• by Judah Phillips , August 29, 2008

Web Analytics Key Performance Indicators (KPIs) are critical for understanding the huge volume of data in your Web analytics tool.  While it's wonderful to have a tool that lets you cut, cross, and slice datasets in innovative ways, it can be a challenge to frame the data or put it in context in a way that helps your business optimize the Web site and meet customer needs.  That's why I like KPIs -- they identify meaningful, business-focused relationships in your analytics data.  By understanding KPI drivers, setting expectations for KPI performance, and analyzing your KPIs toward defined goals for those KPIs, you increase understanding of web data, alleviate data confusion, and provide focus for the usage of your Web analytics tool.

Several activities can assist the creation of KPIs.  Here are a few of them:

·    Determine the Business Strategy.  KPIs can help you figure out if your strategy is working.  To find the KPIs that will help, the Web analyst should be asking the question "how can Web analytics data be used to assist and evaluate decisions that enable the business to deliver on its strategy?"  

·    Define the Site's Goals and why the Site Exists.  A consensus-based understanding of why your site exists enables effective use of online metrics. You need to define the purpose of your site in order to create effective KPIs.  Once you've defined your site's purpose, you are positioned to examine Web data in way that helps you determine whether your site delivers on its purpose - does it exist effectively. Create your KPIs, identify goals for your KPIs, and track your performance against those goals.

·    Recognize Value Drivers.  How does the business make money on the site? Monetization, in cases where profitability is important, influences what you should be measuring.  If you run a media site, you probably make money from selling advertising that is driven from content consumption (the recency and frequency), conversation (social media, such as blogs), and newer types of media products (video, rss, and so on).  You may generate profitable revenue when people complete certain value-driving actions, like conversion events (signing up for newsletters, webcasts, print subscriptions) or lead generation (downloading certain content types, like white papers).  Thus, you create goals for and measure KPI performance around those value drivers.

·    Map Organizational Roles.  Classify your organization into audiences for your KPIs based on what they do on your Web site.  You may create KPIs around the organizational functions and business actions of the actors who receive your KPI reports.  Function defines the group that KPIs are focused for, such as product development or editorial.  Action defines what those people do on the site to make it successful.  By understanding the functions and actions of key actors on your sites, you gain insight into the type of data needed in KPIs and the number of different KPI reports you may need to roll out.

·    Understand the Customer and be Customer-Centric.  KPIs purely focused on internal functions and actions are important, but they need to be customer focused.  If you think measuring conversion is important, while your customers tend to come to your site for informational or non-transactional purposes and then go elsewhere to convert, you are measuring the wrong thing.  You may be disconnected from the reality of why your site exists - to serve your customers.  Learn customer goals by listening to them!  Use VOC (voice of customer) data, competitive intelligence, market research data, and examine historic behavioral data of key segments.  Make sure you don't select KPIs just because they are easy to measure or that are inane, petty, narrow, self-centered, or not focused on helping your business meet customer demand.  Instead, create KPIs that help guide and drive action internally so that your business can focus on meeting the needs of your customers by optimizing the site.

Framing your KPI development around the five bullet points I listed above will help you create KPIs that assist your team in guiding business performance toward goals -- while not forgetting to consider some of the core elements of online business: business strategy, site performance goals, value drivers, organization behavior, and customer-centricity.