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What is the difference between a metric and KPI? (Video) 0

Posted on May 07, 2018 by Rob Petersen

A metric is a standard of measurement. A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets.

What’s the difference? A KPI is a “metric that matters.” It relates directly to the business’s objective or goal to help keep the strategy on track. Because a KPI is a metric that matters, a KPI is a metric that is tied to a target.

The video above explains the difference and offers examples.

Anivash Kaushik, Digital Marketing Evangelist at Google, says a key performance indicator (KPI) is a metric that helps you understand how you are doing against your objectives. Here’s how other experts define the difference between a metric and a KPI.

How do you chose KPIs. Look for the key metrics that:

  1. Relate to your business objective
  2. Provide context by being tracked over time
  3. Are based on legitimate data
  4. Are easy to understand
  5. Create meaning
  6. Can be acted upon
  7. Do it with the key stakeholders who are accountable

The video was created by Rutgers Business School Executive Education. I have had the privilege of serving on their MBA Faculty for 8 years. The Rutgers Business School is ranked #3 in the nation in MBA employment.

Rutgers Business School Executive Education offers Mini-MBA’s in Digital Marketing and Social Media Marketing. They occur offline in a week-long curriculum in an open classroom. Or online over 10 weeks at a pace that accounts for an executive’s busy work schedule. Digital Marketing is ranked among the Top 30 Best Value certificate programs.

Both consist of the same 10 modules that include: Digital and social strategy development, search engine optimization, paid search, content marketing, mobile marketing, video marketing, customer experience and measurement and ROI.

Either is going to up your game in fastest growing marketing channels, help advance your career or assist you in your own reinvention.

Does this video explain the difference between a metric and a KPI to you? Is your organization ready to put to use the KPIs that keep your business strategy on track?

 

 

Top 10 marketing KPIs every business needs to know 0

Posted on September 25, 2017 by Rob Petersen

KPIs (Key Performance Indicators) are measurable values that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets.  KPIs are the actionable scorecard that keeps business strategy on track.

Here’s a brief, video explanation on KPIs from Erica Olsen at On Strategy.

According to Peter Drucker, marketing and innovation are the two chief functions of any business. Marketing is the distinguishing, unique function of the business. The aim of marketing is to know the customer so well the product or service fits him and sells itself.

What are the right KPIs to evaluate marketing effectiveness. Here are 10 marketing KPIs every business needs to know.

1. REVENUE OR PROFITS: In most cases, KPIs are designed to follow the money. If your a sales driven company, booked revenue is the monetary metric that determines the business’ vitality and health. Profit is perhaps the most important monetary metric. Profit is revenue after all the expenses related to the manufacture, production and selling of products. Profits go to owners, shareholder or are reinvested in the company.  Marketing KPIs have to ladder up to either  revenue or profits to show their impact on the business and its ability to grow.

Marketing KPIs - Profits

2. CUSTOMER VALUE:Understanding customer value is by far the most important thing you can do to identify ways to grow your business. If you understand the value of your customers you can: 1) Determine which customers to invest in, 2) Identify new customers and markets to target, 3) Agree which product and service lines should be offered and 3) Change pricing and promote to extract more value. Customer Lifetime Value (CLV) is the metric that defines customer value. It can be an intimidating calculation to some. It has a defined formula and is a marketing KPI that is definitely worth knowing.

Marketing KPIs - customer lifetime value

3. COST PER ACQUISITION (CPA): With the knowledge of the value of a customer, the next marketing KPIs is how much does it cost to acquire a customer. Cost Per Acquisition or Cost Per Action is a primary metric for any marketing initiative. It is the cost for a visitor, prospect or lead to take a desired action or conversion. It is one of the key drivers in determining the impact of marketing.

Marketing KPIs - CPA

4. NEW AND RETURNING VISITORS:  If you’ve never compared the data for your new and returning website visitors, I suggest taking a stab at it. Reviewing the statistics about the different types of visitors to your site can help you answer questions like: 1) Are my visitors engaged? 2) Do my visitors keep coming back to me (my website) for more information? The primary place where new vs. returning visitors can be found is the Google Analytics of your website. Knowing the numbers and the ratio give you the primary information you need to know about growth possibilities for your business and where they are most likely to come from.

