3 items tagged "KPI"

  • Aligning your business with your data team

    Aligning your business with your data team

    It’s important for everyone at a company to have the data they need to make decisions. However, if they just work with their data team to retrieve specific metrics, they are missing out. Data teams can provide a lot more insights at a faster rate, but you will need to know how to work with them to make sure that everyone is set up for success. 

    Data teams can be thought of as experts at finding answers in data, but it’s important to understand how they do that. In order to get the most value out of your collaboration, you need to help them understand the questions that matter to you and your team and why those questions need to be answered. There are a lot of assumptions that get built into any analysis, so the more the data team knows about what you are looking for, the more knowledge they may find as they explore data to produce their analysis. Here are four tips to make more productive requests from members of your data team: 

    Approach data with an open mind

    It’s important to treat the data request process as an open-ended investigation, not a way to find data that proves a point. A lot of unexpected insights can be found along the way. Make your goal to ask questions and let your data team search for the answers. This approach will allow you to get the best insights, the type of unknowns that could change your decision for the better. If you put limitations on what you’re asking the data, you’ll end up putting limitations on the insights you can get out of your inquiry. 

    To really dig into this, think about how questions are answered scientifically. Scientists treat any bias as an opportunity for the insight to be compromised. For example, let’s say you are looking to improve customer satisfaction with your product. Requesting a list of customers with the highest and lowest NPS scores will give you a list of people who are happiest or most frustrated, but it is not going to let you know how to improve customer satisfaction. This request puts too much attention on the outliers in your customer base rather than identifying the key pain points. That’s part of the picture, but not all of it. If you’re trying to create a program that targets your goal, let your data team know the goal, give them a few optional starting points, and see what they come back with. They might surprise you with some sophisticated analysis that provides more insight and helps you launch a fantastic program. 

    Start with a conversation, not a checklist

    The single biggest mistake a line-of-business professional can make when requesting data is to present a data expert with a list of KPIs and tell the data team to just fill in the blanks. This approach misses so much of the value a data team can provide. Modern data teams have technology and abilities that allow them to go much further than just calculating numbers. They can guide analytical exploration through flexible, powerful tools to make sure you’re getting the most valuable insights out of your data.

    Instead of a list of metrics, think about starting your data request as a meeting. You can provide the business context needed and a list of questions that you want answered. You can even present some initial hypotheses about what those numbers may look like and why they might move in one direction or another. This is a great way to kick off the conversation with your data counterpart. From there, you can benefit from their experience with data to start generating new and more informed questions from their initial inquiries. The data team’s job is to get you information that helps you be more informed, so give them as much context as possible and let them work as a problem solver to find data-driven recommendations.

    Data should recommend actions, not just build KPIs reports

    A lot of standard business KPIs measure the results of company efforts: revenue, lead conversion, user count, NPS, etc. These are important statistics to measure, but the people tracking them should be very clear that these numbers track how the company is moving, not why it is moving that way. To make these data points actionable, you need to take analysis further. Knowing that your NPS is going up or down is useless if it doesn’t inform a customer team about the next step to take. 

    A good data team will map important KPIs to other data and find connections. They’ll comb through information to find the levers that are impacting those important KPIs the most, then make recommendations about how to achieve your goals. When you get a list of levers, make sure to understand the assumptions behind the recommendations and then take the right actions. You can always go back to those KPI reports to test if the levers are having the intended effect.

    Data requests are iterative, give the data person feedback

    Communication about data should not end when the data has been delivered to you. It’s important to dig into the analysis and see what you can learn. Instead of reporting that data or taking action on it right away, you should check with your dashboard creator to make sure that he or she can verify that you’re reading all of the data properly and that the next steps are clear. There are a lot of ways to misinterpret data, a good way to prevent mistakes is to continue communicating.

