Acronyms are part of our everyday business language. Some are commonplace like, ASAP, FYI, ETA and DOE. But some aren’t so common, yet appear in blogs, articles, and from mouths of people like me – marketing consultants who spout them assuming everyone knows what they’re talking about. Perhaps you’re a business owner who has heard them but really have no idea what they mean – or more importantly – why you should care. Not all jargon needs to be translated, but these four are critical to understanding your business and can give you deeper insight into how to build a profitable, sustainable business.
1.) Key Performance Indicator (KPI)
Key Performance Indicators, or KPIs, are exactly what they sound like: the most important indicators of how your business is performing. What those KPIs are for your business depends what your goals are. There are literally thousands of KPIs to choose from – and this can feel overwhelming for a small business owner who just wants to make a living. However, knowing what data to track can mean the difference between eking out a living and building a thriving business.
A few examples of basic KPIs every small business should be tracking are: gross sales (that’s an easy one!), cost of sales, gross profit margin, average sale and average customer value. Once you start tracking these, you can start focusing on strategies for increasing them!
2.) Return On Investment (ROI)
ROI is simply a method by which you measure the efficiency of your investments. For example: if you want to understand how effective your last Facebook advertising campaign was you would divide the sales you made from that campaign by the cost of the campaign. For example: if the Facebook ad cost you $50 and resulted in $1500 in sales you made a 30x Return on your Investment (ROI). Conversely, if the Facebook ad cost you $1500 and only resulted in $50 in revenue you would have a pretty significant negative ROI – meaning, you lost money and you may want to shift your strategy.
Now it should be clear how understanding the ROI of marketing promotions can help you make more informed decisions; with the focus being on what is financially better for your company vs. just a list of marketing tactics to get done.
3.) Pay Per Click (PPC)
Pay per click is exactly what it says: you are paying for the actual results of an ad you run online: a click. For many a “click” translates into a web page visit – yes, it is driving traffic to your business website. However, it is important to understand that although PPC is a great way to boost your marketing efforts it does not mean you are paying for actual leads. Consider an example, let’s say you send letters in the mail to all of your contacts. The PPC would be equivalent to knowing how many people opened your letters. Opening your letter doesn’t mean that they will pick up the phone and call you but you now know that there was action taken by the receiver. Knowing and tracking PPCs can help you in your future marketing efforts.
4.) Search Engine Optimization (SEO)
Many businesses are aware there is value to SEO but are unsure of what this means or how it is accomplished. SEO – or search engine optimization – refers to optimizing your webpage – or your entire website – in order to help it rate well with major search engines. All major search engines such as Google, Bing and Yahoo have primary search results, where web pages and other content such as videos or local listings are shown and ranked (“indexed”) based on what the search engine considers most relevant to it’s users. Why do businesses want to consider this? Most people using search engines will only look at the first couple pages before selecting a link they want to click on. Therefore, the better your rating (SEO), the more likely someone will find you in the results of their preferred search engine when they are ready to buy.
If you can get a handle on these four acronyms and start tracking and measuring them, you will gain valuable insight into your business and enable you to make smarter marketing decisions.
If you would like help understanding any of these better or assistance setting up your own KPIs give us a call at 925-953-2240 or contact us.