Marketing KPIs - New vs Returning Visitors

5. TRAFFIC SOURCES:  In Web analytics, including Google Analytics, traffic sources is a report that provides an overview of the different kinds of sources that send traffic to your web site. They include:

6. MARKETING QUALIFIED LEADS (MQL); A marketing qualified lead (MQL) is a prospect already in your lead-tracking system, who has expressed interest in buying your product and passes a set of lead qualifications in order to progress further down the funnel. Marketing qualified lead definitions are typically used by B2B companies to identify a stage in the buyer’s journey. For example, in order to become a marketing qualified lead a prospective customer may have to have a certain number of employees in their company, be in a certain vertical or industry, or have a certain revenue.

Marketing KPIs - Marketing Qualified Leads

7. CONVERSION RATE: The conversion rate is the percentage of users who take a desired action. The archetypical example of conversion rate is the percentage of website visitors who buy something on the site. Conversion rate optimization is important because it allows you to lower your customer acquisition costs by getting more value from the visitors and users you already have. By optimizing your conversion rate you can increase revenue per visitor, acquire more customers, and grow your business.

Marketing KPIs - Conversion Rate

8. RESPONSE TIME: The length of time it takes for a person in the system to react to a given stimulus or event. In any service business, response time plays a significant role in retaining customers.

Marketing KPIs - Response Time

9. AVERAGE ORDER VALUE: Average Order Value (AOV) is an ecommerce metric that measures the average total of every order placed with a merchant over a defined period of time. AOV is one of the most important metrics for online stores to be aware of, driving key business decisions such as advertising spend, store layout, and product pricing. Even though average order value is primarily used in ecommerce, it is a KPI worth knowing for any business.

Marketing KPIs - Average Order Value

RETURN ON MARKETING INVESTMENT (ROMI): Marketing ROI is one of the terms most commonly used to describe marketing success, sometimes referred to as the holy grail of marketing KPIs. The definition of the ROI calculation must be consistent with the financial definition to maintain credibility with finance. The formula in its simplest form is below.

Does your business measure these Marketing KPIs? Does your business need help figuring them out?

 

7 straightforward steps to measure and manage success 0

Posted on August 14, 2016 by Rob Petersen

measure and manage success

“If you can’t measure it, you can’t mange it.” – Peter Drucker

Management consultant, educator and author Peter Drucker, who is often associated with this quote, means you can’t know whether or not you are successful unless success is defined and tracked.

Without clear metrics for success, you’ll never quantify progress and be able to adjust your process to reach your goal. You’ll always be guessing.

How do you get there?

Here are 7 straightforward steps to measure and manage success with plenty of examples.

1. DEFINE WHAT SUCCESS LOOKS LIKE: Success is the achievement of an action within a specified period of time by a specified parameter. Begin with the end in mind. Success looks different based on the type of business and vision of its leadership, but it can’t measured if it can’t be articulated. Here are some examples.

  • Find new customers and get a larger market share than competitors
  • Improve closing ratio from 30 percent to 45 percent
  • Convert 10% of prospect into customers within a year
  • Reduce employee turnover by 25%
  • Earn a substantial return on investment for shareholders who risked their capital in the venture
  • Do ordinary things extraordinary well – Jim Rohn
  • Doing it for yourself and motivating others to work with you in bringing it about – Richard Branson

2. DECIDE WHAT TO MEASURE: “What gets measured gets done” is attributed to Peter Drucker, Tom Peters, Edwards Deming, Lord Kelvin and others. Somebody believes deciding what to measure achieve results. To decide, choose activities and services at the core of what you do and your biggest costs of doing business Think about how they will make your business successful or how they could be improved. Some examples of what to measure are:

  • Number of new leads, sign ups or subscriptions
  • Conversions of leads to sales
  • Sales from returning customers
  • Number of customer complaints
  • Number of returned items
  • Time it takes to fill an order
  • Percentage of incoming calls answered within 30 seconds

3. GET ON TOP OF FINANCIAL MEASURES: In order to achieve success, you need to know how it has to be understood financially. Cash flow is of fundamental importance and can be a particular concern for growing businesses. Most businesses target profits as the key financial metric. It’s important to know how to measure profitability. Key profitability measures to know are:

  • GROSS PROFIT MARGIN: How much money is made after direct costs of sales have been taken into account.
  • OPERATING MARGIN: How much does it cost for the business to run. Overheads are taken into account, but interest and tax payments are not. For this reason, it is also known as the EBIT (earnings before interest and taxes) margin.
  • NET PROFIT MARGIN: When all costs are taken into account, not just direct ones. So all overheads, as well as interest and tax payments, are included in the profit calculation.

