The greatest impact from cookie blocking is observed in indicators like average page views per visit which are likely counting all of the page views but missing any number of visits, hav
Introduction
Throughout my career in web analytics as a programmer, consultant, and analyst, I've consistently noticed that understanding web analytics is challenging for many business professionals Despite user-friendly interfaces and clear explanations, there is often a lack of engagement with the data that could significantly benefit their businesses Given the critical role of web data in the success of online enterprises, it raises the important question: "How can we encourage more individuals to value and utilize the insights derived from our website data?"
How about making it easier for them to understand?
Traditional web analytics presentations are often filled with extensive data and technical jargon that can be confusing for the average person Sales representatives frequently claim that their applications are user-friendly enough for everyone in a company to engage with, but this is seldom the case As a result, many companies find themselves repeatedly switching analytics vendors in search of a more intuitive interface and better reporting options.
In the online workspace, individuals often find that the ideal interface consists of annotated spreadsheets, slides, or emails The most effective reports are those tailored to their specific job requirements, presented in clear and comprehensible language While generic interfaces are widely used, effective reporting must be customized to fit the unique needs of the business, its sector, and its stakeholders Ultimately, many users are unlikely to engage in meaningful analysis using web analytics applications.
So what can you do?
I recommend utilizing key performance indicators (KPIs) and dedicated analytics expertise instead of endlessly searching for a quick fix Through extensive experience and research, I've found that effectively managing KPIs with the right personnel and sharing them across the organization significantly enhances a company's understanding of the Internet's impact on overall business performance, far more than an appealing user interface or attractive graphs By proactively defining business goals and the visitor activities that align with those goals, companies can leverage KPIs to drive success.
Effective performance indicators are crucial for aligning teams and optimizing investments in web analytics, as they ensure that everyone receives accurate key performance indicator reports, fostering a unified approach to business objectives.
This book comprehensively covers key performance indicators (KPIs), including their definitions, applications, and the target audience for their use If you're committed to maximizing your investment in web analytics, this is a must-read!
With over two decades of experience in web analytics, I have witnessed the common frustration organizations face when they recognize the potential of their data to enhance business performance but struggle to access and interpret it While web analytics holds significant power, it is often accompanied by challenges that can make it difficult to navigate.
As a consultant, I have had the privilege of assisting companies in establishing key performance indicators, witnessing firsthand how this practice enhances their willingness to utilize data for decision-making This transformation is akin to converting a group of artists into skilled tax accountants, enabling them to appreciate the beauty within the data.
My successes with key performance indicators prompted me to write about them in both my previous books, Web Analytics Demystified (Celilo) and Web Site Measurement
The increasing focus on Key Performance Indicators (KPIs), highlighted in O'Reilly's "Hacks" and various reports from JupiterResearch, has sparked significant interest among vendors Despite the growing conversation around KPIs, there remains a lack of comprehensive resources on the topic, with only a few articles from vendors and sporadic discussions in the Web Analytics Forum on Yahoo! Groups.
Since I’ve always been an entrepreneur, I saw an opportunity and thusly sat down to write The Big Book of Key Performance Indicators I was going to call the book Purple
"Data Cow or Who Moved My Spreadsheet? aims to provide a comprehensive guide to key performance indicators I kindly ask that you respect my copyright and refrain from sharing this book, encouraging your friends to support the author instead, so my daughter can pursue her dream of attending medical school without the stress of sleepless nights like her father."
How This Book Is Designed to Evolve
The major reason that I have opted to only publish The Big Book of Key Performance
Indicators as an electronic book is malleability; I want this book to get better over time and not simply be the static document that Web Analytics Demystified and Web Site
Measurement hacks are increasingly important in optimizing performance I invite you to share your insights or experiences with key performance indicators You can reach me anytime at eric@webanalyticsdemystified.com My goal is to publish valuable content on this topic.
Why this Book? updated edition of this book once per quarter, free of course to everyone who has already purchased a copy of the book
If you have a really great example, idea or insight, I’ll do my best to include your experience in a future edition of The Big Book of Key Performance Indicators
Key Performance Indicators and Your Web
Understanding key performance indicators (KPIs) is closely tied to the capabilities of your web analytics application Most essential data for calculations is typically accessible through standard web analytics tools, but more advanced applications are required for segment-dependent KPIs If you encounter difficulties in retrieving the necessary data, it's advisable to reach out to your application vendor for assistance If they are unfamiliar with your needs, suggest they consider acquiring this book for further insights.
About the Use of Screenshots throughout This Book
To avoid the lengthy process of obtaining permissions from multiple vendors for using screenshots in this book, I decided to utilize my own work and screen captures from Google Analytics, primarily because it is free It is important to note that this choice does not constitute an endorsement of the application.
