The question that every digital marketing professional is used to hearing over and over is, “What’s your ROI?” In the world of key performance indicators (KPIs) for team leaders, this question is important; it is often asked to prove how effective marketing efforts are and whether money is being well spent. This is when digital marketing teams often look to KPIs for help. However, many misconceptions about KPIs lead to them being misused. So, making sure you understand what KPIs are, their benefits, how to track them properly, and the common mistakes companies make when using them is vital.
What Is a KPI? Why Are KPIs Important?
A KPI is a quantifiable measure that is used to evaluate the success of a company’s performance. KPIs can measure various areas, including marketing, sales, customer service, and operations. Due to their ability to fit into many different aspects of your business and track performance, KPIs are essential for your company’s success. They must be specific, measurable, achievable, relevant, and timebound to be successful.
There are two types of KPIs: leading and lagging. Leading indicators are measures that predict future success while lagging indicators measure past performance. For example, a leading indicator for a marketing campaign might be the number of new leads generated, while a lagging indicator would be the total sales revenue generated.
What KPIs Should You Be Tracking?
Consulting with other team members helps determine how many KPIs you should have and which are most relevant/valuable for your business. They will likely have valuable insights into which indicators team leaders find most helpful in measuring the success of business goals.
The following are some common KPIs that your team should consider and how they can be used to measure success:
- Website traffic: This KPI measures the number of visitors to your website. It’s a good indicator of interest in your products or services and can be used to track the effectiveness of your integrated marketing campaigns. You will need to set up Google Analytics or another similar tool to track website traffic. You can track the number of unique visitors to your site over time to see if your web traffic is increasing. If you see an uptick in traffic directly after launching a new marketing campaign, it could indicate that the campaign helped to drive this traffic. To 100% validate that the traffic came directly from your marketing campaign, you’ll want to use UTM codes or custom redirect links, which track the source of the traffic.
- Leads generated: This KPI measures the number of new leads your marketing efforts have converted into your sales pipeline. This is often one of the most highly coveted KPIs by sales teams as it directly impacts their ability to close new business deals. To track leads generated, you’ll need to set up a system that captures lead information, such as a contact form on your website or a CRM (customer relationship management) system. Once you have this system in place, you can start tracking the new leads generated from the various marketing channels you’re using (email marketing, social media, or paid advertising).
- Customer acquisition costs: This KPI measures how much it costs to acquire a new customer. This is an important metric to track because it can help you determine whether your marketing efforts are profitable. To calculate your customer acquisition costs, divide your total marketing expenses by the number of new customers you acquired. For example, if you spent $1,000 on marketing last month and gained 10 new customers, your customer acquisition cost would be $100. Comparing your customer acquisition costs to the lifetime revenue generated from a customer helps you to determine whether your marketing efforts are worth the investment.
Common Mistakes Companies Make with KPIs
While creating KPIs can be extremely helpful in measuring your business’s success, companies make some common mistakes when selecting and tracking them.
- Failing to align KPIs with business goals: It’s important to ensure the KPIs you’re tracking are relevant to the specific goals that you’re trying to achieve. For example, if you’re trying to increase sales revenue, tracking website traffic might not be the most relevant KPI. Your website generating 50,000 unique visitors per month that don’t purchase anything from you would be of little help to your sales revenue goal. Make sure that the KPIs you’re tracking will give you relevant insights into whether you’re achieving your desired results.
- Tracking too many company KPIs: It’s essential to focus on setting KPIs most relevant to your business goals. Tracking too many KPIs can be overwhelming and challenging to identify which ones are important. Stick to tracking the KPIs that will give you the most insights into whether or not your business is on track to achieve its goals.
- Failing to report KPIs over time: To get accurate insights, you need to report KPIs regularly, such as daily or weekly (it’s not enough to report monthly or quarterly). This will help you identify trends and patterns that you might not have otherwise noticed. It’s also important to report KPIs over time to compare your results from one period to another. This helps you see whether your marketing efforts are yielding results. For example, if you see that your website traffic has increased by 50% over the past month, but your sales revenue has only increased by 10%, you know that your marketing strategy needs some modifications.
By avoiding these common KPI mistakes, you can ensure that the KPIs you’re tracking are the right ones to accurately measure your business’s success. If you need help selecting or monitoring KPIs, contact the digital marketing gurus of Zero Gravity Marketing. We can completely manage your digital marketing campaigns and identify the strongest KPIs to track so you can focus on running your business and achieving your growth goals.