4. SELECT KPIs: Key Performance Indicators (KPIs) are business metrics tied to targets. They are used to evaluate factors that are critical to success. KPIs are the actionable scorecard that keeps business strategy on track. KPIs are applicable to your growth cycle and identity your target audience considering their point of view. They are the measurements that matter. Some examples are:

  • Number of new accounts over a specific time period compared to past performance
  • New revenue measured against the money investing in new marketing campaigns
  • Sell-off of investory in a given year
  • Customer acquisition cost
  • Customer lifetime value
  • Sales by region
  • Employee turnover rate

5. LISTEN TO CUSTOMERS: Measurements are based on your needs but, if your needs include your customers, you won’t achieve success unless you listen to their needs. Consider their individuals need, what they think of your brand, your competition and what their future needs are. Some examples of measurements that show you’re listening to customers are:

  • Customer acquisition cost
  • Churn Rate
  • Net Promoter Score
  • Number of customer complaint
  • Time to resolution
  • Customer engagement
  • Annual customer value
  • Lifetime customer value

6. ASSESS EMPLOYEE PERFORMANCE: A company is only as good as the talent behind it. Consistently and accurately evaluating employee performance is essential not only to individual success, but to the overall success of an organization.

  • Employee turnover rate
  • Percentage of responses to open position
  • Employee satisfaction
  • Qualtity of work
  • Employee efficiency
  • Revenue from new ideas and innovation from employees

7. COMPARE AGAINST OTHER BUSINESSES: One of the best ways to keep your business operating successfully is by continually measuring and comparing its performance against competitor averages. Some basic but important measure of comparison include:

  • Sales
  • Market share
  • Channels of distribution
  • New products and/or product improvements
  • Website visits
  • Employee satisfaction

Are these steps straightforward enough for you? Is there anything else you would include? Does your business need help measuring and managing success.

7 KPI dashboards that are scorecards to success 0

Posted on December 06, 2015 by Rob Petersen

 

 

KPI Dashboard Executive

Key Performance Indicators (KPI) are measurable values that demonstrate how effectively a company is achieving key business objectives.

Organizations use KPIs to evaluate their success at reaching targeted goals. KPI dashboards are actionable scorecards to keep the business strategy on track.

Good KPI dashboards:

  • Relate to the business objective
  • Give a snapshot of the entire business
  • Are a finite number of metrics that all have targets relating to the business objective
  • Present the opportunity for further segmentation on a key metric
  • Deliver insights
  • Present business recommendations
  • Inspire action

What are examples? Here are 7 KPI dashboards that are scorecards to success.

MARKETING ROI

KPI Dashboards Marketing ROI

Return on Investment is one of the most sought after goals for any company. This dashboard from Klipfolio is a great example of marketing accountability to deliver new revenue and new customers through a new marketing campaign. It’s simple, clear and transparent. It gives an up to the minute snapshot of the key metrics that impact this business objective.

SALES

KPI Dashboards Sales

Sales are one of the objectives that KPI dashboards are often built around. This KPI dashboard from Find Examples does an excellent job of demonstrating the actionable nature of a KPI dashboard. By just looking at it, any sales or management team is able to see if the company is on track to deliver its objective; what tactics and working and who are the most likely opportunities. If the company in this example acts regularly on these results, it’s easy to see how much more likely they are to be successful.

NON-PROFIT

KPI Dashboards Non-Profit

This dashboard is for the Indianapolis Museum of Art from Avinash Kaushik. It provides not only a complete snapshot but shows the importance text can provide in a KPI dashboard. In this example, the metrics that are most important to the successful operation and growth of the museum are listed. But there is also the opportunity to provides comments, insights and recommendations through the text box. So the dashboard is a living tool that promotes action.

RESTAURANT BUSINESS

KPI Dashboards Restaurant Business

60% of restaurants fail in the first year according to Cornell University. It seems like the hospitality industry would benefit from KPI dashboards like this one that gives a great snapshot of sales, customer acquisition, cost of goods, menus, key stores and competitors’ pricing at a glance. This is a comprehensive look at a highly competitive industry.

WEBSITE

KPI Dashboards Website

This dashboard of a website’s performance gives all the vital data, a full analysis with trends, insights and recommendation. It provides great perspective while clearly presenting a point of view for improving performance.

GLOBAL PRODUCTS

KPI Dashboards Global Products

A company that has products available globally with different business performances in different parts of the world has specific global goals. Success involves market development, product mix or whether or not customers buy online or offline. This dashboard from Sharepoint gives executives a perspective and uses traffic lights as icons to highlight products doing well or needing attention.

