Indicators
Key Performance Indicators (KPI) are financial and non-financial metrics used to help an organization define and measure progress toward organizational goals. more...
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KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action. The act of monitoring KPIs in real-time is known as business activity monitoring. KPIs are frequently used to "value" difficult to measure activities such as the benefits of leadership development, engagement, service, and satisfaction. KPIs are typically tied to an organization's strategy (as exemplified through techniques such as the Balanced Scorecard).
The KPIs differ depending on the nature of the organization and the organization's strategy. They help an organization to measure progress towards their organizational goals, especially toward difficult to quantify knowledge-based processes.
A KPI is a key part of a measurable objective, which is made up of a direction, KPI, benchmark, target and time frame. For example: "Increase Average Revenue per Customer from £10 to £15 by EOY 2008". In this case, 'Average Revenue Per Customer' is the KPI.
KPIs should not be confused with a Critical Success Factor. For the example above, a critical success factor would be something that needs to be in place to achieve that objective; for example, a product launch.
Identifying indicators
Performance indicators differ from business drivers and aims (or goals). A school might consider the failure rate of its students as a Key Performance Indicator which might help the school understand its position in the educational community, whereas a business might consider the percentage of income from return customers as a potential KPI.
But it is necessary for an organization to at least identify its KPI's. The key environments for identifying KPI's are:
Having a pre-defined business process.;
Having clear goals/performance requirements for the business processes.;
Having a quantitative/qualitative measurement of the results and comparison with set goals.;
Investigating variances and tweaking processes or resources to achieve short-term goals.;
When identifying KPI's the acronym SMART is often applied. KPI's need to be:
Specific;
Measurable;
Achievable;
Result-oriented or Relevant;
Time-bound;
Marketing KPIs
Among the marketing KPIs top management analyzes are:
Customer related numbers:
New customers acquired;
Status of existing customers;
Customer attrition;
;
Turnover generated by segments of the customers - these could be demographic filters.;
Outstanding balances held by segments of customers and terms of payment - these could be demographic filters.;
Collection of bad debts within customer relationships.;
Demographic analysis of individuals (potential customers) applying to become customers, and the levels of approval, rejections and pending numbers.;
Delinquency analysis of customers behind on payments.;
Profitability of customers by demographic segments and segmentation of customers by profitability.;
Many of these aforementioned customer KPIs are developed and improved with customer relationship management.
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