How KPIs (Key Performance Indicators) Help You Improve Your Online Business Dr. Ralph F. Wilson, Web Marketing Today - Mar 25, 2008

Web analytics involves measuring how your website is doing so that you can improve your online business. The sheer mass of data available from an analytics program can boggle your mind. The key is to figure out what few pieces of data are really important and focus on these.

KPIs -- Key Performance Indicators

A successful online business keeps tabs on its website using several Key Performance Indicators (KPIs). According to Eric T. Peterson in Web Site Measurement Hacks (O'Reilly, 2005), a KPI is "any ratio that summarizes two or more important measurements and is tied directly to your business objectives."

I have several primary business goals for my site. Progress toward each goal can be monitored by one or more KPIs that can be seen (or derived from data) in my analytics program. For example:

If you're a web analytics professional,  you might suggest better KPI choices for my site. Great! The challenge is to figure out which KPIs are truly important for a particular business and then regularly track changes in them. A strategic KPI:

• Is directly related to your business objectives.
• Is really "key" to understanding what's happening, not just data that's available and easy to retrieve. Unless you limit to the essentials the amount of data you try to understand, you're likely to become overwhelmed and stop monitoring at all.
• Promotes action, that is, gets you or others in your business to improve what you're doing as a result of what you're seeing.

Move from the Generic Dashboard to Specific Business Goals

If you use Google Analytics (GA, www.google.com/analytics), begin by viewing the built-in KPIs on the Dashboard -- visits, pageviews, pages per visit, bounce rate, average time on site, % new visits, traffic sources, etc. The best insights, however, come from setting up your own goals under "Analytics Settings," tracking those goals, and then seeking to improve your performance. You can go beyond GA's built-in KPIs by plugging key numbers into a spreadsheet and employing formulas to calculate the specialized KPIs that are most meaningful to your particular business.

If you don't have the time, skills, or inclination to do this yourself, consider starting with a technically-minded employee or part-timer who will monitor your data and give you a regular, single-page report displaying your KPIs in graphical form. This person can get training from your analytics vendor's website, books, or through University of British Columbia's online Web Analytics courses (www.tech.ubc.ca/metrics/).

By using KPIs, your business is "instrument flying," keeping you safe and giving your business a good chance of improving and succeeding. Without KPIs you are "flying blind" and are quite likely to crash.