Measuring KPIs (Key Performance Indicators) is crucial for your business success. But to derive the best and quick results, these powerful tools need to be selected carefully. You also should know more about the tools, their function and how to use them. KPIs are considered to be crucial metrics, using which you can accomplish your business goals/objectives.
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Importance of KPIs
- Measure progress from time-to-time: You can track vital result indicators such as sales, revenue, locations, gross margin, employees, etc. You can also measure business progress towards strategy and long-term goals.
- Monitor company health: These are rather scorecards showcasing your company’s health. Monitor vital signs with a few powerful KPIs. There are four categories to be measured, namely, Revenue, Processes, customers and employees.
- Tackle opportunities or solve problems: Install several KPIs in your dashboard to provide you with relevant information as desired. In case, you witness decreasing sales, you can choose a few KPIs to change this scenario. It can be trade shows attended, appointments kept and outbound calls made, etc.
- Make necessary adjustments: The right indicators will inform you if you are missing your set targets. You can predict future occurrences and results. You can also know if you are moving on the right track.
- Analyze patterns: Measuring the same KPIs every quarter allows you to identify patterns in the numbers. This in turn can help improve your business. You will also be able to predict your future slowest quarter. Accordingly, you can carry out a company-wide training program or system update.
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Tips to select the right KPIs
Without using KPIs, you will be left guessing on your product performance. Some tips are provided below to choose the right Key Performance Indicators.
- Define business goals with regards to your product:
- Create measurable goals: Define your business goals concerning your product/service. Evaluate resulting data, so that you can take proper and timely actions. Establish realistic, measurable goals especially for young and brand-new products.
- Clarify Business objectives for your product: You need to know what business goals can be served by our product. In case, it generates direct revenue, then the latter will be the key indicator. If unsure about the goal, then identify how it benefits your organization and to invest in it. You can specify the goal by using tools.
- Avoid vanity metrics: Vanity metrics only enhances your product appearance and not its value. For example, take the download volume of an app. The number of downloads will specify its success. Rather than measuring downloads, it will be better to choose helpful metrics like referral rate or daily active usage.
- Use Ranges and Ratios: Quantify goals using ranges and ratios. You can state that revenue can be increased by a product by about 5-10 percent after its launch, within a year. It will be better than mentioning the new product needs to generate X revenue amount annually. In the case of over-ambitious goals, it should be recognized. Accordingly, adjust your line and target.
- Use Qualitative, Quantitative KPIs: Quantitative indicators like revenue or daily active users help measure the quantity of a product/service and not quality. It gathers statistically representative data. On the other hand, qualitative indicators like user feedback allow you to know why something has occurred. Hence, both the types when combined can provide a balanced view of your product performance. This way, you will also not lose your focus on crucial success aspects. These are the people who purchase, behind the numbers and use your product.
Therefore, getting to know the importance of KPIs can help you to choose the right KPIs.