Key performance indicators (KPIs) are a set of measurements to gauge the company's health and success against targets. These range from financial metrics, to customer metrics, to operating metrics, to marketing and sales metrics.
Some examples of KPIs are:
- Customer metrics (CLV, CAC, retention, NPS, customer number, user retention, customer churn rate, new vs repeat customers, etc.)
- Financial metrics (growth, margins, costs analysis, DSO and DPO, inventory ratios, etc.)
- Process metrics (support tickets analysis, efficiency ratios, faulty orders or products, etc.)
- People metrics (employee turnover, employee satisfaction, etc.)
A KPI analysis involves the process of analysing these indicators and plotting the results in graphs or charts. It involves extensive data collection, cleansing, analysis and presentation and can be carried out with a range of metrics.
The output should be a KPI dashboard or series of charts to help identify areas of strength as well as underperformance.
KPI analysis can help your company identify new opportunities and achieve business goals. For instance, analysing customer cohorts, subsets of users grouped by shared characteristics, can help identify stickier groups of customers. This can be useful to understand who and how is engaging with your product and to refine product or marketing strategy.
Moreover, by looking at underlying data, KPI analysis can identify problems and anomalies. Management can use this data to streamline efficiencies, develop growth strategies and pursue new opportunities.
In short, creating a KPIs driven culture will help you improve business performance across the board. This entails setting out a clear KPIs strategy and using top reporting and tools to help make data-driven decisions.
How to prepare a KPIs analysis
KPI reports should provide a logical, digestible presentation, allowing readers to quickly draw conclusions on business performance and act upon it.
They can inform management about which targets the business is achieving and what can be improved. Similarly, investors will be interested in business KPIs and seeing historical improvement.
Companies collect increasing amounts of data. In order to perform a KPIs analysis, it's helpful to follow clear steps to avoid being overwhelmed.
- Set your goals before analysing the data. Be clear about what you intend to achieve and how the analysis will support this. This will ensure the report is useful and applicable. It will also provide clarity on how to analyse the data
- Focus on SMART KPIs - specific, measurable, actionable, realistic and time-bound. Ensure that you have the necessary data, in the right format, before starting the analysis
- Tie your KPIs to strategic business goals. For instance, your marketing KPIs will be related to customer acquisition and your sales KPIs to revenue
- Avoid an overload of KPIs. You should keep your scope contained and focus on essential KPIs only. Set these up in an easily accessible report or online dashboard
- Expect to update your KPIs and analysis. As the business and its needs evolve, so will its KPIs
Key performance indicators can confirm that your company performance is on track. This can help you calculate your risk position and mitigate potential risks. When performance is not on track, your KPIs can quickly highlight what needs to be adjusted.
Considerations in a KPIs analysis
Different businesses will have different KPIs, so it is important to select your monitored KPIs carefully. Typically, your KPIs will be determined by your company's industry, size, location, maturity and the long term goals for your business. Focusing on the right KPIs will help you quickly identify any potential problems with your company.
A large marketing budget to acquire new customers is not helpful if none of them stick around. Retention rate is just as important as growth, as it h to understand customer satisfaction. However, in order to reduce churn, you first need to diagnose the problems. A detailed cohorts analysis can help you diagnose issues with your marketing strategy or your product.
There are two ways of grouping users: acquisition cohorts and behavioural cohorts.
Acquisition cohorts analyse customers on the basis of their acquisition date. This means the date when they signed up to your product or made their first purchase. You can segment the data by day, week, month, quarter or even year.
This analysis is typically used to determine how long customers continue to use your product or purchase from you, once acquired.
Behavioral cohorts divide users based on behavioral analytics. This could include actions such as app install, app launch, subscription acquired, subscription upgraded, amount spent, etc. or any combination. Users are grouped based on these behaviours within a time frame. You can then monitor how long they stay active after being acquired.
For instance, if you want to run an experiment for your business, you will want to run a time-bound campaign with specific characteristics. You should then group users acquired during these campaigns into specific cohorts and run behavioural analytics on these customers.
Segmenting customers on the basis of groups or cohorts, you can understand behaviour of individual customer groups. This can help infer the impact of specific product changes, marketing or re-marketing strategies on your client base.
How Ithaca can improve your business KPIs
Whether you are trying to better understand your customer or financial metrics, our specialists can support.
An Ithaca specialist can help you prepare detailed customer metrics KPIs, such as customer cohorts or order cohorts.
Several specialists in our network have a strong data analysis background. They can deliver analysis of all cohort types and help you analyse behavioural patterns in different group of users.
We can also help in understanding your financial KPIs. A good understanding of your financial metrics can help you optimise your company's operating and financial performance. For instance, P&L ratios can help you better understand your budget allocations. Your balance sheet ratios can give a picture of your scale-up's liquidity or inventory management.
A complete set of KPIs is also essential as it forms the basis for your financial model and projections. For instance, in order to forecast customer acquisition, you will have to look at historical data and how this has trended over time.
By tapping into our extensive freelance network, we can deliver the right skills needed for an in-depth KPIs analysis project. You can draw on multiple area specialists, combining data analysis with financial know-how to help you build a granular, data-driven financial model.