How to use KPIs and metrics to boost business success
If you’re looking to improve outcomes for your business, using key performance indicators (KPIs) and metrics is a great way to enhance your strategy.
KPIs are measurable objectives that provide directional insight on your company’s progress, while metrics are used to measure the performance of processes, programs or activities that support the achievement of the KPI.
When used effectively, KPIs and metrics can help you improve business outcomes by highlighting areas where you need to make changes or improvements as well as where you are succeeding.
For example, if you notice that your customer acquisition costs are increasing, you can use KPI and metrics to help you determine where those costs are coming from and how to reduce them.
To get the most out of KPIs and metrics, it’s vital first to identify the key goals of your business and then align your KPIs and metrics with those goals. Once you have a good understanding of your goals, you can start to develop specific metrics that will help you track and improve your progress.
So how can you actually go about doing this? Let’s look at a few tips for using KPIs and metrics to help improve performance on your most important goals and objectives.
What are your business goals, and how do metrics and KPIs support those goals?
Whether you’re a small-business owner, entrepreneur, or work for a large corporation, setting business goals offers direction and focus for your day-to-day activities.
Unfortunately, many people find that they don’t take the time to properly set their objectives. If this is true for you, it’s time to start putting some structure into your goal setting.
One way to do this is by using key performance indicators (KPIs). KPIs are measurable objectives that provide directional insight on your company’s progress. They can help you track whether you’re making the desired progress towards your goals and can also help you determine areas that need improvement.
For KPIs to be effective, it’s essential to make sure that they are aligned with your business goals. So before you even start developing specific KPIs, take the time to define and understand your objectives.
Once you understand your goals, you can develop specific metrics that will help you track and improve your progress.
One way to approach this is by using the SMART goal setting model:
- Specific
- Measurable
- Attainable/Achievable
- Relevant
- Time-bound
For example, if one of your business goals is to increase revenue by 20%, you could set a KPI of generating $120,000 per month in revenue.
Once you have established your KPIs and goals, it’s crucial to track your progress regularly. This will help you see how well your strategies are working and what adjustments need to be made as you move forward.
One of the most effective ways to track your progress is to use a dashboard like those that can be built in modern BI platforms like Domo. A dashboard can provide a high-level overview of your business performance, including how well you’re meeting your KPIs and goals. This can help you quickly identify areas of concern or success and make the necessary changes in order to continue moving forward.
How can metrics help me improve my business outcomes?
While KPIs provide a high-level view of your progress, metrics are used to measure the performance of processes, programs, or activities that support the achievement of the KPI.
In other words, metrics help you drill down and determine where exactly you need to make changes or improvements in order to achieve your goals. Tools like Domo can make this exercise of drilling down deeper to answer your business questions intuitive.
For example, if you’re trying to reduce customer acquisition costs, you would use metrics to measure and track the performance of your various customer acquisition channels. This could include things such as the number of leads generated from each channel, conversion rates, average sales prices, and more.
By tracking and measuring the performance of your customer acquisition channels, you can determine which ones are most effective and make necessary adjustments to improve the performance of those channels.
In order to effectively use metrics, it’s essential to understand the concepts of attribution and causality. Attribution refers to how you assign credit or blame for a particular outcome, while causality is the relationship between two variables.
For example, if you’re running a marketing campaign and see that it resulted in a 10% increase in revenue, you would want to understand what caused that increase and whether or not the campaign was responsible.
This is where causality comes into play–while your marketing effort may have contributed to the result, there could be other factors such as changes in customer demographics or spending habits that had an impact on revenue as well.
In order to avoid mistakes in measurement and attribution, make sure that the metrics you use are aligned with your objectives and KPIs. This will help ensure that you’re not simply tracking irrelevant information that doesn’t provide any real insight into how well you’re achieving your goals or improving business performance.
Sometimes it is helpful to see some examples of KPIs being used by other similar organizations. Domo’s App Store includes a catalog of hundreds of KPIs and examples of dashboards that can act as a great starting point of reference.
How can KPIs and metrics improve my business performance?
While KPIs and metrics are essential for providing directional insight on your business’s progress, they offer different benefits that can be applied to achieve greater results.
KPIs focus more on the top level or high-level view of your company’s progress, while metrics drill down into the details to provide a deeper understanding of what’s happening. This can be extremely valuable when it comes to making decisions about where to focus your efforts to improve business outcomes.
In addition, KPIs can help you track overall progress and ensure that you’re on track to reach your goals. They can also help you identify areas of success as well as potential problems so that you can take corrective action as needed.
On the other hand, metrics can help you understand the underlying causes of problems and identify areas for improvement. By understanding how various factors are related, you can make better decisions about allocating your resources to achieve the best results.
When used together, KPIs and metrics provide an accurate picture of your business’s performance. This combined with an up to date tracking dashboard, can empower you to quickly identify problem areas, make changes to improve performance, and achieve greater success in the future.
Conclusion
In order to be successful, you will need to use KPIs and metrics together to direct your business’ performance and achieve greater results.
By applying these principles and using a tool like Domo to monitor and track your progress and performance, you can adapt and make changes as needed in order to reach the goals that matter most.