OKR (Objectives and Key Results) is a goal-setting framework used by organizations to define and measure their objectives and outcomes. Let’s consider a hypothetical example of an e-commerce website called “Myshopper” and demonstrate the implementation of OKR with numbers and calculations.
Objective: Increase Revenue from Repeat Customers
Key Result 1: Increase the percentage of repeat customers by 20% in Q3.
Key Result 2: Increase the average order value (AOV) of repeat customers by 10% in Q3.
Step 1: Data Collection
Myshopper starts by collecting relevant data to establish a baseline and track progress throughout the quarter. They gather information such as:
Total number of customers: 50,000
Number of repeat customers: 10,000
Total revenue generated from repeat customers in Q2: ₹500,000
Average order value (AOV) of repeat customers in Q2: ₹50
Step 2: Key Result Calculation
Myshopper calculates the Key Results based on the collected data.
Key Result 1: Increase the percentage of repeat customers by 20% in Q3.
Percentage increase in repeat customers = (Number of repeat customers in Q3 – Number of repeat customers in Q2) / Number of repeat customers in Q2 * 100
Percentage increase in repeat customers = ((10,000 * 1.2) – 10,000) / 10,000 * 100
Percentage increase in repeat customers = 20%
Key Result 2: Increase the average order value (AOV) of repeat customers by 10% in Q3.
Increase in AOV = (AOV in Q3 – AOV in Q2) / AOV in Q2 * 100
Increase in AOV = ((50 * 1.1) – 50) / 50 * 100
Increase in AOV = 10%
Step 3: Setting Improvement Targets
Myshopper sets improvement targets to achieve its Key Results. They aim to have 12,000 repeat customers (20% increase) and an AOV of ₹55 (10% increase) by the end of Q3.
Step 4: Implementation and Monitoring
Myshopper implements strategies and initiatives to achieve its objectives and drive improvements in repeat customer percentage and AOV. They introduce personalized recommendations, launch loyalty programs, and offer upselling and cross-selling opportunities.
Throughout Q3, Myshopper monitors their progress and tracks relevant metrics. Here are the numbers for the Key Results at the end of Q3:
Key Result 1: Increase the percentage of repeat customers by 20% in Q3.
- Number of repeat customers in Q3: 12,000
- Percentage increase in repeat customers = (12,000 – 10,000) / 10,000 * 100 = 20%
Key Result 2: Increase the average order value (AOV) of repeat customers by 10% in Q3.
- AOV in Q3: $55
- Increase in AOV = (55 – 50) / 50 * 100 = 10%
Step 5: Evaluation and Iteration
Myshopper evaluates their performance against the Key Results. They successfully achieved both Key Results, reaching the targeted 20% increase in repeat customers and a 10% increase in AOV. Myshopper reviews the strategies that contributed to these outcomes, identifies areas of improvement, and sets new OKRs for the upcoming quarters.
By implementing the OKR framework, Myshopper focused on specific objectives and tracked measurable results. This enabled them to align their efforts, monitor progress, and drive improvements in revenue from repeat customers.