Behind every successful online campaign lie effective analytics. It’s the whetstone that sharpens the edge of every marketing strategy. “And what’s the secret to effective analytics?”, you might ask. Simple. Choose and monitor the right Key Performance Indicators (KPIs) that provide actionable insights. They’ll highlight the underperforming areas in your campaign and provide insights for actionable improvements.
Due to the abundance of available metrics, many digital marketers need help picking the right ones to focus on for analytics. Not choosing the right metrics as KPIs ultimately results in a failed campaign. So, to help our growing community of digital marketers gain a better understanding of KPIs, we have tried to answer the following questions definitively.
- What are KPIs and metrics?
- How do you choose the right KPIs?
These answers are relevant to anyone interested in data-driven management. This article will focus on how these questions impact digital marketing professionals, online marketing agencies, and new entrants in digital marketing.
What Are Metrics and KPIs?
We begin by defining exactly what metrics and KPIs are. In the realm of digital marketing, they are integral ingredients. We use them every day to create campaign reports for our clients. They form the very basis for an effective analysis of any marketing campaign.
A metric is any value that expresses quantifiable data. A KPI is a specific metric relevant to business objectives.
Do you notice the words ‘specific’ and ‘relevant’ in the KPI definition? That’s the essence of a good KPI.
KPIs fall into two broad types: number and ratio metrics. Metrics such as page views, impressions, and visitors are metrics represented by numbers.
Metrics expressed in percentages, such as conversion rate, bounce rate, etc., are ratio metrics.
The Difference Between a KPI and a Metric
It’s essential to understand how KPIs differ from metrics and that they are not interchangeable. While all KPIs are metrics of one form or another, all metrics are not KPIs. KPIs, therefore, are a subset of metrics.
Metrics refer to all sorts of numbers and ratios that may or may not provide helpful information for a specific purpose. On the other hand, KPIs are particular indicators that measure performance in pursuing a clearly defined goal. KPIs differ from metrics in that, unlike a general metric, changes in a KPI’s value directly impact your bottom line.
To better understand it, let’s consider the following example:
Let’s say that an ad you put out there to promote a client’s website gets a certain number of daily and weekly impressions. This number is technically a metric. But if your objective is to get traffic to your client’s business website, then simply knowing how many people saw your ad (i.e. impressions) doesn’t help much. This particular metric would be useless as a KPI to measure your ad’s performance.
On the other hand, a metric like Cost Per Acquisition (CPA) conveys the average cost of gaining one new client or customer for your business. If the CPA is too high compared to the profit margin, the odds are the campaign isn’t sustainable in the long run. By knowing, monitoring, and drawing conclusions with this specific metric, it might become precise cuts in the cost per acquisition are required.
As you change strategies to achieve this, you can check how well your strategies are working by monitoring for changes in the CPA. In this instance, the CPA becomes a Key Performance Indicator (KPI) for your business and it provides, like all other KPIs, a way to measure and evaluate the progression towards a specific business goal.
Okay, now that the difference between a ‘metric’ and a ‘key performance indicator’ is clear, let’s dive deeper.
The Form and Function of Key Performance Indicators
As the example above shows, KPIs enable you to accurately measure your progress toward campaign goals. They provide the proper context to a metric by highlighting its direct relevance to a specific objective.
It is essential to understand that KPIs are not absolute. Any metric can become a KPI, depending on the desired objective. Different business verticals will likely have their own unique set of meaningful KPIs. Similarly, online marketing campaigns have a set of most relevant KPIs.
There is one thing that all KPIs have in common though – every performance indicator is tied to a target and provides relevant data that shows how close you have come to that target over a period of time.
You need to choose and monitor the most relevant KPIs for valuable data insights to refine your marketing strategies. This is where most marketers stumble and brings us to the most essential part of this article – a crash course in differentiating between general and relevant metrics and choosing the most valuable KPIs.
Benefits of Key Performance Indicators (KPIs)
Using KPIs (Key Performance Indicators) can significantly enhance performance for digital marketing agencies and marketers in several ways:
- Enhanced Decision Making: KPIs provide concrete data that can inform strategy adjustments and resource allocation, helping agencies and marketers optimize campaigns for better results.
- Increased Accountability: By setting and monitoring specific metrics, teams can have clearer goals and understand their individual contributions to overall success.
- Improved Client Reporting: KPIs enable digital agencies to demonstrate campaign effectiveness to clients through data-driven reports, improving transparency and client satisfaction.
- Strategic Alignment: KPIs help align marketing strategies with business objectives, ensuring that all digital marketing efforts support overarching goals.
