How do you decide on which KPIs to monitor?
With so much influencing a customer’s interactions/buying decisions, it can be difficult to know which KPIs are adding value and which are just adding nice to know information.
Vanity KPIs vs Performance KPIs
In my experience KPIs can broadly fall into two categories. I like to refer to them as vanity and performance KPIs. But the groupings are not as clear cut as you might think.
Some obvious Vanity KPIs could be the number of likes you get on a post, number of comments or number of followers on Social Media.
Some less obvious ones could be sales, email opens or newsletter sign-ups. Let me explain why.
If you have a dress that has taken £100k. Your highest cash driver. But 75% of those sales were driven by heavy discounts, is that dress better or worse than another dress which took £80k sales, with only 25% of sales driven by heavy discounts?
In this example, sales becomes the vanity KPI. As great as it is to take £100k sales. That £100k dress would not have driven as much profit as the £80k dress. Because it had a significantly higher proportion of sales at a reduced price.
Vanity and Performance KPIs go hand in hand
For every Performance KPI there are, typically, two other Vanity KPIs. Email opens is the perfect example of this. An email is sent to the database of 60k customers and it was opened by 15k of the recipients. The performance KPI in this is Open Rate (number of opens/number of emails sent).
I like to think of Performance KPIs as helping to even out anomalies. Make the big number and smaller number more easily comparable. Whereas Vanity KPIs help to increase the likelihood of achieving the overall goal.
In this example the more people in the newsletter database increases the number of potential opens. The open rate let’s you know how well that email did at achieving the goal.
Alone they are just numbers that are nice to know. But together they can point you in a direction of what can be done to improve performance.
Keep your KPIs flexible
Too much of anything isn’t good for you. And it’s the same for KPIs. KPIs will take on different roles throughout the sales cycle. So it’s important not be too rigid, otherwise you might realise the point you needed to shift gears a little too late.
Taking the dress example we discussed at the beginning. At some point the most important KPI will have been to drive sales. Maybe because of this, no one spotted that there was one dress which wasn’t selling. By the time they did it was too late to protect the FP sales – with promotion or repricing it. Causing a lot more stock to go into markdown than initially planned. By which time the most important KPI was profit, meaning the £80k dress gets reordered and the £100k dress is never seen again. (RIP)
Get up close and personal with your KPIs
Monitor them daily. Your customers will be interacting with you daily. Which means each day is another opportunity to learn more about what they might be thinking. And what you can do to get closer to your intended result.
Monitoring your KPIs will also help you to identify when it is time to switch gears. Let’s say your follower growth is in its third week of the same % increase. It will likely mean what you have been doing to increase followers so far has reached its peak. So you need to look at another way to increase followers. Or complete that goal for the time being and then more onto a different goal.
The more familiar you are with your KPIs the better your decision making.
So there we have it. Go forth and create your KPI trackers. And I will meet you back here, same place, same time.
If you have a burning question that just can not wait. You can always drop me a line.
Until next time