Product managers have diverse jobs to perform. Everything they do is to ensure the success of the product in the market. They are vested with the indispensable job of calibrating the value, feasibility, user-friendliness, viability, and efficacy of the product. They work with different teams to make sure that each department is aligned with the goals of the company and the product.
Undertaking all of these crucial jobs can be daunting unless there are proper metrics or KPIs (key performance index). Setting KPI for digital products is a science in itself, and it changes with every product. Depending on the product, there could be different KPIs that should be monitored:
- For a SaaS product (Software as a Service), key KPI could include MRR (Monthly Recurring Revenue), Churn Rate, expansion revenue, upsells/cross-sells, etc.
- For a mobile app, downloads, active users, DAU (Daily Active Users) or MAU (Monthly Active Users), session length/time per day spent on the app, retention rates, in-app purchase, etc. could be KPI
The success of digital products rests heavily on the KPIs (key performance indicators) chosen to track progress. What should be measured, and how it should be measured, can differ from product to product. A product manager needs to have a deep understanding of what makes their product successful so that they can set the right KPIs.
A KPI could be anything from activation rate to conversion rate to customer lifetime value. What’s important is that the KPIs are relevant to the business and its specific goals. The goal is not only to track progress but also to improve it.
What Is KPI?
A key performance index is a quantified value that is used as a KPI (Key Performance Indicator) to track the progress and performance of a business or project. KPI gives an easier way to understand whether the company is in its right direction. KPI is used to measure a company’s productivity and performance.
KPI is numerical data that helps business companies to track their present status, growth, and future projects. KPI helps in understanding whether a project or product is done by the company is going in the right direction or not KPI can be of many types.
KPIs are used to “monitor progress toward organizational goals“. It gives insight into how well we are performing and where we need to make improvements. KPI is an acronym for “Key Performance Indicator”. KPI compares actual results with a target value. It provides information about performance in various areas such as marketing, production, or research and development (R&D).
What are The KPI Parameters?
KPI that will be counted as ROI. The number of transactions on your website. This metric can also be looked at as customers who made an online purchase, their average order size, etc.
KPI for each step of the sales funnel such as landing page visits to conversion rate.
Customer Acquisition Channels
How many customers came from which social media or PPC platform? KPI here will include all the required analytics and efforts involved in getting a targeted audience towards your brand.
KPI ranking and performance of each campaign and how well it performed against set goals.
KPI will track the number of website visitors and pageviews over time as well as session duration and bounce rate.
KPI measuring user engagement can range from time spent on site, number of pages visited, number of videos viewed, etc.
Why Is KPI Important?
It helps in measuring the performance indicators which are important for business
KPI is very useful at the time of resource planning and KPI helps in evaluating if we are using our resources optimally. KPI also helps management to make better decisions because KPI gives a comparison between actual performance and expected/targeted performance.
KPI can be used as a management tool
KPI assists managers in making business decisions at their convenience and on-demand. KPI provides real-time data which shows how well we are performing and where we need to improve so that we reach organizational targets.
KPI helps an organization grow
KPIs help senior managers track progress as it occurs, as well as identify trends that may not be obvious otherwise.
KPI helps the company to decide on many important things
KPI helps in making decisions like setting prices, allocating resources, and checking whether we are meeting our targets or not. KPI gives a detailed overview of an organization and helps management in making better decisions.
KPI makes promotion policies very effective
KPI data is used to determine who gets promotions and who does not within an organization. KPI assists managers in promoting only those employees that meet certain quality standards. Managers use KPI data to find out which employee needs more training and coaching before they can be considered for promotion.
How To Define Your KPI?
It’s not easy to define KPI, it can be a tricky business. It has to be essentially defined according to the core values, objectives, and goals of the business. KPI can be different for different businesses, but there are some general KPIs that could be useful for all businesses.
The following is a list of KPIs that could be used as a guide:
This is a very important KPI for any business. It measures how well the business is doing in terms of generating sales revenue.
Customer satisfaction KPI
This KPI measures how happy customers are with the products or services offered by the business.
Employee productivity KPI
This KPI measures how effectively employees are working and meeting set targets.
Process improvement KPI
This KPI measures how well processes are being improved and whether they meet customer requirements.
This KPI measures how well the business is performing financially and whether it is making a profit or incurring losses.
Brand awareness KPI
This KPI measures how much the general public knows about the products or services offered by a business.
Internal process KPI
This KPI measures how effective internal processes are in a business, such as manufacturing processes, office administration, or information technology systems.
It is essential that KPIs used in an organization be relevant to their particular needs and circumstances. For example, businesses looking to increase brand awareness should measure brand exposure over time and identify which channels of communication are best at reaching potential customers.
Answer the following questions before defining your KPI:
- What outcomes do you intend for from your business?
- What do you want to achieve in your business over some time?