You can learn more about Google Analytics at www.google.com/analytics/
Cookies and Key Performance Indicators
Major web analytics tools depend on browser cookies to connect multiple page views into visits and track individual visitor activity on websites However, the accuracy of cookie-based tracking systems is compromised when consumers block or delete cookies This issue significantly affects various key performance indicators (KPIs) discussed in this book.
Cookie blocking by consumers affects the accuracy of calculations related to sessions and visits Many analytics tools may resort to less precise methods than cookies to connect page views into a single visit, while some applications may entirely disregard visit data for browsers that block cookies.
Introduction to Key Performance Indicators
Chapter 2 Introduction to Key Performance
Key performance indicators (KPIs) address the common organizational apprehension towards complex spreadsheets and applications by translating technical data into business-relevant language.
• Use rates, ratios, percentages and averages instead of raw numbers
• Leverage tachometers and thermometers and stoplights instead of pie charts and bar graphs
• Provide temporal context and highlight change instead of presenting tables of data
Effective key performance indicators (KPIs) are essential as they drive action It is crucial to emphasize that any KPI that fails to prompt immediate responses, such as sending an email or seeking assistance when it changes unexpectedly, is not worth reporting.
What is a Key Performance Indicator?
Key performance indicators (KPIs) are essential metrics that effectively communicate vital information Effective KPIs are clearly defined, visually appealing, set expectations, and motivate action.
What is a Key Performance Indicator?
Key performance indicators (KPIs) are essential metrics expressed as rates, ratios, averages, or percentages, rather than raw numbers While raw numbers are useful for web analytics reporting, they lack context and are therefore less impactful than KPIs.
Receiving 10,000 orders on a Monday may seem impressive, but it loses significance when compared to the 100,000 orders from the previous week This is particularly concerning if those 10,000 orders came from a costly investment to attract 1,000,000 visitors to your site, especially after achieving a much higher volume of orders just a week prior.
Without context, a figure like 10,000 lacks meaning and fails to inform This is why I emphasize, much to the annoyance of my esteemed colleagues, that key performance indicators (KPIs) should always be expressed as rates, ratios, averages, or percentages While raw numbers are essential for providing context and fostering discussion, they do not qualify as key performance indicators themselves.
Key performance indicators (KPIs) effectively summarize and compare data in a meaningful way Before this book, extensive discussions were held on which data could be compared meaningfully Now, you can simply refer to the definitions provided in this book to save time and gain clarity.
Effective presentation is crucial for key performance indicators (KPIs), as it influences how changes over time are highlighted and alerts are triggered based on thresholds However, the most important factor is whether the KPI drives valuable action Companies that utilize colors, visual cues, and appropriate visual elements in their KPI presentations tend to engage readers more effectively.
Figure 1: A standard key performance indicator report showing values for the current and previous reporting period
What is a Key Performance Indicator?
A standard key performance indicator (KPI) report displays values for both the current and previous reporting periods, along with visual indicators that highlight directional changes and percentage changes It also includes target values, the percentage of goals achieved, and relevant warnings to quickly identify any problematic metrics.
In the second example, identifying problem areas on the site becomes significantly easier The use of downward arrows and the color red, often associated with urgency, effectively directs the reader's attention to the metrics that require immediate focus.
Consider the following presentation cues when you build your own key performance indicator reports:
When presenting key performance indicators (KPIs), it's essential to provide temporal comparisons rather than static numbers Avoid presenting a single KPI unless the audience is intimately familiar with it, similar to how they know their age or phone number Since people may not recall these figures consistently, it's crucial to illustrate performance over time by using comparisons such as "this day last week," "yesterday," "last week," and "this week last month."
• Green is good, red is bad, yellow is getting bad If you’re using Microsoft
Excel, use the conditional formatting option to color-code your indicators for easy reading Oh, and bold and red is really bad
Indicators that are trending upwards are marked with up-arrows, while those trending downwards are indicated by down-arrows Incorporating these simple arrows, alongside color-coded numbers, enhances the reader's understanding of whether an indicator is improving or declining over time For instance, a bold red number accompanied by a red down-arrow clearly signifies a worsening trend, emphasizing the severity of the situation.
• Always show the percent change from reporting period to reporting period
Key performance indicators (KPIs) are essential for establishing expectations, so it's important to inform your audience about their current standing in relation to these benchmarks Additionally, when presenting comparisons over time, it's beneficial to calculate the percentage change using the formula: (current period minus previous period) divided by the previous period.
What is a Key Performance Indicator?
Establish thresholds and display alerts As you color code your indicators, ensure to compare the values or percentage changes against a predetermined threshold, and provide a warning if this threshold is surpassed For instance, if there is a 5 percent decline in your order conversion rate, indicate a "MILD" alert.
