Why KPIs Often Fail
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Many eCommerce sites fail to achieve their goals through web analytics because they select the wrong key performance indicators (KPIs) that do not directly relate to improving outcomes. Common mistakes include choosing interesting metrics without understanding how they provide insights or enable decision making. To establish effective KPIs, sites should start by defining goals, then identify the insights and decisions needed to achieve those goals, and select data sources accordingly. A cross-functional team with web analytics expertise is also important to properly interpret data and link it to goals through a methodical process of testing and refinement.
Why KPIs Often Fail
- 1. Why Web Analytics Key Performance Indicators Often Fail By Lindsey Anderson Almost all eCommerce sites share at least one common goal. They want to improve the customer experience, increase revenue, improve customer retention, increase the ROI on their advertising and marketing expenditures, provide the product information their customers want, and/or understand who their customers are and why they buy. Since you cannot manage what you cannot measure, most eCommerce sites have a web analytics package to help them measure site performance. Many of these sites have identified certain site measurements, like the number of new visitors, as Key Performance Indicators (KPIs). Most web analytics packages, through the creation of dashboards, encourage the anointment of various measurements as KPIs. However, many sites are finding that their KPIs aren't helping them achieve their site goals. An indicator of this failure is the large number of users who have stopped using their web analytics package altogether. Jason Burby1 , a ClickZ columnist, reports that a company spending over $150,000 per month on its analytics tool had, at installation, set up over 50 user accounts. But when analyzing who was actually using the package, Jason found over 85 percent of those users hadn't used the tool in over six months. This is not unusual. So why are web analytics KPIs failing to support site goals? There are several reasons but the main one is because there is no automatic, direct connection between KPIs and site goals. Web analytics provides data. Someone has to look at that data and have an insight that leads to a decision that will positively affect site goals. The missing links are insight and decision-making. Far too many sites look at some available reports, identify some interesting data and declare it a Key Performance Indicator without giving enough thought to what insights the data provides and how those insights might enable decision making. At first, site managers will look at these KPIs on a regular basis, but as other business pressures mount, they start looking at these KPIs less and less until they are only occasionally viewed. These site managers have picked the wrong KPIs. Bottom line, if it doesn't have an impact on your performance, it is not a Key Performance Indicator. What site managers should do when establishing KPIs is look beyond what data appears interesting and identify what insights the data provides and what kind of decisions that insight impacts. The reason many sites don't do this is because it is very difficult. Web analytics packages generate an overwhelming amount of data and site personnel have limited experience interpreting the data. The link from data to insight is not always obvious. Establishing this link requires a special skill set, a facility with detailed data and a strategic vision, which aren’t usually found together in the same individual. Web analytics is relatively new and site personnel are still feeling their way. People aren't getting enough training on how to use their web analytics package or on how to interpret the data.
- 2. Experienced, knowledgeable web analytics specialists who already have the training are scarce and consequently are hard to find and expensive to hire. There are other challenges to establishing KPIs. You can only make effective decisions if you have the right data. This reflects the old adage, garbage in, garbage out. Unfortunately, many sites were not properly set up initially for web analytics. By its very nature, installation comes at the very beginning when site managers know the least on how web analytics can help achieve their site's goals. It is easy to make mistakes during installation about what data to collect. Furthermore, what is important to one person may not be important to another. Web analytics KPIs don't come in one-size-fits-all. Different functions on the site have different goals and consequently need different KPIs. Another challenge is that there are positive and negative site goals and consequently positive and negative KPIs. Increasing revenue and customer retention are examples of positive goals; things you want your site to achieve. But most sites also have negative goals; things they don't want to happen. They don't want customers to submit an order and not have the order confirmation page load. So sites need negative KPIs or red flags as well as positive KPIs. These are like the oil light in your car dashboard. As long as it is not lit you don't pay any attention to it, but as soon as it lights up, you focus on it immediately. Does every site need KPIs? A static web site probably doesn't need any positive KPIs because very little is changing over time. But even a static website needs red flags to minimize system failure. Dynamic sites, on the other hand, need both positive and negative KPIs because the site is constantly changing. Change highlights the value of KPIs. It's all about driving performance. The key to improving performance is trying new things. Leading site managers are constantly testing new ideas and using KPIs to determine what works and what doesn't. Working with web analytics is difficult; so how can you avoid failing KPIs? Start by acknowledging that it is hard and follow this methodical approach: Work backwards. Don't start with a report. Start with your goals in mind, both positive and negative. What kind of decisions will you be making to achieve your goals? What kind of insights do you need to make those decisions. Then what kind of data do you need to get those insights? Make it a team effort. This will help you address the skill disparity between detail and strategy, but you still need a professional web analytics person on your team, either as a full time employee or an outside consultant. You need their in-depth understanding of the data. Make it a cross-functional team because different functions will need different KPIs.
- 3. Have regular team meetings and begin each meeting with a review of your site goals. This will keep your goals on the top of everyone's mind on a day-to-day basis and thereby stimulate creative thinking on matching KPIs to goals. Don't start the installation process until you've clearly identified your goals and don't try to do it all at once. Start small with just 2 or 3 goals and add more as you become more experienced. Make sure your team is trained on how to use the web analytics tool. Training shouldn't be a one shot deal. Your team should get periodic refreshers that include insights into how to interpret the data. As you do more advanced training, it should focus more on interpretation and building the links to achieving site goals than on the mechanics of using the tool. Create before and after reports on each site change you make. This will identify what you've done and how it has affected the site, reinforcing the relationship between metrics and outcomes. While methodical, this process is hard work. But through it you should be able to establish 2 or 3 useful KPIs. Once you’ve had some success and understand the process for creating meaningful KPIs, you'll find it easier to create additional ones. Reference: 1. Sharing Web Analytics Insight Throughout an Organization by Jason Burby (http://www.clickz.com/showPage.html?page=3568551)