What is the Key Performance Indicator (KPI)?
A type of doance measurement companies use to check an employee’s or an activity’s success. Marketers look at KPIs to track progress toward marketing goals, and successful marketers constantly check their doance against industry standard metrics. Examples of KPIs include CAC (Customer Acquisition Cost), blog traffic sources, and homepage views. Choose KPIs that represent how your marketing and business are doing.
Example
Let’s consider an example of a software company developing a project management application. Here are some KPIs they might use:
- Customer Acquisition Cost (CAC): This KPI measures the average cost required to acquire a new customer. It includes expenses related to marketing, sales, and advertising. For example, if the software company spends $10,000 on marketing and acquires 100 new customers, the CAC would be $100 per customer.
- Monthly Active Users (MAU): MAU tracks the number of unique users who engage with the project management application within a specific month. It indicates the level of user adoption and engagement. For instance, if the application has 10,000 MAUs in a month, it suggests a healthy level of user activity and retention.
- Churn Rate: The churn rate measures the percentage of customers who stop using the project management application over a given period, typically monthly or annually. A high churn rate may indicate dissatisfaction or issues with the product. For example, if 100 customers out of 1,000 cancel their subscriptions in a month, the churn rate would be 10%.
- Average Revenue Per User (ARPU): ARPU calculates the average revenue generated by each user of the project management application. It helps assess the monetization strategy and revenue potential. For instance, if the software company generates $50,000 in revenue from 1,000 customers, the ARPU would be $50 per user.
- Customer Satisfaction Score (CSAT): CSAT measures the level of satisfaction among customers using the project management application. It is typically assessed through surveys or feedback mechanisms. For example, if 80% of surveyed customers rate their satisfaction with the application as “satisfied” or “very satisfied,” the CSAT score would be 80%.
By tracking these KPIs, the software company can gain insights into various aspects of its business performance, including customer acquisition, retention, engagement, monetization, and satisfaction. This data can inform strategic decisions, prioritize areas for improvement, and drive overall business success.