AN INTRODUCTION TO KPI (KEY PERFORMANCE INDICATORS)

Key Performance Indicator as the name suggests is an indicator particular to a firm, organization or institution that gives them the performance (qualitative/quantitative) over a set goal, that goal being the key priority to that firm.

Choosing the right set of KPIs for a organization is very important. This is because if the people running the company dont know what their primary goal is and have no defined standard to measure the same, they will lag behind and their focus would be too divided. In order to identify the right KPI, one must be clear of future targets and stratezise accordingly. Like for a particular firm, revenue growth rate may be the focus while for some other firm, customer satisfaction in terms of quality of goods may be the focus. In following slides, I present to you KPIs related to marketing.

KPI FOR MARKETING

Market Growth Rate Market Share Brand Equity Cost per lead Conversion Rate Search Engine Rankings (by keyword) and click-through rate Page Views and Bounce Rate Customer Online Engagement Level Online Share of Voice (OSOV) Social Networking Footprint Klout Score

Market Growth Rate

Understanding the size of the market in which a company is operating and the rate at which this market is shrinking or growing is a key indicator to assess future revenue growth potential. Market Growth Rate is usually measured on an annual basis but reports for the same may be submitted on a quarterly basis . Formula for Market Growth Rate: Market Growth Rate(%) = (Total sale in the market in this year/ Total sale in the market in last year) *100

Example of Market Growth Rate Analysis

The market growth rate is also a key indication of the product's stage in the product life cycle (the product life cycle will be discussed in an upcoming section). A high growth rate will usually indicate the market is in the growth phase, where growth is high and saturation is low. A lower, more-stable growth rate indicates product maturation and, of course, a negative market growth rate indicates the product decline stage.

Smartphones and their Growth Rate

Market growth Rate also gives prediction about the fututre and the companies may set their targets accordingly.
For example, for a smartphoneAccording to a new market research report, World Mobile phone & Smartphone Market (2010 2015), the total global mobile handset market is expected to reach US$341.4 billion by 2015 while smartphone sales will account for 75.8% of the overall mobile handset revenue at US$258.9 billion in the same year. Apple is expected to lead the growth till 2015 commanding largest share of the overall mobile handset revenue with 25.8% market share while Nokia will be at the second place with 21% market share. The global smartphone market is expected to register higher CAGR (24.9%) as compared to overall mobile handset market (14.7%) during 2010 and 2015.

So, if a company like Samsung emphasises on market growth rate as its KPI, it may well focus into smartphones

Market Share
Market share is the percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity. Increasing market share is one of the most important objectives of business. The main advantage of using market share as a measure of business performance is that it is less dependent uponmacroenvironmental variables such as the state of the economy or changes in tax policy. Market share is a key indicator of market competitivenessthat is, how well a firm is doing against its competitors. "This metric, supplemented by changes in sales revenue, helps managers evaluate both primary and selective demand in their market. That is, it enables them to judge not only total market growth or decline but also trends in customers selections among competitors.

FIGURE 1 - MARKET GROWTH RATE: MARKET SHARE MEASUREMENT

Company

Growth Annual from Sales Market Previo (USD Share us Million (%) Year ) (%) 742 617 105 60 1,524 48.6 40.4 6.8 3.9 11 13 24 75

Weighted Growth (%)

A B C D Total

5.3 5.2 1.6 2.0

Weighted Average Growth: 15%

Calculating Market Share

"Market share: The percentage of a market accounted for by a specific entity.

"Unit market share: The units sold by a particular company as a percentage of total market sales, measured in the same units.
Unit market share (%) = 100 * Unit sales (#) / Total Market Unit Sales (#)"This formula, of course, can be rearranged to derive either unit sales or total market unit sales from the other two variables, as illustrated in the following: Unit sales (#) = Unit market share (%) * Total Market Unit Sales (#) / 100Total Market Unit Sales (#) = 100 * Unit sales (#) / Unit market share (%) "Revenue market share: Revenue market share differs from unit market share in that it reflects the prices at which goods are sold. In fact, a relatively simple way to calculate relative price is to divide revenue market share by unit market share. Revenue market share (%) = 100 * Sales Revenue ($) / Total Market Sales Revenue($)

Example of Tata Motors Market Share in India

In recent times, the market share of Tata Motors has shrunk to single digit which was quite high a time ago. Now, Tata Motor realizes that for an automobile industry market share is an important KPI, so the company is keen on identifying problems. Some of the problems it has identified for the shrinkage are 1.poor quality, 2. a lack of model upgrades and 3. a perception that the companys cars are only good enough to be used as taxis. The company is keen on gaining back its lost market share.