C-SUITE KPI DASHBOARD

KPI Dashboards Executive

A clear picture of the data doesn’t mean there needs to be a lot of it. But enough to clearly make your point. You also have to tell people what to do with the data. This dashboard for Avinash Kaushik, Digital Marketing Evangelist at Google, is made for C-Suite presentations. It takes the key data findings and, in a text box, presents the insights, actions and financial implications. It’s complete, concise and delivers on one of most important criteria for creating KPIs – taking action.

Do these examples help explain the value of KPI dashboards? Do you see one that is relevant to your business? Does your company need help creating KPI dashboards for your business?

 

12 big business benefits of Customer Lifetime Value 0

Posted on October 18, 2015 by Rob Petersen

 

 

 

Customer Lifetime Value

  • 5% increase in customer retention increases profits by 25% to 95% (Harvard Business Review)
  • 6-7x more costly to acquire a new customer than retain a current one (Bain & Co.)
  • Just 42% of companies are able to measure Customer Lifetime Value (Econsultancy)

There are many reason why customer retention is important. Perhaps most important is the value of retained customers over time.

Customer Lifetime Value is the dollar value of a customer relationship based on the present value of the projected future cash flows from the relationship.

It pays to calculate Customer Lifetime Value. It’s one of the most important metrics for a business.

To show why, here are 12 big business benefits of Customer Lifetime Value.

  1. LARGEST BUSINESS ASSET: Customer Lifetime Value provides an exact figure for the company’s largest asset. The calculations enables you to follow the progress over time and to intervene if events start moving in the wrong direction.
  2. CUSTOMER SEGMENTATION: Customer Lifetime Value enables your business to classify different customer groups and different potential customer groups by long term profitability. So you can decide whether it’s worth it to change market strategy or not.
  3. EARLY WARNING SIGNS: Customer Lifetime Value can be used as an early warning system to detect defection rates. It identifies in which segments the problem originates so actions can be taken to correct the cause.
  4. COMPLAINT MANAGEMENT: If a customer complains about a serious problem, Customer Lifetime Value can help front-line employees decide what action to take immediately and how much to invest to solve the problem.
  5. WIN-BACK CUSTOMERS: A customer that a company wins back has a different Customer Lifetime Value before and after recovery (win-back). Often, second CLV is better than the first CLV.
  6. UP-SELL AND CROSS-SELL: Two fundamental tactics in any marketing program are to up-sell and cross-sell. But which one should to do? When? And to what segment? Customer Lifetime Value can give you a good idea of the return to expect to guide decisions and investments on up-sell and cross-sell.
  7. AUTOMATE INTERNAL PROCESSES: Ask a company what keeps them from maintaining better customer relationships, and their response will probably include something along the lines of “we don’t have enough time,” or “we’re too busy with daily tasks and processes.” Knowing Customer Lifetime Value can help a company determine if investments into Marketing Automation software are worthwhile.
  8. BRAND LOYALTY: Products and services may be easy for competitors to copy, but a company that is good at creating customer loyalty is less vulnerable to attacks from competitors. Loyalty is much more difficult to copy.
  9. BALANCE SHORT TERM RESULTS AND LONG-TERM GOALS: Customer Lifetime Value enables better decision making when having to weigh the competing needs of short-term profitability and longer term goals.
  10. QUANTIFY CUSTOMER SATISFACTION: Many businesses rely on a customer satisfaction scores to guide interactions and explain business results. Customer Lifetime Value puts an amount to the increase or decrease the customer satisfaction scores represents.
  11. LEAD GENERATION: Most CMOs really don’t know and even fewer CEOs know “what’s a lead worth”? When you know Customer Lifetime Value, you understand your lead-to-customer conversion rate and exactly how much a lead is worth. And how much you should be willing to spend on new leads.
  12. RETURN ON INVESTMENT (ROI): Any company has only limited resources. It is natural to want to use them for customers that bring them maximum profits. If you know the cumulative cash flow a particular customer, Customer Lifetime Value helps determine how much should go into retaining a customer to maximize ROI.

These benefits show just how valuable the calculation of Customer Lifetime Value can be. But, in the end, it is a calculation. To put the business building benefits of Customer Lifetime Value to work, people have to take action.

Do these benefits prove the value of Customer Lifetime Value to you. How would you put Customer Lifetime Value to work on your business? Does your company help calculating Customer Lifetime Value?

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