How do the key performance indicators for KPIs work

KPI

definition

KPIs or Key Performance Indicators are key figures that are used to track and analyze factors that are considered to be decisive for the success of a measure or an entire organization. The metrics focus on the business processes and functions that each organization believes are most important to measuring progress in achieving strategic and performance goals.

What are KPIs used for?

In addition to identifying business successes or problems based on measurements of the current and historical performance of companies, key performance indicators can also indicate future results by giving early warning of potential problems. The indicators can, for example, provide information on how to maximize the return on investment or point out necessary measures for search engine optimization. With this information, business operations or search engine optimization can be controlled more proactively and competitive advantages can be achieved over less data-oriented competitors.

Which key performance indicators are used can vary from organization to organization depending on the priorities set. While the reject rate per production lot is one of the most important key figures for a manufacturing company, the click through rate (CTR) is more important for an online shop. Even direct competitors in an industry are likely to monitor various KPIs tailored to their individual business strategies and management philosophies.

Types of KPIs

A distinction is made between quantitative KPIs, which have a numerical basis, and qualitative KPIs, which are more abstract and more open to interpretation. The assessment of the user experience with a website is one of the qualitative indicators, for example, as there is a certain scope for interpretation and no direct key figures can be measured. The CTR, on the other hand, is a quantitative key figure based on exact measured values.

Important steps in setting and using KPIs

When defining and using KPIs, it is important that the goals that are to be achieved with a website, an SEO measure or on social media are clearly defined. Metrics that can be used to measure global goals are particularly important. The greater the influence of certain activities and measures on the achievement of the defined goals, the more relevant the underlying metric is. The SMART formula has proven itself to distinguish relevant KPIs from subordinate performance indicators. With SMART, relevant KPIs are defined as follows:

Figure: SMART formula for relevant KPIs, author: Seobility

The most important performance indicators in relation to search engine optimization shed light on, for example, how well a website is developing and how successful the SEO measures are. Without such key performance indicators, it is difficult to meaningfully evaluate the impact of measures and then make changes to address performance issues.

What are the risks associated with using KPIs?

Key figures only make sense if they are tailored to the strategy and influence strategic decisions. When KPIs are not tied to a company's goals, vast amounts of time and money are wasted collecting information that ultimately has no value in achieving the goals.

In addition, there is often a discrepancy between the questions of whether something can be measured and whether it should be measured. Therefore, another mistake that is often made when using KPIs is to measure all metrics that are easy to measure - regardless of whether the indicators are actually goal-oriented and practical. In addition, it is often assumed that a lot of information is better than no information. In fact, too much information can be just as useless as too little. When determining the KPIs, a dynamic of its own often develops, which leads to an escalating system of indicators with more and more KPIs. The value of too many key figures is at least questionable, but recording and evaluating them is very time-consuming and costly.

Another common mistake when applying KPIs is that no one really analyzes the data being collected to extract relevant insights. In addition, once defined KPIs are often never questioned. It is not checked whether they remain relevant, are linked to the strategy or help to answer critical questions. However, it is important to ensure that the correct data is being collected and that a meaningful amount of data is being collected. Whenever a company's strategy or priorities change, the key performance indicators must be checked and updated if necessary. This is the only way to ensure that only what really needs to be measured is measured and that the indicators remain relevant and are aligned with the new strategy.

Key figures for search engine optimization and online marketing

Below are some sample key performance indicators that are relevant for the areas of search engine optimization and online marketing:

  • Click Through Rate (CTR): The click through rate is the percentage of users who click on a specific link in relation to the total number of users who are shown a page, an e-mail or an advertising banner. The CTR is used to measure the success of an online advertising campaign for a specific website, as well as the effectiveness of email campaigns.
  • Conversion rate: The conversion rate indicates the percentage of visitors to a website who took a desired action - e.g. a purchase, a request for information, etc. - and is therefore an important key figure for online shops, among other things.
  • Bounce rate: The bounce rate indicates the percentage of visitors to a website who leave the page again without moving to other sub-pages of the domain or performing further actions. A high bounce rate is an indicator of poor usability.
  • Organic Visits: The number of organic visits is one of the key figures that can only be influenced indirectly and indicates how many visitors came to a website via the organic search results on Google.

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