Note: Before we delve into the intricacies of KPI design, it’s important to clarify that throughout this article, the terms ‘metrics’ and ‘KPIs’ (Key Performance Indicators) are used interchangeably, as both refer to the measurable values that help us assess the performance and success of an organisation.
Understanding the Basics: Beyond Common Denominators
Understanding KPIs (Key Performance Indicators) is essential in the fast-paced world of global consultancy. As a senior consultant, I've observed many professionals grapple with a common puzzle: "What should we measure, and how?" That's why I decided to break down this topic, which I hope helps you craft KPIs that aren't just numbers, but narratives of your brand's or project’s success.
Often in strategy meetings, you'll hear KPIs being discussed like Net Profit, Return on Investment (ROI), Media Return on Investment (MROI), Lead Generation Rate, Cost Per Acquisition (CPA), Click-Through Rate (CTR), Conversion Rates and many other cost related metrics. However, these figures seldom capture the true essence of a brand's promise or customer satisfaction. In the story of your brand's performance, they're opening acts, not the headliners.
For product companies, the journey toward effective KPI setting has evolved from simple metrics to more nuanced understandings of customer experience, and creating easy, convenient, enjoyable, and intuitive experiences is now more crucial than ever. During the early stages of product development, heuristic evaluations or rigorous usability testing are common procedures in companies to vet and verify value - and I say 'contemporary' because I'm sure researchers are reading this who wish this was standard practice. Sadly it's not- yet, and many companies still have a way to go before incorporating UX metrics beyond conceptual phases into KPI sets is considered non-negotiable, instead of novel.
The Real Challenge: Measuring True Engagement and Happiness
Many digital products are measured by KPIs such as Adoption Rate, Time on Page, and Return Visitor Rate. Whilst this is perfectly valid and rational, these metrics may not always tell you if a customer genuinely finds the language clear, the content meaningful, and the website or app easy to use. For instance, extensive website exploration and high scroll rates may indicate user interest, or misdirection, confusion, and a constant search for more information.
Take another example, the service-oriented insurance industry. Here, KPIs have typically been product subscriptions versus claims. While these metrics are important for assessing profitability, they don't necessarily reveal how insurers impact customers' stress or well-being. But, imagine if an insurance company like Allianz tracked and reported how its well-being tools and advisory content help to reduce mental stress across different demographics- that'd be impressive right? By linking customer service interactions with claim and geographical population data, such as decreasing mental-health-related workplace sickness rates in regions where customer interactions are high or services are heavily utilised, Allianz, could theoretically provide insightful evidence of its impact. However, they would need a holistic multi-tiered KPI approach if they want to do this.
Gross Written Premium and Loss Ratio measure how much an insurance company earns from selling policies and how much it pays out in claims compared to the premiums it collects. For an insurance company to be profitable and efficient, both metrics are important. Net Promoter Score, Customer Retention Rate, and Average Resolution Time are also key metrics for understanding customer engagement and satisfaction. This directly affects customer loyalty and long-term relationship building, so will also likely appear as primary or secondary tier KPIs.
A third KPI tier could include Wellness Impact Metrics. This could include things like a Health Improvement Index, Mental Health Claim Rates, and Engagement in Wellness Programs. These KPIs would not only reflect the effect Allianz's services, tools, and content contributions have on the health and well-being of its policyholders but also highlight its positive commitment to society as a whole. Together, this layered KPI approach- which can span even more tiers, would provide a rounded view that balances profitability with genuine customer wellness outcomes, reshaping how success is perceived and measured within the insurance sector and beyond.
Innovative Metrics: A Look at New Trends in KPI Design
Forward-thinking companies like Headspace might blend traditional conversion metrics with assessments of broader impacts to gauge their convenience and digital effectiveness. Building on the principle of a multi-tiered KPI system, let’s explore for a minute how they might measure success in capturing the effectiveness, efficiency, satisfaction and community impact of their meditation app. This approach not only helps in measuring tangible outcomes but also in understanding the intangible benefits of their digital portfolio.
To evaluate the operational aspects of Headspace, focusing on app performance and user engagement metrics could provide insights into the seamless delivery of services. For example: Session Start-Up Time measures the time taken for the app to launch and begin a meditation session, aiming for optimal user experience with minimal delays. User Retention Rates could track how many users return to the app after first use over different intervals (daily, weekly, monthly), and indicate the app's ability to keep users engaged over time. Subscription Conversion Rate- the percentage of users who move from a free trial to a paid subscription, could indicate the app's effectiveness in demonstrating ongoing value.