Fig: Market Share of Tata over a period

Brand Equity as KPI

Brand equity is a phrase used in the marketing industry which describes the value of having a well-known brand name, based on the idea that the owner of a wellknown brand name can generate more money from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well-known names. Some marketing researchers have concluded that brands are one of the most valuable assets a company has,[5] as brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one. Elements that can be included in the valuation of brand equity include (but not limited to): changing market share, profit margins, consumer recognition of logos and other visual elements, brand language associations made by consumers, consumers' perceptions of quality and other relevant brand values.

Elements that can be included in the valuation of brand equity include (but not limited to): changing market share, profit margins, consumer recognition of logos and other visual elements, brand language associations made by consumers, consumers' perceptions of quality and other relevant brand values.

Measuring Brand Equity

Brand Equity is supposed to be an important KPI and a lot of companies rely on a brand name more than anything else. Brand Equity Index (Moran)Marketing executive Bill Moran has derived an index of brand equity as the product of three factors:

Brand Equity tree:

Effective Market Share is a weighted average. It represents the sum of a brand's market shares in all segments in which it competes, weighted by each segment's proportion of that brand's total sales. Relative Price is a ratio. It represents the price of goods sold under a given brand, divided by the average price of comparable goods in the market. Durability is a measure of customer retention or loyalty. It represents the percentage of a brand's customers who will continue to buy goods under

COKE
By looking at the Picture, we realize That coke has Maintained Familiarity More Than pepsi

PEPSI

But also, we see that pepsi h has changed a lot which one may say is a way to keep up with the changing times.

So, it depends a lot on which consumers you target in the way you shape up your brand.

Examples of Brand Equity (India) Coke v/s Pepsi

Cost Per Lead and its Formulation

Stands for "Cost Per Lead," and is used in online advertising. CPL defines how much revenue a publisher receives when he creates a lead for an advertiser. For example, the publisher may place an ad for an investment site on his website. If a user clicks on the advertisement link, she is directed to the advertiser's website where she can sign up for an investment account. If she chooses to sign up, a lead has been created and the publisher is paid a certain amount based on the CPL.

Example: You have a company that did 31 jobs for a total of $389,529 in sales over the last 12 months. You had 124 calls in for estimates, or leads. You spent $13,750 on advertising. Dividing $13,640 by 124 we get a cost of $110 per lead.

We know that we sold 31 jobs for a total of $389,529 in sales, resulting in an average job size of $12,565. Assuming our job size will remain unchanged, to reach $500,000 next year we need to sell 40 jobs ($500,000 / $12,565). We know that we sold 31 jobs out of 124 leads last year, for a sales ratio of 1 in 4. To sell 40 jobs this year, we'll need 160 leads, an increase of 36 leads.

160 leads x $110 = our new advertising budget of $17,600.

Analysis of a B2B companys CPL

Marketo defines a lead how most companies might identify a marketingqualified lead, so at Marketo prospects are in effect its traditionally defined leads. Confused yet?

Virtual beats traditional in trade shows

Virtual trade shows stand out in this list because they create the most prospects at the lowest cost-per-lead. In fact, the figure on the far right of this chart, lead-to-opportunity index, is calibrated to the virtual trade show statistics. For us, virtual trade shows work great, Jon says. You get the database really cheap and they become leads, too. He adds that pay-per-click advertising has a fairly high cost-per-lead, but they also convert to opportunities at a high level at the highest velocity (in terms of least days), and they almost double the closest conversion-to-lead figure. It is worth it to Marketo to spend the extra cost-per-lead money on PPC ads

This chart takes a look at Marketos prospect generation metrics for the last two quarters of 2010. You will notice above the line are efforts Jon pays some marginal cost for and each includes its cost-per-lead. Below the line are Marketos non-marginal-cost inbound marketing efforts.