CONCERN” warning, if it drops by 10 percent, show a “MEDIUM CONCERN” warning, and if it drops by more than 20 percent show a “RUN SCREAMING!” warning
Establish clear improvement targets and consistently report on them, as setting expectations is essential for effectively utilizing key performance indicators By measuring progress against these expectations, you can identify potential issues early and take corrective action if you are significantly deviating from your goals.
The Indicators
This article categorizes key performance indicators (KPIs) into averages, percentages, rates, and ratios to enhance clarity and usability Although this classification is somewhat artificial, it aligns with how most individuals conceptualize data For instance, inquiries about conversion rates, the percentage of new or returning visitors, or the average number of page views per visit clearly specify the type of numerical data being referenced.
When utilizing key performance indicators, it's essential to remember the definition of an average, or arithmetic mean, as it is crucial for interpreting various important metrics accurately.
The arithmetic mean, commonly referred to as the "average," serves various purposes but can be misleading when applied to skewed distributions A notable example is average income, where the arithmetic mean may suggest that most individuals earn more than they actually do This can create a false impression that the majority of people's incomes are close to the reported average.
The arithmetic mean income is elevated due to high-income outliers, which skews the average higher, unlike the median income that remains unaffected by such extremes This average does not provide insight into the number of individuals earning near the median or the modal income that reflects the earnings of most people Consequently, it is important to avoid carelessly associating the average with the typical income experience.
Many may mistakenly believe that the average income reflects the earnings of most individuals, assuming they are closer to this inflated average For instance, in the set of scores {1, 2, 2, 2, 3, 9}, the arithmetic mean is 3.17, yet five out of the six scores fall below this average.
When utilizing average-based key performance indicators, it's crucial to recognize that skewed distributions can produce misleading results This issue frequently occurs with metrics like average time spent on a page, where the average may seem excessively long or short, despite the data appearing correct To address this, consider alternative methods of analysis.
Averages calculate the median value (50 percent of the values are above, 50 percent are below) or simply do the best you can
Averages can be misleading when analyzing website traffic, as each visitor exhibits unique behaviors and interactions There is no true "average" visit or visitor, highlighting the importance of understanding individual user experiences.
While some believe that relying on averages can lead to misinterpretation of user behavior, I contend that it is beneficial Analyzing the "average" visit or visitor, particularly in relation to key performance indicators, provides insight into the habits of the majority—those who represent the largest segment of your audience This understanding is crucial for making informed decisions about your site, rather than reacting solely to the extremes of visitor behavior.
To effectively analyze visitor behavior, it's essential to monitor the actions of the majority while considering audience segmentation By categorizing your audience into meaningful groups, you can develop targeted KPIs that refine behavioral insights This approach enables you to take more specific actions based on the data, ultimately enhancing your strategy.
Average Page Views per Visit
Average page views per visit are an excellent indicator of how compelling and easily navigated your visitors find your web site
The total number of page views divided by the total number of visits during the same timeframe
Page Views / Visits = Average Page Views per Visit
Sophisticated users may also want to calculate average page views per visit for different visitor segments It is worth noting that many web analytics calculate this value for you
Figure 4: Average page views per visit trended on a daily basis
Average Page Views per Visit
The average page views per visit can be enhanced by incorporating the monetary value of each page view within the advertising business model By utilizing the average cost per thousand (CPM) advertising impressions, one can effectively calculate the value of an average visit.
Average Dollar Value / 1,000 Page Views * Page Views / Visit = Value of Average Visit
For example, an advertising site having an average CPM of $25.00 and an average 3 page views per visit would make the following calculation:
$25 / 1,000 page views * 3.00 page views / visit = $0.075 per visit
Expectations about average page views per visit depend on your business model
To enhance the value of each visit, CPM-based business models reliant on high page view volumes should focus on boosting the average number of page views per visit.
Marketing and retail websites aim to boost their average page views, reflecting increased visitor interest However, it's important to note that a higher number of page views may also suggest visitor confusion, depending on the site's specific objectives.
• Support: Customer support sites generally want to decrease the number of page views per visit, at least in sections specifically designed to help visitors find information quickly
When the average number of page views per visit trend against expectations, I recommend examining a handful of common site components that affect page views:
Effective navigational elements are crucial for user experience; if visitors struggle to navigate your site, they may end up viewing more pages in search of information However, a complicated navigation system can lead to frustration, causing visitors to leave your site prematurely.
Well-written content that adheres to web writing best practices can significantly reduce bounce rates, encouraging visitors to stay longer and explore more pages In contrast, poorly crafted content may lead to early exits, negatively impacting user engagement and page views.
Average Page Views per Visit
Effective search technology is crucial for enhancing user experience; poor search functionality can lead to frustration as visitors struggle to find information, while a robust search feature encourages users to utilize it, potentially decreasing the number of pages they need to view.