If you understand the concept that a "square is a rectangle but a rectangle is not a square" then the ability to comprehend the difference between KPI and metrics are well within your grasp. But before we can hold a conversation about KPI vs. metrics, there needs to be an answer to the question as to "why" this is important.
In marketing, understanding the "why" is many times more important than the actual data collection and analysis. If you do not understand "why" you are doing something, then how can you possibly understand how to use the data after it has been collected? This issue exists in every organization and is extremely prevalent with regards to small business owners. Many times marketers or business owners enter into a contracted service because of buzzwords and felling the need to do something simply for the sake of doing it. What is necessary however is understanding "why" KPI is important and a commitment to learning best practices. So let us take this opportunity to learn the difference between KPI and metrics and "why" they are important for your business or organization.
What is the Difference?
The first concept that is critical to understanding the difference between a Key Performance Indicator and a metric is that a KPI is a metric, but a metric is not necessarily a KPI. But how do you correctly identify a Key Performance Indicator? According to Dennis Mortensen you can identify a KPI by using the following characteristics:
- Echos Organizational Goals
- Decided by Management
- Provides Context
- Creates Meaning
- Derived from Reliable Data
- Easy to Interrupt
- Leads to Action
Now that the correct characteristics have been correctly identified, we must begin to think of what measurable data will be sought to create our Key Performance Indicators. There a literally hundreds of types of data that can be used as an evaluation measure but some of the available choices that will be consistent over most types of organizations will be the following:
- Raw Statistics - [#]
- Progress Completion Status - [%]
- Change in Direction - [%]
Erica Olsen reminds us that true KPI measures do no stand alone as numbers on a corporate report. There must be relevancy as well as framed in regards to both the goals of the organization as well as the actions they are currently focused on to achieve those goals. It is also important to correctly identify the best source of data for each KPI as well as establishing a frequency of reporting to correctly monitor progress.
Next KEY Step
Once KPI has been correctly identified, sourced and reported, it is imperative to to use them as foundation for evaluating the success of your online marketing efforts. As all things with marketing, the primary goal is to achieve the fundamental vision of the organization. Once those strategies and efforts are in line, the other contributing factors can be established. Those efforts include:
- Devising a Strategy
- Identifying Objectives
- Establishing Critical Success Factors
- Formulating Key Action Initiatives
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When holding a discussion regarding Key Performance Indicators it is critical to understand that not only is KPI is important to your business or organization but "why" it is important to your business or organization. If done correctly, Key Performance Indicators can expose new growth opportunities and align your marketing efforts to work in tandem to not only evaluate effectiveness but also be the KEY to a sound and unified online marketing strategy.
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