What are KPIs?
A KPI or key performance indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. KPIs are used to track and monitor progress towards specific goals, and to identify areas where improvement is needed.
What are Metrics?
Metrics, on the other hand, are any quantifiable measures of business performance. They can be used to track a wide range of activities and processes, from website traffic to customer satisfaction.
The Difference Between KPIs vs Metrics
The key difference between KPIs and metrics is that KPIs are strategic and metrics are operational. KPIs are used to measure progress towards specific business goals, while metrics are used to track the performance of specific activities or processes.
Another way to think about it is that all KPIs are metrics, but not all metrics are KPIs. Every KPI is a measurable value, but only those metrics that are directly linked to key business goals are considered KPIs.
Here are some examples of KPIs and metrics:
KPIs:
- Monthly sales revenue
- Customer acquisition cost
- Customer lifetime value
- Average order value
Metrics:
- Website traffic
- Bounce rate
- Conversion rate
- Number of leads generated
- Number of customer support tickets opened
As you can see, the KPIs are all focused on tracking progress towards specific business goals, such as increasing sales or improving customer satisfaction. The metrics, on the other hand, are more general and can be used to track the performance of a wide range of activities.
Why are KPIs important?
KPIs are important because they help businesses to:
- Track and monitor progress towards specific goals
- Identify areas where improvement is needed
- Make better decisions about how to allocate resources
- Communicate performance to stakeholders
How to choose the right KPIs
When choosing KPIs, it is important to consider the following factors:
- What are your most important business goals?
- What activities and processes are most critical to achieving those goals?
- What data is available to measure those activities and processes?
- How often will you need to track your KPIs?
Once you have considered these factors, you can develop a set of KPIs that will help you to track and monitor your progress towards your business goals.
It is also important to note that KPIs should be reviewed and updated on a regular basis to ensure that they are still aligned with your business goals and priorities.