Choosing the Right KPIs for better Decision-Making
Working with goal management and KPI (key performance indicator) reporting is essential for improving the performance and results of your online business. But how should goals be set? And how do you choose the most important KPIs?
In e-commerce, data floods in from every direction – customer service, Google Analytics, ads, and reviews. As an e-commerce manager, online marketing coordinator, or anyone overseeing online performance and marketing budgets, you’re likely swamped with reports measuring everything from clicks to customer sentiment.
With so much data, it’s easy to lose track of what matters. How do you know what’s working? Which metrics deserve your focus?
This is where goal management and KPI reporting come in. By identifying the most critical data, you gain clarity on what’s driving success – and what’s holding you back.
To reach your goals, you need clear objectives, reliable metrics, and a strategic dashboard. Your goals are the destination, objectives are the waypoints, and KPIs are the instruments that keep you on course.
But here’s the challenge: many businesses choose KPIs that seem important but lack a connection to real objectives. As a result, they track metrics that lead them in circles.
Building Your Cockpit
To truly benefit from KPI reporting, start with your business goals. Are you aiming to increase revenue, strengthen brand loyalty, or improve processes? Once you know where you want to go, you can define objectives and select KPIs that serve as true indicators of progress.
Imagine your business as an aircraft. Pilots rely on their cockpit instruments to make informed decisions in real-time. Similarly, your digital business needs a well-constructed cockpit – a strategic dashboard that shows, at a glance, whether you’re soaring or stalling.
But a cockpit cluttered with irrelevant dials is more dangerous than helpful. That’s why choosing the right KPIs is essential. The right KPIs provide clarity and insight. They highlight what’s working and, equally important, what isn’t.
WHAT’S A GOOD KPI?
A good KPI is like a trustworthy co-pilot. It supports your business objectives, prompts action, and is easy to understand. Let’s break it down:
Every KPI should tie directly to your broader goals. If your goal is to increase revenue, KPIs like “conversion rate” or “average order value” make sense. If it doesn’t align with a goal, it’s just a vanity metric.
KPIs should be agreed upon by decision-makers. When management is involved, KPIs are more likely to lead to action rather than gathering dust in a report.
A good KPI isn’t just a number; it’s a call to action. If a KPI shows poor performance, it should spark a conversation: “What’s causing this? What can we change?”
KPIs should be based on reliable, measurable data. Gut feelings won’t help you steer through the storm.
Everyone on the team should understand the KPI measures and why it matters. Simplicity keeps everyone aligned.
SPOT THE DIFFERENCE BETWEEN KPIS AND MEASUREMENT POINTS
KPIs should be distinguished from measurement points. Many people confuse KPIs with measurement points, which makes it all the more difficult to build a well-defined cockpit.
Broadly speaking, while a KPI indicates whether an organisation is on track to achieve its goals, measurement points explain why things are going well or poorly. A KPI shows whether action is needed, while a measurement point indicates what needs to be addressed.
For example, if your KPI is “conversion rate,” measurement points might include “page load time,” “bounce rate,” or “purchase funnel performance.” The KPI tells you there’s a problem; the measurement points help you diagnose it.
HOW DO YOU CHOOSE THE RIGHT KPIs?
Selecting the right KPIs begins with defining clear business goals. Let’s break it down with some examples:
You could break this goal down into two objectives:
Objective 1: Improve Conversion Rate
KPI: Conversion Rate (e.g., percentage of website visitors who make a purchase
Measurement Points: Page load time, bounce rate, cart abandonment rate and checkout process efficiency.
Objective 2: Increase Average Order Value (AOV)
KPI: Average Order Value (e.g., average spend per transaction)
Measurement Points: Items per transaction, upsell and cross-sell rates, discount usage, and product bundling performance.
The objective of this goal could be to Boost Customer Retention.
KPI: Customer Retention Rate
Measurement Points: Time between purchases, Net Promoter Score (NPS), email engagement rate, and repeat purchase frequency
The objective of this goal could be to Optimise Internal Processes.
KPI: Order Fulfilment Time
Measurement Points: Picking and packing time, inventory accuracy rate, shipping delay rate, and order error rate
The Journey to Clarity and Success
Choosing the right KPIs isn’t just about metrics – it’s about clarity, strategy, and action. By aligning your goals with meaningful KPIs, you’re equipping your business with the tools to navigate confidently, optimise performance, and achieve success.
Need help defining your KPIs or optimising your strategy?
She’ll help you explore how you can set better goals and choose the right KPIs to drive your business forward.