    Even if you’ve gotten the right takeaways from the data, it’s still good to consult with your dashboard creator and go over your interpretation of the information so they know how you read data. You may need a follow-up meeting to restart with the overall question you want to answer, then see what additional data needs to be collected or what modifications are needed to make the report or dashboard work best for your intended use-case.

    Author: Christine Quan

    Source: Sisense

  • Three objectives to guide your business' KPI's

    Three objectives to guide your business' KPI's

    Many data analytics vendors give users the ability to measure everything but offer little guidance. This can be overwhelming for new users. It is very important to determine the metrics that really matter to your business. To get you started, your business should establish critical metrics, and then teach you how to quickly identify areas of concern to meet the unique needs of your business. 

    We have learned three objectives that serve as guideposts to help you decide what to measure. These guideposts are also a rubric to make sure that each functional area of the business is aligned toward overall success. In other words, every area of the business, like sales, inventory management, operations, and finance, is measuring core Key Performance Indicators (KPIs) that contribute to the overall success of the business. The three key objectives are improved customer experience, optimizing growth, and increasing profitability. Excelling in these three areas will drive your business goals. Each of these objectives drives and supports the others and creates a framework for success.

    1. Improve customer experience

    When considering how to improve customer experience, it may be helpful to begin asking the following questions. What is the experience of your customer base? How would you measure that experience? Do you know what factors might be impacting your customers’ experience? Do you know how to measure those factors?

    Customer experience is critical to increasing your market share. However, this is difficult to do if your customers are leaving because they are dissatisfied. So, how can we make sure our customers have a great experience and want to keep us as their supplier? First, customers want their orders on time. It might be they need their order delivered to a job site so they can complete their work.

    In this case, a key metric is 'delivery in full, on time' (DIFOT). A gauge on your dashboard can quickly show you what percentage of your orders are delivered in full and on time. In just a few clicks you can go from a high-level summary to a detailed analysis of your data to see DIFOT rates by warehouse, category of products, individual products, and more to pinpoint the problem. Is it a shipping problem from a particular warehouse? Is there a problem with a product category? Do I have enough product in stock? This is a key element to a positive customer experience. To be sure you always have the right product in stock, create a KPI to measure 'stock outs' or priority items out of stock.

    2. Support company growth

    When considering ways to support the growth of your company, begin with the following questions: What are your top growth opportunities for new customers or new products? Are you aware of your biggest opportunities? Where might you have some risks? Can you quickly list these risks and opportunities? Growth is the key to business success. If you’re not increasing your share of the market, or at least keeping up with your competitors, then eventually you’re going to be out scaled. Maybe you have enough market share for the immediate future, but if you’re not striving to grow, then you are likely to be overtaken by your competition.

    It is important for sales managers to be alerted to 'customers in decline'. By having market analysts monitor customers whose sales have been declining for the last few months, your sales team will be able to quickly intervene before the sale is lost. Begin with the customers with the highest sales values to prevent the greatest losses. Another important alert is new customers and the product categories and individual products they are purchasing. The purchasing manager should pay attention to the sales trends for new products to ensure there is always enough stock on hand. 

    3. Enhance profitability

    What can you do today to move the needle on your profitability? This is a core objective for every business. In the beginning, a small company must focus its efforts on gaining volume. However, once a company has matured, it is in a position to make small, subtle changes that will have a tremendous impact on profit. 

    Improving profitability usually involves making small changes in highly repeated business processes, adapting to your environment. For instance, strategic price increases can improve your profit margin without risking sales volume. Improving delivery processes can reduce the cost of each truck leaving the warehouse. Minimizing deadstock frees up cash that can be used on other profitable investments. To monitor profitability, your sales manager can create a KPI to monitor margin trends, deadstock, and low turns.

    When measuring the right KPI's, your sales team will know which customers are at risk. Your accounting team will know to keep an eye on those customers’ accounts receivables. Your warehouse will know how they’re performing against on-time delivery targets. In this way, each area of your company can work to meet the same three objectives to drive your success.

