What Are Your KPIs and Why Do They Matter?
If you’re thinking about marketing for your fashion startup, you’re likely running into a lot of mentions about metrics, measuring success, and these things called KPIs. What do they mean, exactly, and how do you decide what’s right for you and your business?
Let’s start with the basics. KPIs are “Key Performance Indicators,” which are, simply enough, the most important numbers that you choose to measure on a regular basis to track how your business is performing. You’re in charge of setting these based on your goals, so it’s up to you which numbers are the right ones to be measuring.
How Many KPIs Should I Have?
At the very top level of your business, you should really be focusing on improving just three to four metrics. By the way, this doesn’t mean you shouldn’t be measuring more than three things, but you should be laser-focused on improving and growing just a few things, otherwise you may spread yourself too thin.
Here’s an example: Your marketing KPIs could be new website visitors, new customers, and total checkout value. By focusing on improving those three numbers, you can easily narrow down your focus on how to drive more visitors to your website, how to get those new visitors to buy for the first time, and then how to get them to spend more once they’ve decided to buy.
How To Change Your KPIs As Your Business Grows
You can change your KPIs as your business grows and your focus shifts. Perhaps you’ve figured out a few fantastic, ROI-positive ways of getting new customers in the door, and now you want to focus on keeping your existing loyal customers coming back. You could change one of your KPIs to customer retention or customer lifetime value, and then start coming up with ways to improve that going forward.
Narrowing down your KPIs also helps you focus your marketing strategy. Evaluate any marketing campaign opportunities against the question: will this help me improve my KPIs? Is this the best opportunity to improve my KPIs? If not, why am I doing it? As an entrepreneur and founder, you don’t have the time for marketing tactics that aren’t taking you one step further towards the goals you’ve set for yourself.
How Often Should I Look At My KPIs?
Know them by heart. It’s best to be looking at your KPIs weekly, if not daily. It’s easy to start simple with a spreadsheet where you simply enter the numbers every week at the same time. Once you start seeing patterns and trends, for example, when you run a big influencer campaign and see your new traffic jump 30% in a week, you will know you’re moving in the right direction.
It’s helpful to set a goal for yourself too, like improving your sales 5% each week, for example. The best rule of thumb is to set one that feels just out of reach. You don’t want to set a goal that’s so easy that you can beat it every week without breaking a sweat. It’s better to set a goal that you can probably hit three times out of four when you’re really focused on it. It’ll make beating your goal that much sweeter every time!
What Are The Right KPIs for Me?
Let’s review a few KPIs that you can choose for your own business. We’ll focus on marketing KPIs here, but keep in mind that you can also have KPIs for all business departments like inventory, logistics, and finance.
New Customers: This one’s simple. How many new customers are purchasing your product each day or each week? Make sure to differentiate between a new customer and an existing customer coming back to purchase more (which is also great, but a different metric!).
Unique Visitors: You can measure a few different metrics when it comes to your website traffic, but unique visitors is a good one that’s readily available on Google Analytics dashboards if you’re not sure where to start. As the name states, this one tells you how many unique people are visiting your website within a certain period of time. It’ll ignore people who visit more than once.
Total Sales: This includes sales from new and existing customers, and will be the best overall indicator of your business as a whole. If you want to get a better understanding of where your sales are coming from though, you’ll need to dig into a more specific metric. For example, you could look at new customer sales vs. existing customer sales to see who the sales are coming from, or total checkout value to see if your increase in total sales is due to people just buying more on average, rather than an increase in new customers.
Customer Acquisition Cost (CAC): How much does it cost you to get a new customer each time? This should include your costs for ads, events, samples, marketing materials, etc., so you get a full picture of what each new customer costs to acquire. Make sure you include costs from paid channels like Facebook ads as well as organic/earned channels like PR and organic social! This one is easy to calculate, just take your total costs and divide them by your total new customers within a certain period of time. You can also break it down by channel so you get Facebook acquisition cost, for example.
Customer Lifetime Value (CLTV): This tells you the average value that a single customer has over their lifetime. Ideally, you’re looking for customers that will come back time and time again to purchase more from you, so your customer lifetime value should be more than just what they purchase in their first order. This is a good metric to compare to how much it costs to acquire a new customer.
Customer Retention: How many of your customers come back within a certain period of time? The more customers you retain, the more you’d be willing to pay for a customer because you know they’ll stick around and spend more. Loyalty programs, email marketing, and customer service are key factors in improving customer retention.
Regardless of which KPIs you choose to focus on, you want to spend time reviewing them and making decisions base don what you’re learning. The more you do this, the better business person you become.