Bear with me for a minute, basketball fans.
If you work in digital analytics, you are familiar with the concept of the Key Performance Indicator (KPI). A KPI is a piece of data, shown over time, that gives you immediate insight into how your business is performing against your goals. Sometimes they are very general (such as Orders per Visit, a.k.a. Conversion Rate) and sometimes they are more specific (for example, Bounce Rate for visitors coming from search). These things are lifeblood of some business goal you’ve set. A business typically has several KPIs that they monitor every day. And not every metric is a KPI; a common rule is that it isn’t a KPI unless it’s something that, if decreasing below acceptable norms, would cause your business to take immediate action to rectify.
If you don’t work in digital analytics, but you are an NBA fan, we can finally explain KPIs to you using NBA statistics, a language you probably already speak. Here it is, courtesy of basketball-reference.com:
How do basketball teams win games? While searching for an answer to that question, Dean Oliver identified what he called the “Four Factors of Basketball Success”:
Free Throws (15%)
The number in parentheses is the approximate weight Mr. Oliver assigned each factor. Shooting is the most important factor, followed by turnovers, rebounding, and free throws.
The article goes on to explain that each of those four factors is expressed in a rate: Effective Field Goal Percentage, Turnover Rate, Rebounding Rate, and Free Throw Rate. These have all the markings of good KPIs. I want to be as good as I can be in each of those four areas, and if I succeed, I’m almost definitely going to win basketball games.
If I were compiling a basketball team, or coaching a basketball team (or advising a basketball team on how to begin analyzing itself), those would be my first KPIs. Those are the metrics that I would use to gauge success. And while basketball, like business, has one metric that trumps all others (for basketball, it’s wins; for business, it’s profit), these are strong leading indicators of a team’s ability to win.
So, basketball fan, think of your digital analytics friends as something like basketball coaches who are looking at effective field goal percentage and benching that wing player who won’t stop taking threes early in the shot clock, or a GM who sees that his team is weak in rebounding and therefore targets an athletic big man in the NBA Draft. It’s clear to an NBA fan, looking at how his team is performing in each of the Four Factors, how a coach or GM might address a deficiency in these areas, just as analysts are great at coming up with recommendations when a KPI is struggling and needs to improve.
In fact, that’s the great thing about KPIs: they provide a really nice, simple jumping off point for analysis. Why were the Jazz so bad at eFG% this past season? We can begin to answer that problem for management with some very specific advice, especially when we add in analysis of shot location and lineups/rotations. Why are my web site visitors who arrive after performing a Google search leaving so quickly? We can look at that user segment and see what they’re doing and where they are running into roadblocks, or look at our landing pages and analyze them for effectiveness. Same thing.
So now you’ve got something to talk about with your digital analyst friends. And digital analysts, you can ask your NBA friends how their team’s turnover rate has been trending lately. Your next cocktail party is sure to be a smashing success!