KPI Meaning


The KPI - key performance indicators - are an important part of the information needed to determine and explain how a company is making progress toward its business and marketing goals

Basic KPI definition

A key performance indicator - KPI - is a measurable measure that a company uses to determine how well it meets the set operational and strategic goals.

This means that different organizations have different KPIs, depending on their respective performance criteria & priorities. At the same time, the indicators usually follow industry standards.

There is a subtle difference between key performance indicators and marketing statistics. An important point to remember is that KPIs are marketing statistics, but not all marketing statistics are KPIs. A company needs to know how to determine which marketing statistics qualify as their most important performance indicators. These indicators don't necessarily have to be financial, but are important when steering marketing vehicles for management. Without these indicators and the guidelines they provide to companies, it's almost impossible for them to reach their full potential.

Characteristics of KPIs

- Quantitative: They can be presented in the form of numbers.
- Practical: They integrate well with current business processes.
- Directional: They help determine if a company gets better.
- Actionable: They can be put into practice to bring about the desired change.

A key performance indicator must be based on legitimate data and provide a context that reflects the business objectives. They must be defined in such a way that factors outside the control of a company can't impede their implementation. Another important factor is that they have a specific timetable that's subdivided into key checkpoints.

Examples of Key Performance Indicators

The KPI of an organization isn't the same as the goal. For example, a school may want all its students to complete a course, but use the dropout rate as a KPI to determine their position. On the other hand, a company can use the percentage of income it receives from returning customers as its KPI.

Other examples of KPIs for companies are:

- The status of existing customers.
- New customers they have acquired.
- Customer exhaustion rate.
- Segment customers based on profitability or demographic data.
- Waiting time for customer orders.
- The length of the stockouts.

Choose KPIs

Companies must take a number of steps before choosing the best KPIs, including:

- Clearly defined business processes.
- Set requirements for business processes.
- Have qualitative and quantitative results measurements.
- Determine variances and adjust processes to achieve their short-term goals.

When choosing the right key performance indicators, a company should begin by determining the factors that management uses in managing the company. You must then examine and identify whether these factors help to assess the company's progress against the strategies listed. Do they also allow those who read the reports to make similar assessments from outside?

Although industry standards are important, companies don't necessarily have to choose comparable KPIs for their business colleagues. What is more important is how relevant the indicators are for the company or its unit / division.

There is no specific number of KPIs that a company needs. In general, the number can be between four and ten for many types of companies and they must be crucial to the success of the company. Remember: nothing is important if everything is important. Companies must also regularly review their objectives and strategies and make the necessary adjustments to their key performance indicators.

Key performance indicators are important for a company because they help focus on common goals and ensure that those goals stay aligned within the organization. This focus will help a company stay ahead of its task and work on meaningful projects that help to achieve goals faster.

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