What is a KPI? KPIs to Use to Improve Your Marketing Strategy!

There’s a good chance most of you already heard about some Key Performance Indicator (KPI).
But, even though you’re familiar with the term, you opened this blog because you’re not quite sure of “What is a KPI exactly?”.

Let’s go through the definition of KPI and get a better sense of what is the utility of Key Performance Indicators.

What is a KPI?

Key Performance Indicator, or KPI, is a form of performance measurement that helps you understand how your organization is performing against standards you’ve previously set.A well defined KPI will act as a compass for your business. It will guide and help you understand the right path for your strategic goals.

To be effective, a KPI must:

- Be simply defined and measurable
- Be communicated in the right way throughout your organization and department
- Be applicable to your Line of Business and crucial to achieving your goal.

Here are some broad examples of KPIs:

Net Profit Margin - can be used to calculate the percentage of profit a business produces for its total revenue.
Sales Growth - Measuring the ability of your team to increase revenue over a given period of time.
Monthly Recurring Revenue (MRR) - The most significant metric of subscription businesses that measures the predictable and recurring revenue components.

Main Types of KPIs

There are various Key Performance Indicators that you can track, depending on your company’s objectives.If you like getting actionable and valuable information about the performance of your organization, it’s crucial to select the right KPIs from the start.
Every business department has different tasks and goals, so consequently their KPIs will be different.

These are the main types of KPIs:
- Marketing KPIs
- Business KPIs
- Financial KPIs
- Sales KPIs
- Project Management KPIs

Since our interest is the specific field of digital marketing, we’ll talk more on that topic and its KPIs.

Digital Marketing KPIs

Digital Marketing KPIs is something that companies of all sizes use for measuring their marketing results. You’ve heard the universal rule that 80% of the outcome comes from 20% of your input. We can easily presume that this rule also applies in digital marketing.

So the first question you need to ask is: Where should I focus my resources and marketing efforts?
The answer to this question we can find if we evaluate the performance of your social media, SEO, lead generation and advertising strategy. Marketing Key Performance Indicators are measurable values marketers use to calculate their success across all marketing channels.

The popular marketing KPIs are:

- Cost Per Lead
- Cost Per Acquisition (CPA)
- Marketing Qualified Leads (MQL) and
- Website Visits Per Marketing Channel.

Digital marketers rely on marketing KPIs for making decisions and to assess their marketing data in a more informative and organized way.

Two people tracking KPIs

We’ve Created 5 Categories of Digital Marketing KPIs

1. SEO Optimization
2. Lead Generation
3. Website and Traffic Metrics
4. Paid Advertising
5. Social Media Tracking

SEO Optimization KPIs

One of the most profitable lead channels is the organic traffic from search engines.
SEO metrics focus mostly on acquiring a large amount of leads through organic traffic.

That’s why it’s paramount to get ranked for keywords with high search volumes - even though the conversion rate you might have is 0.05%, if the number of people visiting your page is huge, that conversion rate is actually a huge number too. Best part is, SEO traffic is absolutely free of any charges.

Here are the most important SEO KPIs:

Inbound links to website

Let’s back up and define the types of links your website can have. Inbound links, usually referred to as back-links, are hyperlinks on a third party web page that links to a page on your site.
On the other hand, outbound links are meant to direct you to another specific website altogether. As one might expect, inbound links are more SEO important because as you acquire more inbound links from third party websites, in the eyes of the Search Engines, your reputation grows.

However, it’s not only the number of back-links you have. Measure only the quality links from pages with a high page rank. The number of inbound links shows whether your content is shared on other sites. Also, It’s an indication the authority you have in your certain field. There are plenty of SEO tools that you can use to crawl the web and see all inbound links to your website.

Don’t forget the reputation that comes with Inbound links. Establish your brand as an industry authority with articles, reports or guest blogging to get targeted inbound links from other brands websites.

Traffic From Organic Search

With SEO metric you will see the number of monthly website visits that come through search engine results from Google, Bing, etc. The organic traffic of your website is highly beneficial as it’s free and generates large numbers of leads. You can get the monthly traffic that came from organic search with Google Analytics and Bing SEO Analyzer.

If you’d like to get better results with SEO, read our Google SEO Guide. Other SEO KPIs that are just as important are: Conversions from organic search page, Page authority, Keywords in Top10 SERP, Rank increase of target keywords, Conversion rate per keyword and Number of Unique keywords that drive traffic.

Bounce Rate

Bounce Rate gives you the percentage of visitors who leave your site after viewing only one page. Experts have been debating for years about the importance of Bounce Rate in Google Analytics for SEO. There are a lot of situations where it doesn’t make sense for Google to punish pages with high Bounce Rate.

