The Return on Investment (ROI) and Key Performance Indicators (KPI) are both strong metrics an organization can use to measure how successful they are in obtaining their goals and objectives. They are useful tools to help organizations analyze their efforts, both financially and non-financially. A key question has been, is there a right or wrong metric to use?
Understanding the Return on Investment
Since the ROI is so strongly geared towards the financial aspects of an organization, it hones in on the company profits. This includes all resources used to generate that profit. But, you can’t measure your ROI with social media totally. You can measure how many hours employees placed into researching and writing blog posts, and the designers creating the images for them, but you can’t state what returns that one post generated in sales. The only way organizations can come close to tracking ROI for social media is using tracking tools such as the Facebook Conversion Measurement, or tracking visitors on landing pages and coupons.
ROI is not black and white. It’s not always saying your return will be positive either. For instance, let’s say the cost to place an ad in a highly recognized online magazine is $1500. Your organization has tracked $2000 worth of business from this. Your ROI did not turn out to be a $500 profit though. Have you calculated how much it cost to design the ad, run it by marketing, and legal? However, you also could have a customer contact your sales team 3 months later because they did click that ad and signed up for your monthly newsletter.
How to Measure Your KPI
A KPI must be well thought out. An organization can’t say they want to generate new customers and have no way to distinguish the new from repeat customers. How can you tell your conversion rate? A few other things to measure your KPI by include:
What do your unique visits look like? This helps you measure what content seems to be most important to your customers. You may notice a trend such as consumers spending more time with your white papers than a traditional blog post.
- Who is looking at your content? Google Analytics is excellent at helping you find out where people are viewing your content. This can help you in planning where your marketing efforts should be focused.
- What is the most engaging and important content for your readers? You can actually measure with certain social media tools what your audience is spending the most time viewing. The longer they are paying attention to your content, the more engaged they are and possibly willing to share that content. You also know that you are not going to have a high conversion rate if readers are doing a 2-minute overview of a whitepaper.
Some of your KPI’s are going to be set up as long-term goals. For instance, if you want more website sales, you may start by upgrading your website to become more responsive, changing your vendor for your e-commerce page, and redesign it so it’s easier to navigate. From there, you can measure your website stats to see if consumers are on your page longer and making more purchases.
So Which Is Actually Best for an Organization: ROI or KPI?
Measuring the ROI has been the talk of the town, while KPI has become more important and recognized in recent years. Both are vital to helping organizations understand where they are in achieving their goals. The ROI assists organizations to understand their financial metrics. The KPI can measure both financial and non-financial metrics.
The reality is that both are vital for an organization. The ROI can be useful for executives in clarifying what is going on with their business financially. The ROI can actually be a KPI as well. The KPI will help them plan and execute their strategy for success. The KPI will serve as an excellent guide and the ROI can tell how well the strategic plan is working.
In the end, an organizations goal is to increase their revenue and be profitable. Setting goals with their KPI and attaining them as well as having positive ROI’s are the key to both. They work hand in hand, and although your organization may be used to using a strict financial ROI measurement, taking the time to place a few KPI’s in place may grow your business much further.