To obtain a high-level understanding of what constitutes a Key Performance Indicator (KPI), we first have to look at the so-called "anatomy" of a KPI (pictured below). This article is intended to inform you about the difference between a Key Metric and a Key Performance Indicator (KPI) and their relationship to each other.
What are KPIs?
To know if you are helping your organization achieve success, you need to measure how your website is contributing. KPIs are great for reporting to management on performance and ROI (Return on Investment) of your website. Key Performance Indicators (KPIs) are a group of indicators (Key Metrics) that help organizations assess progress to strategic objectives.
What are Key Metrics?
Most Analytics data can be identified as metrics. Key Metrics, however, are the actual numbers and actions on your website that truly matter to reach your strategic objectives. Key Metrics are the tactical initiatives you and your web team identify for your website. These are the types of visitor actions that are helping your organization reach its overall objectives, whether that is lead generation, digital engagement, or customer satisfaction. Examples of Key Metrics could be a newsletter sign-up or form completion, but the point is to identify if those actions truly matter for your organization.
How do KPIs and Key Metrics relate to each other?
To understand the exact actions that need to happen for each Key Metric to be successful, you need to identify triggers. This process is shown in the image below.
To put this into practice, let's look at an example of this process:
If you are a law firm, you might be interested to know:
a) how many visitors sign up for your newsletter or
b) how many visitors submit a request for retainer offers.
Strategic objective: Increase Lead generation
Key Metrics: a) Sign-ups for newsletter b) Requests for retainer offers
Trigger: What actions do your users need to perform on your website for the key metric to be successful?
a) Those that view the "Thank you for signing up for our newsletter" page, which indicatesa completion
b) Those that click on the "Submit" button for requesting a retainer offer
KPI: By grouping, the Key Metrics "Newsletter Signups" and "Requests for retainer offers" you could name your KPI "Lead Generation" and see how those combined metrics are performing toward that objective.
In this example, the KPI is tracking the success of increasing lead generation at the law firm. By knowing how well your team is generating leads online through various Key Metrics, you can determine how successful the website is at reaching this specific strategic objective.
I've delved into the intricacies of Key Performance Indicators (KPIs) and Key Metrics extensively. Understanding KPIs involves grasping their anatomy, their relationship with Key Metrics, and how they contribute to assessing organizational success. KPIs essentially encapsulate critical business indicators that measure progress toward strategic goals.
Firstly, let's break down the core concepts:
Key Performance Indicators (KPIs):
KPIs are metrics used to evaluate the performance of an organization in achieving its strategic objectives. They're not just any metrics but a carefully selected group that directly correlates with overarching goals. For instance, in the context of a law firm aiming to increase lead generation, KPIs could be "Newsletter Signups" and "Requests for retainer offers." These KPIs reflect the firm's focus on generating leads.
Key Metrics:
Key Metrics are the specific data points or actions on a website that are crucial in achieving strategic objectives. These metrics are more than just numbers; they represent user actions that align with organizational goals. For example, in the case of the law firm, "Newsletter Signups" and "Requests for retainer offers" are considered Key Metrics, indicating visitor actions contributing to lead generation.
Relationship between KPIs and Key Metrics:
KPIs are built upon Key Metrics. Key Metrics are the measurable actions, such as signing up for a newsletter or requesting a retainer offer, that directly impact strategic goals. The triggers or actions leading to successful Key Metrics are crucial to monitor. For instance, the law firm might monitor specific actions like users viewing the "Thank you for signing up" page for newsletters or clicking the "Submit" button for retainer offers.
Practical Implementation:
In the example of the law firm, the KPI "Lead Generation" is constructed by grouping the Key Metrics "Newsletter Signups" and "Requests for retainer offers." This KPI provides a holistic view of how well the website is performing in generating leads. It enables the firm to assess the success of its online lead generation efforts by monitoring combined metrics aligned with their strategic objective.
The essence lies in identifying the right Key Metrics that directly impact strategic objectives and constructing KPIs that reflect the amalgamation of these metrics to gauge overall performance accurately. This process empowers organizations to make data-informed decisions for achieving their goals.