- How can KPI help you in achieving this?
- How will you measure the whole process?
Example for KPI
Now you must be wondering, what real KPI constitutes. What are the factors involved? Here we give you the KPI parameters and KPI example for a digital product business.
To clear up further, here is an example of Marketing KPI.
A marketing KPI would typically consist of the following:
- What is the weekly, monthly, or quarterly traffic you get on your website?
- Keywords in top Search engine outcomes (SEO).
- Interaction content.
- Blog, article, or content published.
What Is the Intelligent KPI?
An intelligent KPI can substantially aid the progress and performance of your organization simultaneously, it can even be detrimental if certain key criteria are obliviated.
An intelligent KPI is mostly used when you need to track a digital product. With great KPIs in place, it becomes much easier to make data-driven decisions that will improve the quality of your digital product. KPI’s must be relevant and actionable if they’re going to be effective in helping you achieve desired outcomes. You also need to set a timeframe for each KPI so that you can track and measure progress.
KPI’s are important metrics that should be closely watched by business owners. By monitoring KPIs, business owners can identify whether they are making the or lack thereof of their business in comparison with past performance, goals, and potentials. KPI’s can also be used in determining which strategies and methods to put in place to maximize profits and revenue.
KPI’s are also incredibly important as they provide a business owner with feedback, which can be used to improve on internal practices and processes or even change the overall direction of the business itself.
Below are a few points that determine whether your KPI is well developed or not.
The goal of your KPI is specific or not
KPIs can be general or specific. This is determined by how KPI was established, if it were to be effective in its function it needs to be specific and focus on one specific aspect of your digital product.
KPI can also be relevant when they are aligned with company strategy
KPI should not exist in a vacuum and should be aligned with company strategy, if you cannot directly link KPI to one of the company’s strategic goals, it should be discarded as irrelevant KPI.
Whether or not you can measure the progress
KPI should be able to track the progress, if it can’t, there’s no point in having it.
Whether the objective is realistic and attainable
KPI should be achievable or KPI progress can be negatively affected or KPI might fail to accomplish what it was originally designed for.
Whether the goal is relevant to your organization
KPI should reflect positively on your organization’s performance. KPI, that are of no direct impact to the company, might be discarded
Whether or not KPI reflects operations-specific activity
KPI should only measure what you control and the KPI measurement process should not include features outside of your influence.
Whether KPI is sustainable over time
KPI values and KPI calculation algorithm should remain relevant over a longer period (3-5 years). If it cannot be sustained, KPI needs to be recalculated and adjusted accordingly.
Whether you can evaluate and consistently re-evaluate your performance or not
KPI is not static, KPI needs to be reevaluated and KPI performance improvement plan needs to be set and executed regularly. KPI should be used as a means of improving the company’s performance over time.
How To Develop KPI?
Now that you know what KPI is, its importance, its features, let’s quickly look at how to develop an effective KPI.
It is not an easy task, but it can be done if you follow these steps:
Define what you want to measure
This may seem like an obvious first step, but without a specific goal in mind, KPI will be difficult to develop.
Identify the key factors that influence the outcome
Once you know what you want to measure, you need to identify the factors that have the biggest impact on that outcome.
Create measurable indicators for each factor
Once you know which factors influence your goal, you need to create measurable indicators for each one. These could be percentages, dollars, or any other metric that is easy to understand.
Share KPI with the stakeholders and team members
Once your KPI is in place, you need to share them with the stakeholders and team members. Make sure they have their own KPI for assessing results, or that they can easily access yours.
Agree on when to measure KPIs
When you’re starting it’s best not to focus on KPI too much. Instead, look at KPI after a month or two of launching new mindfulness sessions to get an idea of how the program is going. Focusing on KPI during the initial stages might lead to pressure and disappointment if there are no immediate outcomes.
Revise, review and reevaluate your KPI from time to time
As your mindfulness program evolves, so too should your KPI. KPI that was relevant at the start of the program might not be as pertinent a few months in. Be prepared to change and adapt your KPI as needed.
Develop an actionable KPI
Having a KPI that is specific, measurable, and achievable is key to ensuring the success of your mindfulness program. Make sure to develop an actionable KPI that people can work towards and use to track progress.
Assess the attainability of KPI
Before setting your KPI, it’s important to assess the attainability of the goal. If it’s not achievable, you may need to adjust it. This can help ensure that team members don’t become discouraged if they don’t meet the goal.
When you do achieve your KPI, make sure to celebrate! This is a great way to show team members and stakeholders that the mindfulness program is successful and worth investing in.
A Final Word
A well-developed KPI is a powerful tool and can be an asset if created and used smartly within your organization.
KPI can help you track your progress, identify areas of improvement and work more efficiently together with your team members.
Thanks to the benefits of KPI it is imperative that they are created smartly so each KPI has a value that can be realized by the company.