Hack94.Use Key Performance Indicators


Hack 94. Use Key Performance Indicators

Key performance indicators are a powerful way to present complex information that works to maximize the use of web measurement data within your organization.

A key performance indicator (KPI) is any ratio that summarizes two or more important measurements and is tied directly to your business objectives [Hack #38]. Examples include ratios like your order conversion rate (orders divided by visits) or the average number of page views per visit: numbers that, when they change significantly, prompt someone to pick up the phone, send an email, instant message, or walk down the hall and say, "Something is going on; we need to look into this more deeply right away!" The use of key performance indicators is a powerful and advanced strategy that can dramatically increase your ability to get executive buy-in for your metrics reporting strategy [Hack #91].

A handful of really, truly useful key performance indicators is listed in Table 7-1. These are the kinds of useful ratios that are presented on a daily basis to captains of industry like Michael Dell, Jeffery Bezos, and Meg Whitman: CEOs who clearly get the power of the Internet and understand that every minute counts in an increasingly competitive world.

Table 7-1. Really, truly useful key performance indicators

Order conversion rate

Buyer conversion rate

Cart conversion rate

Checkout start rate

Revenue per visit

Revenue per visitor

Average order value

Visits per visitor

Page views per visit

Percent committed visitors

Lead conversion rate

Home page bailout rate

Average number of items per purchase

Average time spent on site

Percent file take


While Table 7-1 provides a handful of examples, there are hundreds of other potentially valuable measures. Your central challenge is to figure out which ones are best for your business. Here are some recommendations to consider:


Refer back to your business objectives

Any ratio that speaks directly to your company's business objectives [Hack #38] and will drive action is a good KPI, as are any ratios that are direct measurements of key activities associated with your business goals.


Figure out which indicators are really "key"

George Orwell once wrote that "all numbers are created equal, but some are more equal than others" (or something like that); clearly Mr. Orwell was a web measurement guru in his spare time. While the KPIs most valuable to specific business models are covered later in this chapter, determining which numbers are "more equal than others" is a great place to start. In general, any number or ratio that senior managers ask about on a regular basis should be considered important.


Make sure your indicators promote action

The best KPIs are those that, when people look at them and realize they've gone down from week to week, make people freak out and call meetings. The numbers that make people the most nervous are the best candidates, always. Conversely, if you're thinking about a number but cannot think of any action you would take if that number absolutely tanks, set that number aside.

When in doubt, simply consult the hacks describing specific key performance indicators for online retail [Hack #96], advertising and content [Hack #97], customer support [Hack #98], and lead generation [Hack #99].

7.5.1. Best Practices for Defining Key Performance Indicators

Assuming you're still nodding your head and you're thinking to yourself, "yeah, I need to make up some KPIs right away," here are a handful of best practices that you should follow.

7.5.1.1 Use KPIs to drive action.

The most important thing any key performance indicator does is get someone to take a closer look at your visitor's behavior. Since you'll be using KPIs to compare data day to day or week to week, any time you see a strong decrease or a surprising increase, you need to be asking yourself, "why did that happen?" and, "what impact will that change have on my business?" Make sure that you do everything in your power to highlight significant changes, using colors, fonts, and in-your-face warning messages when necessary (Figure 7-5).

Figure 7-5. Key performance indicator worksheet


7.5.1.2 Present KPIs visually whenever possible.

You should give serious consideration to how you present the information, and make an attempt to, well, make it interesting. Strange as it sounds, overburdened senior executives often respond to visual representations that present complex information in a simple, effective format. Some analytics vendors allow you to present KPIs using tachometers, thermometers, trended graphs, and the like, as illustrated in Figure 7-6.

7.5.2. Use the language of the business to increase familiarity.

Another nice benefit of using key performance indicators is that you're able to use your own words to describe the numbers, not the words used in your measurement application. It sounds simple, but this can be very important; you don't want to force people inside your organization to learn new names for ideas they're already familiar with. For example, if people are familiar with "average sale value" (ASV) not "average sale price" (ASP) use average sale value in your report. Familiarity with the data lowers the barrier to understanding and use.

Figure 7-6. KPI dashboard


7.5.2.1 Explain the how and why of KPIs.

Since the use of KPIs is pretty advanced, many of the folks you provide them to will be unfamiliar and will require further explanation. Two simple things you can do to help are to provide personalized training and a glossary with every KPI report. The training will allow folks to ask questions (and help you determine whether they get it), and the glossary will save you time because these folks will have something to refer to (other than you) if they forget what you told them.

While it will take a little extra work to build KPIs and get them implemented into your reporting program, experience shows it's well worth it. Everything you do to make web measurement data more palatable helps. Bymaximizing the information content and presentation of the numbers you provide, you can dramatically increase people's interest and use of the data.



    Web Site Measurement Hacks
    Web Site Measurement Hacks: Tips & Tools to Help Optimize Your Online Business
    ISBN: 0596009887
    EAN: 2147483647
    Year: 2005
    Pages: 157

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