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Web Site Measurement Hacks
By Eric T. Peterson
August 2005
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HACK
#94
Use Key Performance Indicators
Key performance indicators are a powerful way to present complex information that works to maximize the use of web measurement data within your organization
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A key performance indicator (KPI) is any ratio that summarizes two or more important measurements and is tied directly to your business objectives . Examples include ratios like your order conversion rate (orders divided by visits) or the average number of page views per visit: numbers that, when they change significantly, prompt someone to pick up the phone, send an email, instant message, or walk down the hall and say, "Something is going on; we need to look into this more deeply right away!" The use of key performance indicators is a powerful and advanced strategy that can dramatically increase your ability to get executive buy-in for your metrics reporting strategy .

A handful of really, truly useful key performance indicators is listed in . These are the kinds of useful ratios that are presented on a daily basis to captains of industry like Michael Dell, Jeffery Bezos, and Meg Whitman: CEOs who clearly get the power of the Internet and understand that every minute counts in an increasingly competitive world.

Table 0. Really, truly useful key performance indicators

Order conversion rate

Buyer conversion rate

Cart conversion rate

Checkout start rate

Revenue per visit

Revenue per visitor

Average order value

Visits per visitor

Page views per visit

Percent committed visitors

Lead conversion rate

Home page bailout rate

Average number of items per purchase

Average time spent on site

Percent file take

While provides a handful of examples, there are hundreds of other potentially valuable measures. Your central challenge is to figure out which ones are best for your business. Here are some recommendations to consider:

Refer back to your business objectives
Figure out which indicators are really "key"

George Orwell once wrote that "all numbers are created equal, but some are more equal than others" (or something like that); clearly Mr. Orwell was a web measurement guru in his spare time. While the KPIs most valuable to specific business models are covered later in this chapter, determining which numbers are "more equal than others" is a great place to start. In general, any number or ratio that senior managers ask about on a regular basis should be considered important.

Make sure your indicators promote action

The best KPIs are those that, when people look at them and realize they've gone down from week to week, make people freak out and call meetings. The numbers that make people the most nervous are the best candidates, always. Conversely, if you're thinking about a number but cannot think of any action you would take if that number absolutely tanks, set that number aside.

When in doubt, simply consult the hacks describing specific key performance indicators for online retail , advertising and content , customer support , and lead generation .

Use the language of the business to increase familiarity.

Another nice benefit of using key performance indicators is that you're able to use your own words to describe the numbers, not the words used in your measurement application. It sounds simple, but this can be very important; you don't want to force people inside your organization to learn new names for ideas they're already familiar with. For example, if people are familiar with "average sale value" (ASV) not "average sale price" (ASP) use average sale value in your report. Familiarity with the data lowers the barrier to understanding and use.

Figure 2. KPI dashboard


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