How to leverage your KPIs in assertive decisions

04/05/17

Defining branded KPIs is far from a simple task. And yes, as difficult as it may be to accept, your mother was right: you are not everyone. A set of KPIs can work for one business model and not necessarily work for another. Finding which indicators are relevant and actionable is the key to measuring performance accurately and making more assertive decisions. Shall we?

The goal of a Key Performance Indicator (or key performance indicator) is to measure the performance of an area of the business in relation to the objectives of the company. Therefore, to be considered a KPI, the indicator needs to be quantifiable, actionable, and essential to the success of the business. Only a set of efficient KPIs will allow the evaluation of results over time, acting as the thermometer of the current strategy.

There are many factors that influence the variation of KPIs: business strategy, market share, product mix, business model … All of these factors shape the business objectives of an organization, leading to a unique set of KPIs and they are subject To the butterfly effect of these factors and may lose relevance if there is a significant change in one of them.

Starting from there, the assertiveness of strategic decisions from KPIs will depend essentially on the following four points:

Goals

Before starting to plan and create the indicators, it is very important that the company has its strategic objectives very clear. The goal setting process is closely linked to the knowledge of the market in which the company operates, the customer it wants to reach and where it wants to reach.

The selection of KPIs is the end point of a long process developed by the business areas and mainly by the strategic area of the company, depending on an internal alignment and constant reassessment of the macro and micro objectives (by area). Communication between executives, managers and operations must be fluid so that decision making is assertive. Make sure everyone understands where we’re going, how we’re going, and why.

Planning

After setting the strategic goals, it’s time to plan. We need to understand how to measure the success of the business day by day in order to define the most appropriate KPIs. And it’s no use to randomly select a handful of industry-related metrics and expect them to fit your business.

Your online operations, for example, can focus on a subset of global business goals and still require different KPIs than those applied to physical stores. That is, if your business is retail, you will consider the sales volume; If it is a blog, the volume of unique users is a fundamental data to consider. However, it is important to note that not always a single indicator will be responsible for performance, so it is crucial to know what success means for your case.

The planning stage involves working with all the factors that have the function of feeding this KPI. These factors that feed the KPI are called micro metrics, which will have the function of supporting the macro metric of which we speak. Want a practical example?

Suppose your business is an e-commerce and your main KPI to be worked on is the number of orders sold. In order to have a clear understanding of the best ways to increase the performance of this KPI, the first process to be worked out is understanding the purchase steps within your e-commerce.

We will find in the middle of the path several points to be worked out and these points can be called micro metrics. The performance of your payment page, for example, has a direct influence on the performance of your macro KPI (number of orders). If your payment page does not bring a good user experience, we will invariably have our low performance KPI macro, since poor experience could mean that the user does not place the order.

Indicators

When planning and defining KPIs, you may realize that the most important indicators do not always allow for decision making in isolation. Complementary KPIs need to be defined, and for most businesses analyzing a single indicator can distort the data and cause you to make a poorly reasoned decision. Want an example?

Imagine that a sector within an e-commerce request the completion of a project to increase the services provided by the business. In this case, the main KPI for the project is the contracting rate of services, that is, how many of the orders made have contracted this service more. However, although the emphasis has generated user interactions, these interactions did not increase conversions (hiring services).

After a study carried out, some points were identified that could be altered or tested to improve the performance of this page and, consequently, increase the adhesion in the contracting of this service. The changes caused the site to have a considerable increase in conversions in purchases and, consequently, revenue.

However, the service contracting rate still decreased when we used the KPI defined for the test. What is the position to be taken in such cases? Here comes the question of perspective: Looking at the KPIs of the business as a whole (requests and conversions), we have had significant increases, so we kept the new proposal on the air. If you did not create a KPI for the project and just work with the business metrics, the project would be a complete success. On the other hand, if we skipped the site’s key metrics and worked exclusively with the project metric, then it would be a disaster.

Therefore, any project that involves improvements to your business must be accompanied by its respective KPIs, as well as a KPI for the project itself, in order to know if the objectives of the project have been achieved and to understand how the proposed changes influenced the business as one all.

After defining your KPIs, we come to the final stretch: analyze the dimensions that will be used.

Dimensions

In the example used, we can consider the dimensions that influence processes:

Clients: Being this the end user, it is it that impacts the other end of the process. If the customer is not satisfied with what comes, or with the experience you have, there will be no purchase.
Planning: The planning area is who will develop the full scope of processes, what will be the processes, goals and KPIs, and how this influences the increase in sales on the site.
Media: Analyze where users are accessing the site, which partners are used to increase traffic, and verify separately whether their indicators are within the average site. If not, investigate the reasons. It may be that you have paid for the wrong word (sponsored link), non-existent promotion when accessing the site, among others.
Logistics: Although the logistics area is not directly linked to the user experience within the site, it interferes positively or negatively in the purchase decision. It is very likely that the user will stop making the purchase if the store offers a very long delivery time.
Financial: The forms of payment chosen during the purchase process also affect the choice of the user. An example of this is when an e-commerce is expanding its public and still does not offer option of payment via boleto bancário for the user who does not use credit cards.
The process of creating KPIs requires time and dedication of the team, but the benefit generated will revert to more assertive actions, take the strategic objective to the operational line, generating happier and loyal customers.

If you are still not sure which KPIs are right for your business, we can help. Contact the Pmweb team and count on us for even better results.

Article written in collaboration with Victor Loureiro.

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