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Guide
A key performance indicator (KPI) is a quantifiable metric that measures the performance or progress of specific business goals and objectives. Common KPIs include revenue, customer satisfaction, customer lifetime value (CLV), and conversion rate (CVR), and return on ad spend (ROAS).
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A key performance indicator (KPI) is a type of metric that helps you quantify your business objectives and measure your progress to those objectives. As the name implies, KPIs should measure the results that are most important to your business. They track your progress toward your high-level strategic goals.
Key performance indicators are one of the best ways to evaluate the success of your business in a succinct, measurable way. Having KPIs in place gives you a way to see whether your business is making progress toward success—as you define it.
Whether your top priority is brand loyalty, sales growth, profit margin, customer satisfaction, or something else, the right KPIs will be centered around that priority and the metrics that meaningfully capture your progress.
Without KPIs—or with a focus on the wrong KPIs—you could end up spending your effort on a strategy that is inefficient for achieving your objectives. You might pay attention to metrics that don’t actually drive the right outcomes or even move you in the wrong direction. For instance, if your goal is to drive customer acquisition, then tracking brand awareness metrics such as site traffic or video views may put your focus on the wrong areas of performance.
Don’t overlook the importance of KPIs for your employees and business leaders. As your team looks to meet specific goals while making strategic decisions and determining priorities, they can use KPIs to help measure how their work ladders up to key strategies. This can help individuals recognize the importance of their role in the business, which can positively influence employee engagement.
There are multiple types of KPIs, and the right KPIs for you depend on the nature of your business and its priorities, so there is no way to create an exhaustive list of all possible KPIs. Instead, the 12 categories below show you different types of KPIs. Note that these aren’t 12 separate categories, but rather 12 descriptors that show the various ways KPIs work, which can give you a framework for creating and selecting your own.
Let’s take a look at some KPI examples that marketers often use for their campaigns.
KPIs are related to objectives and key results (OKRs) but they are not the same thing. Whereas KPIs are individual metrics that track your company performance, the purpose of an OKR is to act as a strategic framework for the business. KPIs can certainly feed into your OKRs; the objectives in OKRs are the larger organizational goals that explain the why of your KPIs.
Creating a valuable KPI takes a few steps. Below are some instructions on how you can start that process for your business objectives.
Understanding the relationship between KPIs and OKRs can help you create and define your own KPIs. Your long-term business objectives will guide you in creating a KPI, so select one of your overarching goals.
Now you can decide on a performance indicator you need to measure in order to make progress to those objectives. Remember to look at both external performance (like sales) and internal performance, (like employee engagement).
Know how you will determine success or failure on the KPI. What is the improvement you want to achieve in this metric? What is the time frame for accomplishing that improvement? Can your employees understand how their work contributes to it?
Establish a regular cadence for checking on the KPI. If your time frame is one year, you might choose monthly or bimonthly updates. For marketing KPIs, you can use reporting or analytics solutions such as Amazon Attribution to help you measure progress.
Once you go through this process and create multiple KPIs, consider creating a KPI dashboard that provides visibility into your progress through an aggregated view.