Conversion Rate as KPI

Conversion marketing is an e-Commerce phrase most commonly used to describe the act of converting site visitors into paying customers. Although different sites may consider a "conversion" to be some sort of result other than a sale. One example of a conversion event other than a sale is if a customer were to abandon an online shopping cart, the company could market a special offer, e.g. free shipping, to convert the visitor into a paying customer. A company may also try to recover the abandoner through an online engagement method such as proactive chat in an attempt to assist the customer through the purchase process Conversion rate = No. of Goal Achievements/ Visits

Methods of increasing conversion rates in e-commerce

Among the many actions taken to attempt to increase the conversion rate, these are the most relevant: Generate user reviews of the product or service clear distinction of the website for a certain conversion goal (e.g. "increase sign-ins for newsletter") Improve and focus the content of the website (which may include text, pictures and video) to target conversion Increase usability to reduce the barriers to conversion Improve site navigation structure so that users can find and browse without thinking too much about where to click Improve credibility and trust by showing third-party trust logos and by good site design use AIDA (attention, interest, desire, action) to move the user through the conversion funnel

An Example For Conversion Rate- FLIPKART

In August, Flipkart digital VP Sameer Nigam indicated that, Flipkart crossed Rs 1 billion in revenue in July. This is Rs 100 crore in revenue for the month, or in USD terms is about USD 18 million (taking 1 USD = 55.1948 INR, average for the month). Now popular site, Trafficestimate.com, gives traffic estimates for popular web-sites on the net. The graph below shows traffic estimates for Flipkart.

An Example For Conversion Rate- FLIPKART

We see that Flipkart did approximately 33.11 million visitors in the month of July. Now most ecommerce sites have a 1-2% conversion rate (traffic to customers). Assuming a 1.5% conversion rate we get the estimate that Flipkart had 33.11 million X 1.5% = 0.5 million customers (approx), who bought something at the website. So how much does the average customer at Flipkart spend ? According to the comScoreASSOCHAM report on the State of E-Commerce in India (2012), this figure stands at $35 per transaction. This means that the estimate for Flipkarts revenue in the month of July is approximately 0.5 million X $35 = 17.5 USD million As we can see this is pretty close to reported revenues. Further, plotting revenue estimates by this method for the last 12 months, we get the following graph

Search Engine Rankings And Click-Thru Rate

Click-through rate (CTR) is a way of measuring the success of an online advertising campaign for a particular website as well as the effectiveness of an email campaign by the number of users that clicked on a specific link. The purpose of click-through rates is to capture customers' initial response to websites. Most commercial websites are designed to elicit some sort of action, whether it be to buy a book, read a news article, watch a music video, or search for a flight. People generally don't visit a website with the intention of viewing advertisements, just as people rarely watch TV with the purpose of consuming commercials CTR= Clicks/Impression Click-through rates for banner ads have fallen over time. When banner ads first started to appear, it was not uncommon to have rates above five percent. They have fallen since then, currently averaging closer to 0.2 or 0.3 percent. In most cases, a 2% click-through rate would be considered very successful, though the exact number is hotly debated and would vary depending on the situation. The average click-through rate of 3% in the 1990s declined to 2.4%-0.4% by 2002.

Click Through Rate of Facebook Ads- An Example

Refer the link- http://digiday.com/platforms/facebook-ads-are-killing-it-but-why/

The average click-through rate for Facebook Inc. ads for Nanigans retailer clients stood at 0.20% in the third quarter of 2013, up from 0.05% the same period a year earlier. However, the cost-per-thousand (CPM) impressions for the ads increased 169.7% to 89 cents in the third quarter compared with 33 cents a year earlier. But while CPM costs have risen, the cost per click has decreased. The average cost per click fell to 45 cents in the third quarter, down from 62 cents a year earlier.
Also refer to - http://www.smartinsights.com/internet-advertising/internetadvertising-analytics/display-advertising-clickthrough-rates/