Whether you’re just getting started in analytics or already have a comprehensive program in place, you’re bound to hear the term ‘Key Performance Indicators’ (KPIs) thrown around a lot.

Perhaps the most fundamental question for any marketer is: ‘What is the objective?’ Setting KPIs is an easy way to answer this question. Once you’ve established your goals and objectives, you can determine what metrics to use to measure your progress. The purpose of this blog post is to discuss key considerations for setting up and measuring KPIs online, with an emphasis on marketing analytics.

Marketing KPIs: Before You Begin

When it comes to online marketing, the first thing you should do is identify your target audience and segments. It’s essential to have a clear picture of who you’re addressing with your marketing campaigns and what they’re interested in. Take some time to think of questions to ask yourself to get the most out of your insights. Here are a few suggested questions:

• Who is my ideal customer?
• What is my ideal customer’s profile (demographics, psychographics, or digital history)?
• What motivates my ideal customer to buy?
• What would my ideal customer like me to offer?
• What are my competitors doing that I’m not?
• What do I need to do to become my ideal customer’s best friend?
• How do I want my customers to feel when they interact with my products or services?
• What do I need to do to make my customers love me?
• How do I want my customers to feel when they interact with my products or services?
• What do I need to do to make my customers love my products or services?
• Which marketing tactics and channel are my most effective and efficient?
• How can I measure the success of my tactic or channel?

How to Set Up Your Marketing KPIs

Once you’ve got your target audience and segments in mind, you can start to map out your strategy and objectives for the year. This is the perfect time to set up your key performance indicators or KPIs. Setting up your marketing KPIs is a multi-step process that involves five key steps:

• Determine the goal.
• Design the framework.
• Establish the metrics.
• Set the benchmark.
• Review the results.
• Update the goal and set new benchmarks.

Let’s take a closer look at each one.

Step one: Determine the goal.

The first step in the process of setting up your key performance indicators is to determine the goal you’ll use to track your progress. It’s essential to have a clear picture of what you’re aiming for and how you’ll measure your progress. If you’re new to setting KPIs, you might want to set a SMART goal (Specific, Measurable, Achievable, Realistic, and Timely).

SMART goals are highly effective as they ensure you define a clear picture of what you’re aiming for. They help you break down your goals into small, actionable chunks, which makes them very easy to manage. They also help you establish a benchmark to measure your progress. To learn more, read this guide on setting and using SMART goals.

Step two: Design the framework.

Your second step in the process of setting up your key performance indicators is to design the framework. This involves laying out the criteria you’ll use to measure your success. You want to be careful here as you don’t want to end up with a framework that’s too broad or too narrow. Your framework should be broad enough to cover all the metrics you’ll need to track, but you should also include sufficient detail so you can track each one accurately.

If you’ve never designed a framework for your key performance indicators, it can be a daunting task. The first step is to make a list of all the metrics you’ll need to track. It’s a good idea to make a note of which one you’ll use to evaluate your success at the end of each month.

Step three: Establish the metrics.

Your third step in the process of setting up your key performance indicators is to establish the metrics. Metrics are simply measurements used to determine your progress. Once you’ve outlined your framework, you can determine which metrics to use to track your key performance indicators. To start, you could use a classic set of metrics such as:

• Sales – how many customers did you acquire?
• Cost per acquisition (CPA) – how much did you spend on acquiring a specific customer?
• Retention – how many of your customers did you keep?
• Monthly revenue – how much money have you made this month?
• LTV (Loan to Value) – what is the estimated value of your customer base?
• Churn – how many of your customers did you lose this month?
• Net Revenue – how much money did you make after subtracting all your costs?
• ROI (Return on Investment) – what is the net profit (revenue – cost) as a percentage of the cost?
• CAC (Cost per action) – how much did you spend on one particular action (eg. lead generation, website traffic, etc.)?
• LTV (%) – what is the estimated value of your customer base as a percentage of the cost?
• Churn (%) – what is the estimated cost of your customer attrition?
• Net Profits (%) – what is the estimated net profit of your business as a percentage of the cost?
• CAC ($) – what was your cost per action?
• ARPR (Average revenue per regular customer) – what is the average amount of revenue a regular customer brings in? (Assuming no new customers join your team mid-year)
• Revenue growth (%) – what is your estimated annual revenue growth as a percentage of the previous year?
• Online Conversions (%) – what is your estimated website traffic increase as a percentage of the previous year?
• Booking Count (incoming calls) – how many bookings have you received via phone calls or emails from prospective customers?

As you can see above, you don’t need to track everything. Pick three or four metrics that you’ll use to evaluate your progress. Be careful not to choose too many metrics or your framework could become too complicated. If you’re feeling overwhelmed, it’s a good idea to take a step back and re-evaluate your objective. If none of the metrics above seem to fit your business, you can consider using a different set of metrics.

Step four: Set the benchmark.

The fourth step in the process of setting up your key performance indicators is to set the benchmark. Benchmarks allow you to measure your progress against a pre-determined standard, which in turn lets you determine if you’ve fulfilled your objective. Set a benchmark and then track your progress against it. Your benchmark should be based on the goal you set in Step one, but you should also take into consideration what you’ll need to track. For example, if your goal is to increase website traffic by 10%, then your benchmark should be set at this level of website traffic.

Step five: Review the results.

The fifth and final step in the process of setting up your key performance indicators is to review your results. Once you’ve set your benchmark, you can track your progress against it. To start, you could use the metrics you set in Step three to review your results. It’s essential to look at the big picture rather than just the numbers, so be sure to review all the metrics you’ll need for this step.

You’ll want to look at your benchmarks objectively and with a critical eye. Are you achieving the results you set out to achieve? Did you under-perform or over-perform? Is there anything you could do better?