For example, according to Clicktale service sites tend to have Bounce Rates of 10-30%, content sites about 40-60%, and blogs have rates of 70-90%. Blogs don’t have the purpose to lead the visitors through the whole website. But at the end of the day, it’s not that important whether Google is tracking Bounce Rate in Google Analytics. Direct implications are easy for us to track.

The difficult part is understanding how Bounce Rate indirectly affects SEO.
What do we mean by this? If your Bounce Rate is high, it might be a symptom of weakness in other SEO factors.
Some of the SEO problems you should check for when your bounce rate is abnormally high are:

- Low quality of your website design
- Slow loading speed
- Mismatch between keywords and content
- Poor mobile optimization

Domain Authority

Moz developed a search engine ranking score called Domain Authority. It can predict how well a webpage will rank on search engine result pages.
The score ranges from 1 to 100 and the greater the score, the higher ability to rank. Domain Authority can be calculated by evaluating factors like linking root domains and number of total links into a single Domain Authority score. This score can further be used to compare with competitor websites or for tracking your website’s ranking strength over time.

Let us emphasize that Domain Authority is not a metric used by Google in determining search rankings. If you want to check the Domain Authority of your website, you can use the free MozBar Chrome-extension.

Two people trying to monitor their KPIs

Lead Generation KPIs

For you to properly evaluate whether your lead generation tactics pay off the effort, track the cost-effectiveness of your customer acquisition and lead generation channels.

Monthly New Leads

With this widely used metric you can see the number of new leads that have been acquired in the last month. Signing up for a free trial or creating an account on your site qualifies as a new lead.
Keeping track of lead generation metrics hints whether your marketing efforts are moving in the right direction.

If you want to improve on new leads, increase the budget of PPC campaigns, create SEO optimized content or try new marketing tactics such as short term social media campaigns and temporary discount offers.

Cost Per Conversion

With this KPI you will see the cost to acquire a lead that took an action which is important for your business. While an advertising campaign can generate hundreds of leads for you, usually only 2% convert into a client.

If the Cost Per Conversion is lower than your customer lifetime value, your marketing strategy, instead of generating profit are wasting resources.
There are simple formulas that calculate the monthly cost of time and resources spent on a lead acquisition source, i.e. social media management, GoogleAds campaign, etc.
Other examples for lead generation KPIs are Cost per lead generated and Average time of conversion.

Website and Traffic KPIs

The KPIs that are monitored should provide guidance for improving your marketing performance. Some of the most popular goals of website-related marketing is increasing the traffic and conversion rate on your website.

Monthly Website Traffic

In addition of overall traffic, track the number of visits to multiple page categories such as your homepage, blog, pricing page landing pages, etc. Use those numbers to see the parts of your site that have the highest interaction rate and apply the best practices to the other pages as well.
This doesn’t only apply to best performing pages - you can see which pages receive less traffic, and through KPIs such as bounce rate you can identify where the interaction goes wrong.
Additionally, you can start using heatmaps to see what works on a particular page and what doesn’t. Use Google Analytics to monitor the monthly traffic of all your web pages.

Average Time on Page

This is one of the most important metrics for organic search traffic because Google ranks websites based on their relevance.
If you have a visitor on your site who bounces right after arrival, search engines will see that action as a consequence of the content that they saw and its irrelevance.
With higher average time on site, your site will more likely rank well on search results and convert more visitors to leads. You can improve by providing more useful content or adding more information on your pages. Decorate your landing pages with colourful images or organized and easy-to-read text.

Other examples of website and traffic KPIs are: Returning vs. new visitors, Visits per channel, Website conversion rate, Click-through rate of web pages and Pages per visit.

Paid Advertising KPIs

Leads and conversions from paid advertising

Track the number of monthly leads and conversions from PPC campaigns as a percentage of overall results. This way, you get an overview of your paid marketing performance. If you use GoogleAds, the results will be outlined in your Google Analytics account.
You cant start with a/b tests of your ad copy or target keywords that are closely related to your unique value proposition if you’d like to improve.

Cost Per Acquisition (CPA)

While generating leads through PPC campaigns can be quite expensive, it is very important to monitor the Return On Investment.
Compare number of cost per conversion with your customer lifetime value to make sure your campaigns are profitable in the long term.
This metric should be calculated with a two month gap as it can take a lot of time for a lead to convert. Sum up the monthly costs of all resources, time and money spent on paid advertising campaigns. Divide it with the number of that month’s leads that have converted to paying clients.
If you’d like to improve, start targeting keywords with low competition (long-tail keywords) or improve the customers landing page experience.

Also, you should know the difference between Return On Ad Spend (ROAS) and Return On Investment (ROI).
ROI is a metric that measures the profit generated by your ads relative to the cost of those ads.
It’s a metric that is most effective at measuring how ads contribute to an organization’s bottom line.

