What are KPIs and Why You Should Pay Attention to Them

If you want to know how your business is doing, you need to know your key performance indicators, or KPIs.

This is easier said than understood, as the term KPIs has become so commonplace it’s meaning has been lost.

So let me use an example that’s close to home for everybody.

Your car dashboard is actually a KPI dashboard. If you’re a diligent car owner you track your car’s:

RPMs
Gas mileage
Temperature and
Speed limit

For example, your 16 year old son may have just gotten his driver’s license, and he’s using your car. But you’ve noticed every time he brings the car back the gasoline gauge has gone down half a tank. There’s a KPI that worries you.

How is it that your son is using up half a tank of gas every time he drives himself to soccer practice or goes to visit his friends?

So you decide to driver with him one day, and notice how he accelerates when the light turns green. The RPM dial goes all the way up….his foot is really heavy on the accelerator.

You notice also that he’s regularly driving at 5-10 miles per hour above the speed limit.

Finally, you notice the gas mileage is way below what it is when you drive the car.

Those are three KPIs you’ve noticed that show you that your son is consuming too much gas every time he drives.

So what do you do, take away the car keys from your son? No, you teach him how to monitor the KPIs, and how to drive at an appropriate RPMs, speed limit and how to keep the gas mileage down.

Monitor your Business KPIs to Ensure the Health of your Business

As online marketers, you can do the same: track the key figures that show how healthy your business is.

This works especially well if you’ve already had some sort of track record. In other words, you’re not just starting out in business.

If you have Google Analytics set up to measure not only traffic, but conversion funnels, you have everything you need to track your KPIs.

But what are the KPIs you need to track?

Five KPIs Online Marketers Should Track

We've identified five core key performance indicators you should track to let you know how your business is doing. These KPIs are important to know a they relate to each other, and not as stand-alone figures.

When you compare the numbers from each KPI to each other, you can tweak each stage of your business to improve your efficiency.

By efficiency, I mean doing more with less. For example, if you find that it takes you 100,000 site visits to close $100 in sales, your business is not very efficient. You probably want to reduce the number of website visits to sales.

The five KPIs you should track and compare are:

Traffic
Time on Site
Page Views
Intermediate Conversions
Sales

Traffic

Traffic is the most basic metric you can measure – but many marketers get caught up in their traffic numbers, to the exclusion of everything else.

The most important part about traffic is as it relates to conversion. Taking my example above, does it take you 100,000 visitors to close $100 in sales? If all you’re getting is 2,o00 visitors per month, you’ll only make $100 every 50 months. That’s a recipe for failure.

If that’s the case, then you’re either attracting the wrong traffic, or you’re terrible at engaging and converting prospects, or both.

Keep traffic in mind as it relates to other metrics, and don’t get caught up in traffic – focus on the other areas of your business.

Time on Site

A good indicator your landing page or website is on the right track is if your visitors are engaged with your content. That’s where time on site comes in handy.

Google Analytics provides this as part of the “Audience” section, “Behavior” tab, “Engagement” detail. They break it down by 1-10 seconds on site, 11-30 seconds, 31-60, and so on.

If most of your visitors are spending less than 10 seconds on your site, your engagement is low.

The more your site visitors engage with your content, the more time they spend on your site, the more likely they are to convert into prospects turn into customers.

Page Views

Page Views is a tricky KPI. Don’t focus on how many pages your visitors are consuming, but which pages.

If you've had your site up for any length of time, you’ll probably get a pretty good idea which pages your visitors who convert to customers visit before buying from you.

Focus on the path they take to get to your conversion or sales page.

In Google Analytics, look at “Site Content.” If you find that not enough visitors are consuming the content that usually leads to conversions, maybe you need to change something on your website. Maybe you need to feature “related content” sidebars more prominently. Maybe you need to remove other calls-to-action that are distracting your customers.

Intermediate Conversions

By intermediate conversions I’m referring to email subscriptions. In a B2B sales process, or situations where the price tag is fairly high or there’s a long sales cycle, getting somebody to subscribe to your email newsletter is a good indicator of future sales success.

Set up conversion goals in the Google Analytics “Conversions” section. Focus on improving your conversion rates so it takes less traffic to drive intermediate conversions, or you convert more for the same amount of traffic.

Sales

Sales is the ultimate KPI. If you’re not making enough to cover your marketing costs, that KPI is a glaring red flag.

But you can also look at your sales figures and compare them to every other KPI you've been measuring. So for example:

Sales divided by traffic: this gives you your conversion rate
Sales divided by time on site: shows you how much time on your site you should be striving for
Sales divided by and compared to particular page views: this is not a straight mathematical formula – you also have to look at the qualitative part of the picture. Which page views results in sales
Sales divided by intermediate conversions: do you get more sales from email newsletter subscribers, or more sales from those who visit your website cold from Google or other sources?

What next?

Focus on KPIs can tell you whether your business is healthy, and can tell you what you need to tweak in order to increase your business efficiency.

Don’t’ just focus on traffic. Look at traffic quality, and what content you’re providing site visitors.

Is your content engaging them? Are they staying for a while, or are they hitting the back button as soon as they get to your site?

Are they consuming the right content? How can you improve your visitor’s flow through the right content?

Are they subscribing to your newsletter? How do newsletter subscriptions affect sales?

Finally, what are your sales? Are you spending too much time driving traffic for miserable sales numbers, or are you efficient at driving high sales numbers from very little traffic?

KPIs can give you the answers to all these.