- Performance Optimization: Regular review of KPIs allows for continuous improvement, helping marketers refine tactics based on what works best, which can lead to higher ROI and efficiency in campaigns.
Incorporating KPIs strategically can transform a digital agency’s approach to campaign management, client relations, and overall business growth.
How to Choose the Right KPIs
Choosing the right metrics as your KPIs is essential for any online marketer. Here are some simple, actionable insights to help you make better choices when selecting KPIs to measure the effectiveness of your marketing campaign.
If you want to perform effective campaign analytics with relevant KPIs, always choose:
- An available and easily measurable metric:
A KPI should be easily measured and understood. Choose from the set of metrics available to you. As you go along and new sets of data crop up, you can expand your selection of KPIs. But when starting a campaign from scratch you will probably have a limited number of metrics available. That’s okay. Start from where you are, and work with what you have. - A metric based on accurate data:
Use KPIs based on concrete and verifiable data (‘Customer Happiness’, for example, is difficult to quantify). Only monitor those metrics that provide factual data and can be readily verified. - A metric that directly impacts your bottom line:
When determining relevant KPIs, you might find that many metrics directly or indirectly affect your bottom line. It is best always to choose to monitor those metrics that directly correlate to your business objective. - A metric that provides the right context:
A useful KPI provides the right context along with the raw data. It points to a specific action to enhance your strategy. For example, a high bounce rate tells you that the content on your web page is not engaging enough, so you need to work on that. And that’s precisely the point. Studying such metrics can lay bare the flaws in your existing strategy so that you can fix them. - A metric that reflects your organizational goals
Finally, a KPI must always be a metric that reflects your organization’s goals.
As you become more adept at conducting analytics on your marketing and advertising campaigns, you can easily identify the most relevant metrics for every campaign that can serve as performance indicators for your goals. Mastering effective analytics with the right KPIs might take time and practice.
Are you seeing additional information on selecting the right KPIs for different platforms/campaigns? Check out these resources:
What to include in a KPI report?
A KPI report is a vital tool for agencies to track and optimize campaign performance. The report helps effectively communicate key performance data with clients or stakeholders helping to make informed decisions to drive success. Here’s what to include:
- KPI Overview: Define each KPI and explain why it was chosen, ensuring alignment with strategic goals.
- Data Analysis: Offer a thorough analysis of the data collected for each KPI, highlighting important patterns and outliers.
- Visualizations: Use graphs, charts, and tables to visually represent the data, making complex information easier to understand and more engaging.
- Comparative Analysis: Compare current performance against historical data or industry benchmarks to contextualize performance.
- Actionable Insights: Interpret the data to provide clear, actionable recommendations tailored to improve future performance.
This structure helps ensure the report is comprehensive, clear, and useful for making informed decisions.
Further reading: What Should Be Included In a KPI Report.
Best Practices for KPI Reporting
To make KPI reporting as effective as possible, ensure the report or dashboard is not only useful but also actionable and aligned with business goals. Key practices include selecting appropriate KPIs, presenting data clearly, updating regularly, and tailoring content to the audience’s needs. Each step enhances decision-making and strategic planning.
- Select Relevant KPIs: Choose indicators that directly relate to critical business goals. This ensures that the report focuses on the most impactful data.
- Maintain Clarity: Use clear, jargon-free language and effective visualizations, such as charts and graphs, to make the data accessible to all stakeholders.
- Regular Updates: Update KPIs consistently at regular intervals to track progress and respond promptly to changes. This can be monthly, quarterly, or on another regular cycle, depending on the business needs.
- Actionable Insights: Analyze the data to draw conclusions that lead to actionable steps. This should directly inform strategy and operations to improve performance.
- Customize for Audience: Tailor the presentation and depth of information in the report to meet the specific needs and understanding of different stakeholders, from technical teams to executive management.
- Automate Processes: Leverage software tools to automate data collection and visualization. Automation helps eliminate human error and frees up time for more strategic tasks.
- Provide Context: Compare the data to historical performance, industry standards, or competitor benchmarks to offer context. This helps stakeholders understand the bigger picture and the significance of the data.
- Continuous Improvement: Treat KPI reporting as a dynamic tool. Regularly review and refine KPIs and reporting practices to align with evolving business strategies and market conditions.
Want to Win Over Your Clients with Top-Notch KPI Reports?
Understanding KPIs is crucial for marketing agencies to align their strategies with client goals and measure campaign success effectively. KPIs help agencies track progress, optimize performance, and demonstrate value through clear, data-driven insights.
Swydo reporting and monitoring tool makes monitoring KPIs and tracking performance over time a breeze. Request a demo or grab a free trial to create your custom marketing report in just minutes. Take the first step towards client satisfaction today!