The Alphabet Soup of Common Business Terms – Demystified!
Confused by the alphabet soup of business metrics you hear around the office? Here are some of the many business metrics you may hear, defined:
KPI: this stands for Key Performance Indicator. A KPI is the outcome of a business objective, i.e. what you measure an objective against.
ROI: Return on Investment, or ROI, is a measure of the business value you get out of a particular investment. For example, if you were to invest $500 on a website redesign, and your new website brought in 3x the revenue, after you subtract the costs you could say that the ROI of the website redesign was 200%, or an additional $1000.
ROAS: Return on Ad Spend. Similar to ROI, this measures the business value you get out of an advertising investment. For example, if you were to spend $5 on an ad, and from that ad you got $55 of new business, after you subtract costs, the ROI would be 10x your spend (or 1000%).
CPC: Cost per click, or CPC, indicates the price you pay for a user clicking on one of your ads.
CPM: Cost per thousand impressions, or CPM, indicates the price you pay for a user seeing one of your ads.
CTR: Click thru rate, or CTR, is the ratio of clicks on a particular link or object vs impressions (ad), opens (email), or visits (website).
LTV: Life-time value, or LTV, is the value you expect to get over the course of a customer’s life, based on the duration you expect them to remain a customer
HiPPO: Highest paid person’s opinion. The HiPPO is generally a term used to describe an organization that operates top-down rather than bottom-up or data-driven (hint: you want to try to avoid HiPPO situations)
More business jargon? Try the dejargonizer Chrome extension!