Now let’s turn our attention to efficiency metrics. These KPIs focus on the impact of the app on users' well-being and their happiness with the experience, highlighting the core mission of Headspace. A metric such as the Average Meditation Completion Rate could measure the percentage of meditation sessions completed by users relative to those started, reflecting user engagement and the app’s ability to maintain commitment. User Reported Wellness Improvement through regular surveys or in-app feedback mechanisms, could track users’ self-reported improvements in managing stress, anxiety, and overall mental health. Metrics like an Emotional Response Rating actioned after each mediation session, could enable users to rate how they’re feeling potentially indicating how much immediate relief sessions bring.
Lastly, let’s consider other possible community impact and satisfaction metrics. Headspace could pioneer metrics that extend beyond individual user evaluation to assess the broader societal impact of its app, especially to foster a greater sense of comradery and 'joy of use'. Creating a Community Engagement Score, a metric which assesses user participation in community features of the app, like group meditation challenges or sharing achievements with friends, could promote a sense of kinship and collective wellness. A Net Joy Score (NJS)- Inspired by the Net Promoter Score, could be another custom metric for the brand enabling users to rate how much ‘joy’ Headspace sessions bring to their lives. This could be measured through periodic surveys and a Societal Impact Factor framework that fuels collaborations with academic institutions conducting anthropological studies. Within communities where there are high app user concentrations, we could conceivably assess the long-term impact of meditation on healthcare dependencies, workplace productivity, entrepreneurship, and crime rates.
To implement such radical KPIs though, just like Allianz, Headspace would need to enhance its data collection and analytics capabilities, possibly incorporating machine learning to parse large datasets and identify behavioural shifts. To collect feedback and participate in wellness studies, they could also engage users more dynamically in and outside of the app through text and wearable device prompts. As a result, each interaction becomes a data point that can help measure and enhance meditation's impact on individuals and communities.
Such a robust framework could transform how digital wellness platforms perceive their role, not just as service providers but as catalysts for positive change, making a profound difference in people’s well-being through innovation and insight-driven strategy. Experience-first KPI models are also gaining traction in other sectors, recognising that superior customer experience directly connects to revenue gain. Given the market is saturated with competing products and services, delivering exceptional experience is no longer a choice, but a must for brands attempting to differentiate themselves.
According to a recent comprehensive study by Lynxeye, where more than 550 brands and companies were surveyed in 8 markets totalling around 17,000 respondents, purpose-driven companies consistently score higher on business metrics, and their market demand is perceived to be 1.9x more attractive by the general public. Proving the role of experience in profit.
A Case in Point: BMW's Shift from Sales to Experience
A few years ago, BMW reportedly shifted its North Star metric from the number of cars sold to the number of miles driven. This metric not only highlights a commitment to sustainability but also enjoyment, aligning perfectly with the upper tiers of Maslow's hierarchy of needs within the UX pyramid (see below).
In Maslow's Hierarchy of Needs, physical and emotional needs are categorised into five levels based on importance. The levels are:
Physiological Needs: These are the basic needs for survival such as food, water, and shelter.
Safety: Once the basic needs are fulfilled, the next layer encompasses security and safety.
Love and Belonging: This layer revolves around emotional relationships like friendships, romantic attachments and family.
Esteem: The need for self-esteem and respect from others comes next, highlighting achievement and the desire to be valued.
Self-Actualisation: The highest point of the pyramid pertains to reaching one's full potential and realising personal growth through self-fulfilment.
In the context of KPIs and user experience, companies like BMW are aiming at higher levels of this hierarchy, focusing not just on basic requirements (like transportation) but also higher psychological demands like social recognition and personal accomplishment by enhancing the 'joy' and experience of driving.
Final Thoughts: Measuring What Truly Matters
Developing KPIs that reflect both tangible and intangible benefits is crucial for a comprehensive evaluation of a brand's success. These metrics should tell a story, one that goes beyond spreadsheets and presentations to encapsulate the real value delivered to customers and the broader public.
In the pursuit of setting effective KPIs, remember that the best metrics are those that can tell the full story of your brand's journey, its challenges and its triumphs. Whether you're assessing user engagement or the holistic impact of your services, the key is to measure not just for the sake of reporting, but for reporting meaningful insights that drive strategic decision-making and foster genuine improvement.
Let's continue to think creatively and critically about the KPIs we choose to track. After all, in a world where data is plentiful, insight is gold!
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I'd also love to find out what custom metrics you're creating, and what challenges you face when bringing them to the table.
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