ROI = Profits - Costs x 100 / Costs

On the other hand, ROAS, or Return On Ad Spend, measures gross revenue that is generated for each dollar spent on advertising.
It is an advertiser-centric metric that gauges the value of online advertising campaigns.

ROAS = Revenue from ad campaign / Cost of ad campaign

Quality Score

Quality Score is definitely the most puzzling KPI amongst PPC advertisers.
As a metric created by Google, it can tell how relevant your ad content is using metrics like CTR and other performance variables like customers experience on your landing page.
Digital marketers find it difficult to fully understand Quality Score because it’s less straightforward than other easily measured KPIs like clicks.

Quality Score is determined using expected CTR, ad relevance, landing page experience and ad format.

Google is actually transparent about how Quality Score is calculated. Sometimes advertisers underestimate Quality Score, not understanding its consequences.
Between 7 and 10 is a good Quality Score. Meaning you pay less money to advertise with Google Ads. A bad Quality Score is 6 or lower, meaning you pay more for a click than the click’s actual cost. Check out this image to see the impact of Quality Score on your Cost Per Click.

Quality Score Ranges From 1 to 10 and depending on the score of the ad, your Cost Per Click varies

If your budget is not an important enough reason to take actions for improving your Quality Score, then know that Quality Score also affects other KPIs.

Absolute Top Of Page

In Google Ads you can get a lot of valuable data in the Auction Insights section. From Impression Share and Overlap Rate to Average Position and Outranking Share. What we want to talk about is The Absolute Top of The Page Rate.
This relatively new metric in Google Ads tells you how often your ad (or the ads of another participant) was shown at the absolute top of the page as the very first ad above the organic search results.

For example, if out of 100 impressions, an ad has 10 impressions in which it appears as the first ad above the organic search results, the absolute top of page rate will be 10%.
If you think that it is not that important what position you are, as long as you are on the first page of the search results, check out this statistic:

How average position of your ad can have a massive impact on your expected Click Trough Rate

Social Media KPIs

There are two core ideas that your social media efforts should be focused on: building an engaged community and turn them into your customers. Here are some of the widely used social media KPIs to keep track of your marketing performance.

Traffic from Social Media

Tracking the social media KPIs as a percentage of all visits to understand the meaning of various channels to your website traffic.
You can use the Google Analytics reports for an overview of your website’s traffic sources.
You can improve by acquiring a large following, share meaningful posts, create social media campaigns to increase awareness, and be liked, shared and get new followers.

Leads and Conversions from Social Media

While most of us consider social media just as a brand awareness tool, it can also be used as a profitable lead generation channel too. Monitor the number of monthly leads and conversions from social media to assess this channel’s efficiency in your marketing efforts.
Other social media KPI’s are: Conversion rate, Managed audience size, Engagement rate, Mentions and Social media ROI.

Honorary Mention: Customer Retention Metrics

Even though we haven’t mentioned these metrics, they are still very important for your digital marketing efforts:

Retention Rate

Your websites retention rate is a KPI that measures how many customers/clients are sticking around or making repeat purchases. For online startups and related businesses, this kind of metric can be tracked by comparing the sign-up and drop-off rate of your app or software. In turn, entrepreneurs can measure this metric by comparing the number of returning clients they have with the number of one-stop shoppers for the same type of transaction that has the potential to be a recurring process.

Net Promoter Score

With Net Promoter Score, you can have a greater insight into your customer relations.
Each customer who takes the time to rate the probability of them recommending your product and/or service to other people measures their general satisfaction and loyalty to your brand.
After calculating the overall Net Promoter Score, you’ll be able to tell if your customers are willing to refer your products or services to others.
You are probably wondering which tool to use for this one. As simple as it may sound, you can determine this score with a short survey sent out to your customers, asking them one simple question:

“What is the likelihood for you to recommend our company to a friend or a colleague on a scale from 1 to 10?”

Keep in mind that only 9’s and 10’s are promoters and customers that are 6 or below are considered to be a detractor. Then you can calculate Net Promoter Score simply by substracting the percentage of detractor responses from the percentage of promoter responses.

Net Promoter Score = % of Promoters - % of Detractors

CSAT (Customer Satisfaction Score)

I know that you know you should be measuring customer satisfaction, but when there are so many types of satisfaction surveys it can be a daunting task to choose which one to send out to your customers.
So let’s talk about one of the most popular methods called Customer Satisfaction Score (CSAT).
This is the most straightforward of all customer satisfaction survey methodologies, and it measures customer satisfaction with an interaction, purchase, or with a business.
It’s calculated by asking a question, such as: “How satisfied were you with your experience?” Your customers will choose from a corresponding survey scale that varies from 1-3, 1-5 or 1-10.

To Wrap Up

We hope that after reading this text you’ll have a clearer picture and you’ll easily define your Key Performance Indicators.
If you enjoyed this read, feel free to check out our previous blog on: What is a Fractional CMO?