What is KPI and why is it important?

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Everyone knows today how important digital marketing is to a company's strategy. After all, those who are not present on digital channels end up falling behind the competition.

At this point, it is not only important to be present (this is a must), but to understand how to measure results It is essential to know what is working and what is not. That’s where we get into the subject of this post: What is KPI (Key Performance Indicator) and what is its importance?

What is KPI?

KPI is the acronym for Key Performance Indicator, or, in good Portuguese, Key Performance Indicator. This is a strategic metric used to evaluate the performance of an action, process or area of the company in relation to a specific objective. And they are essential for the strategic planning of your company.

A KPI can be a number or a percentage, depending on the information that needs to be displayed. In digital, a bounce rate, for example, might be 60% and a unique visitor is measured by quantity. Both can be important KPIs, depending on the company's goals.

“KPI is an indicator that shows, objectively, whether your strategy is working. It answers the question: are we on the right track to achieve our goals?”

The difference between KPI and metric

It is important to highlight what is not KPI. Or what may not be. In this sense, a metric may become a KPI, but it may not be either. A metric is anything that can be measured. In other words, a metric is data that may or may not be relevant to your business and decision-making. A KPI, on the other hand, is essential to your business. So, if a metric becomes essential, it becomes a KPI.

For example, the number of followers on Instagram is a metric, while the conversion rate of leads into customers is a KPI — it shows whether your strategy is actually generating results.

Why are KPIs important in digital marketing?

Strategic direction

Without metrics, everything becomes trial and error. KPIs help you see what works and what needs to change. They are the GPS of your digital marketing plan. Without them, you’re driving in the dark.

Additionally, KPIs help maintain focus. When each action has a number attached to it, it becomes easier to align teams and avoid wasting time and money.

Data-driven decision making

In modern marketing, there is no longer any room for guesswork. Therefore, decisions need to be based on real, up-to-date and objective data. This is exactly what a good KPI offers.

Want to know if your investment in paid media is worth it? Analyze your CAC (Customer Acquisition Cost). Need to understand if your blog content is performing? Look at the conversion rate of visitors into leads.

KPI is the translator between result and action.

How to define relevant KPIs for your company

Set a goal

Relevance is the buzzword when talking about KPIs. But you will only know how to define a KPI if you have a clear objective for your digital marketing. After all, the KPI will be responsible for measuring whether you are on track to achieve your goals. And if you don't have goals...

Therefore, before defining KPIs, answer: what is your business objective? Increase sales? Reduce acquisition costs? Improve customer retention?

From there, define KPIs that are clear, accessible, and actionable. A good KPI shows what needs to be done.

Define when to measure

A very important point is to define how often to measure your KPIs. If there is no frequency, there will be no way to compare the results. Likewise, there will be no impact on decision-making.

Another important point is that you can categorize your KPIs, a practice that has been adopted quite frequently. You can have a primary or main KPI, or even several primary ones. And have secondary KPIs. This can also help in data analysis. Also, always keep in mind that the primary KPI (or primary KPIs) must always be aligned with the main objective.

What to consider

When choosing a KPI, keep in mind that it must be objective and that it must be checked regularly. Therefore, discuss with other members of your team whether these KPIs are in line with what your company needs to grow.

KPIs for different areas and stages of the funnel

However, you can (and should) have different KPIs for each area of the company and for each stage of the customer journey. Here are some examples:

• Top of the funnel: organic traffic, campaign reach.
• Middle of the funnel: leads generated, email open rate.
• Bottom of the funnel: conversion rate, CAC, LTV.

Therefore, each KPI must accompany the customer throughout their journey — from the first click to after-sales.

Examples of KPIs

As we have already said, it will depend on your objective which will be the primary, secondary KPIs, etc... but to help you define these KPIs, we have listed some that may be important:

• CAC (Customer Acquisition Cost): how much you spend to acquire each customer;
• ROI (Return on Investment): how much your campaign returns for each real invested;
• CPL (Cost Per Lead): How much you invest to get a conversion from a visitor to a lead;
• LTV (Lifetime Value): total value that a customer generates during their relationship with the brand;
• CTR (Click Through Rate): click rate in media campaigns.
• CVR (Conversion Rate) conversion): percentage of visitors or users who performed a desired action, such as a purchase, download, filling out a form, etc.;
• Engagement on social media: likes, comments, shares (when linked to goals).

See a list of KPIs that can be secondary and support primary KPIs:

• Traffic;
• Blog/newsletter subscribers;
• Origin of traffic;
• Bounce rate;
• Pageviews;
• Likes;
• New visitors.

Of course there are many more. We just gave some examples so that those who are just starting out can get a sense of direction and start measuring results.

Additionally, these KPIs can be tracked in tools such as RD Station, Google Analytics, Mautic, HubSpot and paid media platforms.

How to track your KPIs in practice

Having the right KPIs is not enough. You need to monitor them continuously, understand their variations and act based on the data.

For that:

• Use visual dashboards with automatic update.
• Perform periodic analyses (weekly, monthly or per campaign).
• Create an analysis process: KPI → Diagnosis → Action → Test → Evaluation.

Tracking KPIs without gaining insights is the same as having a compass in your pocket and continuing to go around in circles.

Most common mistakes when working with KPIs

1. Measure everything: too many indicators confuse more than they help.
2. Not acting on data: having numbers and not making decisions is a waste of time.
3. KPIs that are too generic: using indicators that don’t say anything about your specific goal.
4. Focusing on vanity: likes and followers can boost your ego, but they don’t always impact sales.

Remember: A good KPI is one that generates action.

https://youtu.be/lJxVZNncR1E

In short…

Knowing what KPIs are and how to use them strategically can completely transform your digital marketing results. It’s the difference between sailing aimlessly or with a map, compass and a well-defined destination.

At Vero Contents, we believe that data is just as important as creativity. Amazing content only makes sense if it’s aligned with metrics that show its real performance.

And don’t forget that it’s essential to define a KPI and measure it regularly. In addition, set clear objectives and goals so that these KPIs can generate practical results. Our experience shows that companies that define clear objectives and measure their KPIs tend to be more successful than their competitors.

So, do you already know which KPIs guide your company's growth?

Talk to a Vero Contents expert now!

KPI Frequently Asked Questions (FAQ)

1. What is KPI, in simple terms?

KPI is a strategic metric used to measure a company's progress toward a goal. It is a number that shows whether the strategy is working.

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2. What is the difference between a metric and a KPI?

Every KPI is a metric, but not every metric is a KPI. KPIs are metrics that have a direct impact on business goals.

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3. How many KPIs should I have?

The ideal is to work with a few good KPIs. On average, 3 to 5 KPIs per area or campaign are enough to direct actions.

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4. How do you know if a KPI is efficient?

A good KPI is specific, measurable, relevant to the goal, and actionable. It needs to answer a clear strategic question.

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5. What tools can I use to track my KPIs?

You can use tools like Google Analytics, RD Station, Mautic, HubSpot, Looker Studio (Google Data Studio), among others.

Article originally published on 05/22/2022 and updated on that date.