed to performance-driven management, it must link its goals to its processes and create key performance indicators that objectively measure performance and keep the company on track. Whether your goal is to create a successful eCommerce site, increase customer satisfaction by 15% or reduce expenses, you must have a good understanding of what you mean by the word ‘success’.

This was posted in Bdaily's Members' News section by Elegant MicroWeb Technologies Pvt. Ltd. .