Building and scaling an online business involves spending time, money, and energy. It’s difficult to objectively assess the success of an SEO service, so it’s important to track key metrics and KPIs. (Key Performance Indicators). In this article, we will introduce you to formulas that allow you to assess the effectiveness of business processes.
How do KPIs differ from metrics?
KPI – shows the effectiveness of business processes, especially those that want to grow predictably. It is easy to distinguish them from metrics: they are always expressed in percentages. There is a fixed “normal” KPI. So, when comparing your company’s KPIs and average market indicators, you can draw a conclusion about the effectiveness of business processes.
Metrics are indicators that can be calculated. For example, the number of registrations on a website or likes on a social network.
Key KPIs
We suggest considering 11 key indicators that will help assess the effectiveness of business processes.
Conversion Rate (CR)
The number of users who performed a targeted action: bought your product, filled out a form for a conference, downloaded an application. This is one of the main types of data that demonstrates marketing indicators and their effectiveness.
Click-through rate (CTR)
The indicator shows the percentage of users who clicked on advertising. This is one of the main indicators that you need to pay attention to when launching contextual advertising.
Return on advertising (ROAS)
This indicator shows the company's profit for every $ 1 spent on advertising. Calculate this KPI for your business. If ROAS is more than 100%, then advertising costs are paying off.
Return on investment (ROMI)
One of the main KPIs (in marketing it is also called ROI), which shows income or business loss.
Average Revenue Per User (ARPU)
ARPU shows how much money each user brings in over a certain period of time.
Churn Rate
Shows how many clients have abandoned services for a certain period.
If the Churn Rate is high, this may be due to a high price tag for the product/service or low quality (compared to the product competitor).
Revenue Churn
Indicates the loss of profit due to customer loss.
Market Share (SOM)
Shows what part of the market your product/service occupies in the market.
Share of Customer Wallet (SOW)
Marketing metric shows your customer loyalty customer. This is the percentage ratio of the number of purchased products/services of your company to the total number of purchases in your niche over a certain period.
For example, in May, Masha spent 150 UAH in cafe X, and the total expenses in the cafe amounted to 600 UAH. SOW = 25% (150/600 * 100%).
Customer Retention Rate (CRR)
It is easier to sell to an existing customer than to acquire a new one. CRR shows how users behave on the site: do they buy once or return after a while?
A good CRR tends to be 100%. If the rate is falling, analyze what has changed in customer service.
Cart Abandonment (CAR)
This KPI shows the number of users who added an item to their cart but did not complete the purchase. This happens when a customer gets distracted, finds a better price, or decides to wait until payday.
Metrics and KPIs need to be monitored, even if sales are growing. Performance indicators allow you to analyze costs and the results obtained. It is important to be guided only by current data.
Key metrics
Let's consider the key metrics that every marketer, online business owner, and analyst should have in their arsenal.
Cost per click (CPC)
CPC is the main metric when setting up advertising, which will help you evaluate the effectiveness of advertising campaigns.
Cost-per-action (CPA)
The cost you pay for a targeted user action (such as a subscription or registration on the site).
Cost per lead (CPL)
Shows the price for the contact information of users whose services/products are interesting.
Lead (application) - a potential client. CPL shows the effectiveness of your efforts and spending on customer acquisition.
Customer Acquisition Cost (CAC)
The portion of your budget you spend on acquiring each customer.
Time to Payback CAC
The indicator helps calculate the return on investment for each customer acquisition.
Monthly Revenue (MRR)
The indicator is used by service owners who provide subscription services.
Customer Value (LTV)
LTV is the profit from all customer purchases.
Conclusions
We have considered the main metrics and KPI indicators. They allow you to assess the effectiveness of business processes, and identify the strengths and weaknesses of the strategy.
Marketers track metrics based on the results of the work performed. For example, to assess the effectiveness of an advertising campaign. Indicators do not affect the future. KPIs are the opposite: they affect the future, allowing owners of online businesses to analyze and compare the results of business processes with competitors. Most indicators can be viewed in Google Analytics.
In a nutshell, KPIs are indicators that you plan before starting work, and key metrics are an assessment of actual results and the costs of achieving them.
