What are the KPIs in business intelligence?
The KPIs in business intelligence are typically around major business areas such as financial metrics, marketing metrics, customer service metrics and HR metrics. KPIs also cover specific areas like project management metrics and retail metrics. These KPIs are measurable outcomes that indicate the company’s performance against its goals. To define your KPIs for successful business intelligence, you have to identify which aspects of your business you want to look into and have all the relevant data in your hand. Investing in a powerful business intelligence tool should let you calculate your KPIs faster, with many of them capable of diving deep into your data and generating novel insights to inform your next decisions and actions.
The best performing businesses work their way through numbers, and there’s no reason why you shouldn’t give more flesh to your business decisions as they do. Business intelligence key performance indicators or KPIs allow you to glean the overall health of your company, any one of your departments or even how your customers perceive your company. And nowadays, you don’t have to tread the business intelligence game manually. You just have to invest in an excellent business intelligence tool to weave the magic numbers for you, a feat that is severely limited or altogether forbidding in the past. If you are resourceful enough, you should know which business intelligence tools is best for your unique needs.
In this article, we present some of the more crucial business intelligence key performance indicators to give you a head start in evaluating how your business stacks up against the goals you have set for it from any given point in time. If you have ever tried doing it on your own, you know how easy it is to get lost in the forest of KPIs and metrics that you need to account for in order to be on your way. By organizing them into major categories, you get a good handle of how to proceed with this task that is essential to realistically assess where your business is right now in terms of expectations and actual achievements. Below, we’ll also present some business intelligence KPI examples, the better to illustrate how the KPIs fit into your operations.
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In fact, if you haven’t used business intelligence software before, you can start with Sisense. It is easy to set up and use and can be scaled to advanced features as you gain mastery of it, plus you can try its full features at no cost.
The race to more meaningful use of data is punctuated by the use of artificial intelligence, with 38 percent of businesses already invested in AI.
AI dives through data exponentially faster. AI can detect crucial insights that humans can easily miss. A progeny of AI, chatbots, already glean more from how visitors behave on websites, enabling businesses to design more powerful content crafted after the unique personalities of the visitors.
How are companies impacted by this amazing chatbot technology? The answer can be gathered by how about 80 percent of businesses have already started using chatbots to give them critical insights about their customers and prospects alike.
Business Intelligence Key Performance Indicators with Examples
1. Financial Metrics
The mother of all metrics. From a tool like your accounting software, you should be looking at your cash flow, your balance sheet and your income statement to derive your financial metrics. One look at any of these metrics should tell you if your business is healthy moneywise, which means you are generating revenue and astutely handling your finances. If you are planning to steer your company into new growth direction or to spark interest from potential investors, you will be presenting these financial KPIs to them for proof of investment value.
1. Liquidity Ratio
Can the amount of cash on your hand cover the expected needs of the business for the next fiscal year? Or perhaps you have contracted multiple obligations that would compromise your cash supply for the same period in consideration? If your financial position raises questions about your actual capability to pay, then you are setting yourself up for a disappointing meeting with your potential investors.
Clue: if you are a startup company, aim for a 2:1 asset to liability ratio. Established companies that are competently run would typically have higher ratios.
2. Net Income vs. Net Earnings
You will be looking at your income statement for this. Scrutinize the numbers for growth of income and growth of earnings. If you have both showing positive growth rates over time, then that means your company is on the way up. Watch out for some mixed numbers, which should also tell you about other important things about the revenue performance of your products or services.
For one, you could be looking at an increasing growth of earnings but a decreasing growth of income. The exact opposite could also be true: a decreasing growth of earnings but an increasing growth of income. For the first, you could be selling more of your products or services but not generating wide margins from them. For the second, you could be selling fewer items but realizing more profits from them.
You would want the second scenario than the first one, where you are essentially expending much effort and facing no happy numbers to show for it.
2. Marketing Metrics
Business-wise, next only to financial metrics in the ladder of importance. Marketing metrics reveal the numbers to inform you whether your latest marketing campaigns are delivering the rates you have set to reach. Capable marketing software tools should give you the values, for example, on your new content approach riding your latest marketing campaigns across multiple channels.
1. Conversion Rate
It could be about how your latest website content, as well as the look and feel redesign, resonates with your target lead personas. Conversion rate can point to visitors heading for outright purchase or filling out a lead capture form. What matters is you have set up a threshold for you to measure. Ideally, your conversion rate should be increasing over time rather than decreasing. If that happens, it is time to tweak things up on your website.
For a website, the conversion rate is the total number of conversions from the total number of sessions for any given time. If your site logs a million sessions each month and gets 150,000 orders as a result, then your conversion rate is 15%. To help you win the conversion game, you may consider investing in a conversion rate optimization software.
2. Customer Acquisition Cost (CAC)
You have succeeded in turning a website visitor into a purchaser, but does the cost of doing it justify the whole process? If spending USD25,000 on a marketing year yielded 25,000 customers, then you spent a flat USD 1.00 for each one of them. If each one brought in an average USD 100 purchase during the same period, then you have done quite well considering the low marketing investment you have made for each customer you succeeded in acquiring.