    Source: Phocas Software

  • What to track when running a subscription-based business model

    What to track when running a subscription-based business model

    The subscription-based business model is no longer the preserve of magazines and home security systems. Today, we’re seeing it employed in a variety of other markets, including everything from software to education to physical products.

    In order for these operations to be profitable and sustainable, however, they require constant optimization. If you get the right data in hand, it becomes a lot easier to know which direction to take.

    Five KPIs and metrics worth tracking

    The subscription business model isn’t new, but today it’s become workable and even as valuable today for new lines of business as it was decades ago. Subscription sales yield an array of potential benefits, including predictable revenue, higher customer lifetime value, easier opportunities for up- and cross-selling, and greater customer loyalty.

    In non-traditional industries, like men’s grooming, it has a way of differentiating a business from the pack.

    Another benefit of running a subscription business is that the owner gets access to mounds of useful data. And if you employ the data strategically, you can learn a lot about who your customers are and what they might want.

    In order to gain such insights, though, you have to home in on the appropriate key performance indicators (KPIs) and metrics. Here are a few that we recommend you try to keep tabs on:

    1. Customer Acquisition Cost

    A successful business has to know exactly how much it costs to acquire each customer. Once you have that information, you can run projection models that will help you predict fairly accurately how many new customers you will be able to onboard over a given period of time.

    For example, if you know it costs you $17 to acquire a new client, and you have a budget of $75,000 for the next 90 days, you can calculate that you should be able to bring in somewhere around 4,400 new customers.

    Second, customer acquisition cost helps you zero in on profitability and figure out how much you will have to charge in order to reach various desired profit levels.

    2. Growth vs. Churn Rate

    Churn, also known as attrition, is a critical concern. This is the rate at which you lose customers each month. (If you have 1,000 total members and you lose 150 each month, your churn rate is 15%).

    Conversely, your growth rate is the number of new members you typically land each month. In order to expand your customer base, you obviously need the growth rate to be higher than your churn rate.

    3. Impact of Dues Increases on Renewal

    According to one study, dues increases of less than 20% do not typically result in a substantial drop in overall renewal rates. Anything above 20% does tend to damage retention rates, however.

    Frequency and timing also matter. 'The more often you raise dues, the less the amount should be', Membership Works advises.

    'If you wait too long and have to go with a high percentage, you risk member anger. Smaller increases on a more regular basis can train your members to expect that increases will happen.'

    In terms of data, you should be tracking the impact your dues increases have on the renewal rate. In other words, what percentage of your member base renews when you raise your prices versus what percentage cancels or lapses.

    4. Lifetime Value

    Lifetime value (LTV) is worthwhile to know in every business model, but that’s especially the case with subscription-based companies. This number can be hard to pin down, but it’s worth a serious attempt to obtain. It helps determine what your sustainable customer acquisition cost will be, and when it makes sense to invest more in this area.

    5. Member Engagement

    No concrete metric tracks member engagement across the board, but you’d do well to look for key performance indicators in your data. If you run a membership website, you might study the number of times a member logs on per week.

    If you sell a solid consumer item, a useful metric would be the frequency with which a customer reorders that product. In essence, you’re looking for signs that people are interacting with you on an ongoing basis.

    Leveraging insights for growth

    We live in a digital world where data and data collection are ubiquitous. Companies have millions of data points available to them at their fingertips. But how many of these firms are actually making serious use of the loads of information they possess?

    It’s one thing to have a lot of raw information and various isolated insights. It would be something else entirely to be able to leverage those insights in a way that optimizes, expands, and improves your ongoing operations.

    So as you gather data and analyze certain metrics and KPIs, make sure you have a plan in place to make great use of those numbers… or develop one as soon as possible based on what your metrics are hinting to you. You’re either going to sink or swim with this; there isn’t much in-between.

    Author: Larry Alton

    Source: SmartDataCollective

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