Metrics vs KPIs: All you need to know!

Recently, I have been researching how to collect and measure useful  key performance indicators from the  metrics available in Google analytics tools. As part of this investigation I am going to introduce a Web analytics measurement framework to define the KPIs for travel sites.

The travel industry today is facing severe challenges like price wars, safety and security issues (and that’s not even going into the volcano problems of late). Now the internet is providing a medium that  increases customer awareness of these issues. Essentially being a tour operator online is as difficult as ever. Only adding to the difficulty is the issue of measuring a tour operators website performance, which can be hard at the best of times in comparison to a retail site due to the company selling invisible products like ‘experience’. Website traffic and conversions can easily be tracked, measured and compared but how do you define a conversion for example on website where you can’t directly book? This is a problem a lot of luxury tour operators face. A way out is to find out the Key Performance Indicator (KPI) to measure performance.

What is the difference between a metric and a KPI?

Before I start to go through the travel site examples, it probably makes the most sense to talk about the difference between metrics and KPIs. A metric just is a number, it can be viewed as a count (number of visitors) or a ratio (conversion rate). All of the data we get from analytics tools are metrics.

KPIs are metrics, but not normal metrics. A definition of a KPI is a metric that helps you understand how you are doing against your objectives. In other words, KPIs are a bridge between business objectives and web analytics data. Because different companies have different objectives, the KPIs tend to be unique to each company.

For example, on an ecommerce site like www.24studio.co.uk, the objective is to sell as much product as possible. So the KPI could be based on the number of orders, and average size of orders. For the a luxury travel site www.turquoiseholidays.co.uk, the business objective can be sending out so many brochures to encourage a holiday purchase, so one KPI could be the amount of brochures sent out that lead to conversions.

Web analytics measurement framework

Here is a framework proposed by Avinash Kaushik, which is very useful to prevent us from getting lost amongst the data and metrics.

The framework is split into 4 parts:

• Business objectives:  These are the answers to questions like “Why do I need this website?” or “What do I want from this website?”.
• Goals are specific strategies that will help you to accomplish the objectives.  We can define some high level goals to help identify the specific activities we should spend our valuable time on.
• KPIs: as I stated above, KPIs are the metrics attached to our goals.
• Segments: Without segmenting the data, overall totals can often be quite useless, so the best way to find insight is to segment the data. For example, we could choose visitors who spend more than 2 minutes on the site and look at their activity specifically. These are the useful metrics we want to look for.

KPI examples for an online travel website

Now we could follow the framework and start to identify the KPIs for a Web Travel Site.

After we define the Key Performance Indicators, we should start to think about what segmentations we should make in order to measure and improve the KPIs. For example, a KPI above is Revenue/Booking. So the segments we need might be:  what are the most popular destinations or hotels, where are is the traffic coming from or who looks at these hotels?

What else do we need to do with KPIs?

There actually is a one more thing we need to do with KPIs and that is to set KPI Targets.  They are the numerical values which are pre-determined as an indicator for success or failure. It is crucial to create the targets for every KPI. In order to set the number, we need to look over the historic performance. Without having a KPI target, you can collect all the data you want, but you won’t know if you are hitting your objectives or not.

That’s all for this week, check back next week for another look into the world of analytics.