3. Project Management Metrics
If your finances and marketing expenditures are in order, then it could only be because your production units are doing their best to finish projects on or ahead of time, within budget and keeping clients and employees happy while going about the works. But what to measure to see where everything actually went at the end of the day or at the end of a year? As the owner of a business or as a project manager, you should be looking at your productivity, profit margins, ROI, customer satisfaction and earned value among other things—items that you can easily derive from any of these best project management platforms.
Productivity is a straightforward computation of how much you are getting from all those that you put into a project. By dividing all the input units with the output units, you get a good picture of how efficient you are using the resources available to you for each project.
2. Return on Investment (ROI)
Return on investment tells you how much you get in return for each dollar you invested in a project. It’s a simple equation that involves the project net benefits divided by the costs, then multiplying the result by 100.
To determine the net benefits, assign a dollar amount to benefits like increased output, cost savings and contribution to profit, among others. For the costs, do the same for labor, overhead and resources.
4. Customer Service Metrics
When you consider that 89% of US customers have switched to a business competitor after a poor experience, it makes sense that any customer service metrics must go beyond operational data and include how your customer service staff are engaging with your customers. Experience data recognizes the intimate human factor behind business and customer relationships, allowing you to see how your customers value the experiences they had dealing with your employees.
1. Net Promoter Score (NPS)
Sourced from a single-question survey, this gold standard customer experience metric gives you a singular picture of customer loyalty. Customers respond with values ranging from 0 to 100, where you will be aiming for the higher end of the range. You get promoters from those who score 9 or 10, passive from those who score 8 or 9 and detractors from those who give you a score of 0 to 6.
Measure your NPS by subtracting the number of detractors from the number of promoters. If you have 10% detractors, 10% passives and 80% promoters, your figures would be: 80%-10% = 70 NPS.
2. Customer Effort Score (CES)
Harvard Business Review points to a reduction of customer effort as the most important factor in customer loyalty, reputing views that the way to the customer’s heart is over-the-top customer service. Customers value their time above all else, so paving the path for simpler, faster resolution of their concerns trumps all other considerations. If customers find it hard to do business with you, you may just as well be ready for them to leave you in a huff and try their hands elsewhere.
To derive a CES, simply compute the average of the scores, say 0 to 10, your customers give you based on how much effort it has taken them to resolve their queries.
How to proceed with such customer service insights? For one, you may find as many businesses already did that, acquiring the best customer support software that matches your needs can do wonders to how your customers can see you in a better light.
5. Human Resources Metrics
Human resources (HR) metrics inform you how much the people you took on board are contributing to the health of your business. They also tell you whether you are able to keep good workers or making them unhappy enough to jump fences and work for others instead, most likely a competitor in the same industry. Having the means to monitor the productivity and performance of your HR team lets you know what processes and policies do and don’t work, giving you the initiative to reinforce the positives or resolve issues as they emerge. In your pursuit of managing your people resources better, these HR platforms could steer you in the right direction.
1. Cost per Hire
Cost per hire is a straightforward measurement of how much you spent recruiting and hiring a new employee. If hiring 10 new senior data analysts involved USD2,000 on referral fees, USD2,000 on ads fees, and 100 hours of HR staff time processing and interviewing candidates and onboarding cost you a total of USD24,000, then your cost per hire is 24,000/10 = USD2,400.
2. Net Income per Employee
You may call this revenue or profit per employee to give you a quick idea of how efficient and productive your workers are. To derive this metric, simply divide the total net income by the total number of employees. You could also apply this formula for each department. If you want to see these figures up, you could do well to invest in new technologies or ongoing programs to improve the skill sets of your employees. You might even encourage them to take up higher education.
6. Retail Metrics
If you’re in retail, a few numbers can tell you what’s happening in your stores. With the values, you can institute programs to steer your business to more growth and prune out policies that impede it. You can easily derive your working data from a POS platform that not only shows information about your sales and inventory but also your customers.
1. Sales per Square Foot
Sales per square foot tells you if you are putting to good use every available space and fixtures in your store. With this information, you have a good idea on how to optimize the layout of your current or next store while displaying a good mix of products to enhance your sales.
To compute your sales per square foot, simply divide your total sales by your store’s total square feet. You may not have to resort to a 7-11 space and product layout, but spatial awareness keeps you on track of what your store is for.
2. Sell-Through Rate
Your sell-through rate tells you about the percentage of units that you have successfully sold against the total number of units that were available to be sold. You can measure your sell-through rate using the formula: (number of units sold/beginning inventory) x 100.
By using this metric, you can judge if certain merchandise is worth displaying or discarding altogether. If it is selling well, the numbers will also tell you how many items to keep in your inventory and for how long or under what season.
Information is not enough: act decisively with the help of business tools
Knowing which areas of your business are performing to expectations is one thing, but ensuring that you keep it that way while resolving those ones that are unable to keep pace and measure up to your goals is another thing. The advent of powerful software and new technologies mean that you have more help in steering your business to growth. Add in the right mix of key talents and people and your business should be set for bigger things ahead.
Most of the leading software already incorporate business intelligence capabilities in their features. These include the ones indicated here. If, however, you want a dedicated business intelligence tool, you couldn’t go wrong with Sisense. You can sign up for Sisense free trial here.