KPI - what is this in marketing and how to calculate it?

At enterprises, managers often use the fashionable word "KPI"; what it is, I want to understand and the common man in the street. The essence of this concept is that all the goals of the organization can be divided into levels. These goals are brought to the attention of employees in the form of certain elements - plans, activities.

What is KPI?

KPI - these are the main indicators of the company / enterprise's performance, helping it achieve its goals . Translated from English, this abbreviation means key performance indicators, and more often in Russian is translated as "KPI" - key performance indicators, which is not entirely true, because the English word performance, in addition to efficiency, also implies performance.

KPI - what is it in simple words? Any enterprise consists of units, each of which solves those or other tasks. For example, the director is primarily interested in the costs of the company, the accountant - in the correctness of the paperwork of the company, the head of the sales department - in the receivables of the firm. All these elements, collected together and represent kpi - indicators of efficiency and effectiveness of the company.

What is KPI in sales?

Key performance indicators in sales are different for each firm and are divided according to the stage of its development and a specific function:

• by sales volume: sales, shipments, sales volumes and direct sales (this parameter is expressed in percentages and is calculated for a certain period, for example, a quarter);
• on profit margins (the company aims to reach a certain planned profit in the future);
• on the promotion of new products (here plans are set for some specific groups of goods of the company);
• to attract new customers (if sales in the firm fall, then it will be sensible to attract new customers, or work with a new category of customers, the development of a new market).

KPI - "for" and "against"

Indicators KPI have both their supporters and opponents. We give a few arguments of both. Pros of the system under consideration are the following:

• Clear installation for ordinary employees;
• development of relations of cooperation in the organization;
• reduction or complete elimination of voluntarism by management;
• a clear incentive mechanism for employees;
• clear development goals, results-oriented;
• The possibility of adjusting the activities of employees with negative results of their work.

As for the minuses of the KPI concept, they are the following:

• since the calculation options are somewhat different, the evaluation may be biased;
• Key performance indicators are sometimes the only incentive and evaluation mechanisms in the enterprise, which is not enough;
• the high cost of implementing such evaluation procedures, accounting - feedback is needed to managers, but not all employees are well trained to calculate the required ones independently.

Types of KPIs

The KPI system is divided into the following several types:

1. Target : reflect how firm is close to achieving the marketing goal.
2. Process : this is how effective the process of the implemented system is, they help to evaluate the activity of the organization and, in the presence of errors, organize the process in a different way.
3. Project : they are aimed at specific specific tasks and show whether the planned work is being carried out in the company as a whole.
4. External : reflect the situation on the market as a whole; employees can not influence their meaning.

How to calculate KPI?

Key performance indicators of KPI can be calculated in several stages:

1. The choice of KPI (from three to five), for example: the number of new customers; the number of purchases made a second time or more; reviews from grateful customers.
2. Calculation of the weight of each selected indicator with a total amount of one point (for example, 0.5 for attracted customers, 0.25 for reviews on the site).
3. Compilation and analysis of statistics for the selected period (quarter, year).
4. Drawing up a plan to increase the selected values ​​for the selected period.
5. After the lapse of the period - the calculation of the coefficient of effectiveness (comparison of purpose and fact).

Key performance indicators - books

The system of key performance indicators is described in a large number of domestic and foreign publications that will answer the question. KPI - what is it?

1. Kulagin O. (2016) "Management by objectives. Secrets of KPI technology " - a new manual, many examples and theoretical information.
2. Kutlaliev A., Popov A. (2005) "Advertising Effectiveness" is an old but very well-written book.
3. Wayne W. Eckerson (2006) "Dashboards as a control element" is an easily written application manual with many examples explaining what KPI is.