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Business KPI - Defining Your Key Performance Indicators (Part I)

Business KPI - Defining Your Key Performance Indicators (Part I):


Business KPI, or Key Performance Indicators, are simple business metrics that allow you to monitor the health and profitability of your business over time.

They are a way to actually see how effective your marketing programs are in growing your small business. If your KPI's are trending downwards, you'll be able to take corrective action before it is too late.



The main challenge in determining any business KPI is to identify the actual metrics that will help grow profits. You can measure until the cows come home, but if your KPI's don't allow for practical changes that actually increase business results, you're wasting valuable time.

Any key performance indicator you define needs to be quantifiable and to reflect a critical success factor for your business.

Defining Your Business KPI:

Before we go through in-depth examples of solid key performance indicators, here are five critical factors for any business KPI.

1.    While it may seem obvious, it should be stated. Key performance indicators must be tied to the overall goals of the company.
2.    A business KPI must be easy to measure with consistency and accuracy.
3.    Performance indicators must be quantifiable. "Generate more web traffic" or “find essay writing checker” is too broad to be considered a KPI.
4.    Each performance indicator must have a corresponding target. For example, if you define "Newsletter Registrations" as a business KPI, you might define the target as "150 new registrations per month."
5.    Don't overdo it! It's better to have three or four focused performance indicators as opposed to a dozen that only serve to spread out your attention and efforts.
Below are some examples of solid key performance indicators. I've focused these examples on a typical small business website. Feel free to use them for your own business. In addition, many of these ideas can be developed as offline KPI's as well.

Business KPI #1: Conversion Rate:

Conversion Rate is simply the percentage of visitors that take some defined action.
That action could be any of the following:
  • ·         Responding to a direct mail offer
  • ·         Making a purchase online
  • ·         Coming into your physical store and using a coupon
  • ·         Registering for your company newsletter
  • ·         Downloading a report
  • ·         Making a donation
  • ·         Filling out a survey

The average conversion rate for an ecommerce website (i.e., for people making a website purchase) is around 2%, but I've seen some sites achieve double-digit conversions through split and multivariate testing.

Of course, non-purchase conversions can be significantly higher. For example, if you are surveying existing customers and offer an incentive for completing the survey, it is possible to achieve a 50% or higher conversion rate.

If you would like to use Conversion Rate as one of your KPI's (and I strongly encourage you to do so), your first step is to decide how you wish to define your conversion. Any of the above examples I've given would work just fine.

So how do you actually go about measuring conversion rate? As an example, suppose I wish to monitor monthly newsletter subscriptions as one of my business KPI. Each month, all I would need to do is to count up the number of people that subscribed to my online newsletter and divide that by the number of unique visitors that viewed my newsletter registration page.


This is easily and quickly accomplished by using a website analytics package. Personally, I use Google Analytics, because it's powerful, easy to install, and completely 100% free.

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