KPIs and metrics are often terms used interchangeably.
But do they mean the same thing?
The answer is no.
While they work in similar ways, KPIs and metrics are not used for the same purposes.
In this guide, we’ll explore the key differences between KPIs and metrics. Because the differences could mean the difference between focusing on the right measurements and causing confusion for your business’s decisions.
Let’s go.
What is a KPI?
Kicking us off are KPIs.
KPI stands for Key Performance Indicator.
A KPI is a quantifiable value used to track progress against set goals. These goals can be across individuals, teams, or companies. To make the most impact on your strategic business outcomes, KPIs are the key targets you should track.
For instance, say your business has an overarching goal to increase leads by 20% over the next 12 months. The relevant KPIs to track for this goal may include number of new leads, bounce rates, conversion rates, and average time on page.
Think of KPIs as a map including guidance to measure performance.
Typically measured through business analytics software, KPIs are an incredibly useful tool to determine your business’s operational, strategic, and financial results.
The most effective KPIs are:
- Simple and straightforward in terms of both easy to both measure and understand.
- Clearly defined with exact time frames and quantities.
- Relevant to the business and to the assessable performance.
- Clear indication of performance - related to goals and objectives that are aligned with strategic goals.
- Actionable and relatable to achievable goals with actionable motivation toward these objectives.
- Measurable and quantifiable indicators that shouldn’t be generalized or open to misinterpretation.
By contrast, ineffective KPIs are:
- Vague: Goals such as “Increase leads”.
- Easily manipulated: Namely, the number of outbound calls made by sales reps.
- Irrelevant: E.g. data relating to competitors.
Effective KPIs include clear progress data towards the overarching goal.
This is what good KPIs look like:
- Number of engaged and qualified sales funnel leads.
- Average support resolution time in the last quarter.
- Average time for conversion in the last 12 months.
The three KPI examples above have many things in common.
Firstly, they are simple. There’s no confusion over what is being tracked and measured. The clearly defined attributes are here, too. Specifically relating to certain periods of time, there’s zero vagueness.
KPIs are important measurements of business success, because determining, tracking, and reporting on your KPIs gives you transparent performance oversight. KPIs provide a value to compare performance rates—so you can identify with ease if you’re reaching your goals.
With the most relevant KPIs in place, you can set goals, develop strategies to attain them, and have a historical business performance record.
What is a Metric?
A metric is a quantitative measurement that businesses use to track performance of particular business processes—both at a tactical and operational level.
Providing context to the performance of key business goals, a metric is not essential to business success as KPIs are.
Let’s look at an example of a metric.
Because metrics are measurements of specific business processes, you could call the number of overall conversions per landing page a relevant metric. In this example, the number of conversions is a data point.
As a metric, this is useful to discover how many website visitors engage with the content on certain landing pages sufficiently to convert.
Achieving high conversion metrics results has value and certainly demonstrates that CTAs are on point, but it doesn’t count as completing an objective (a KPI). A KPI would track the number of conversions per landing page, but take a deeper look—such as specific the CTAs that drove conversions.
To track overall business performance, metrics should be measured regularly.
Examples of effective metrics include:
Organic search rankings
Overall website rankings and rankings of specific content pieces. Search impressions for certain URLs based on keywords.
Website visits
A quantifiable measure of website visits in a specific time period. Further metrics include definition by demographics and source channels, etc.
Inbound website links
Attraction and acquisition of backlinks over time, and quality of backlinks (i.e. from authoritative websites).
By analyzing metrics, you can effectively measure performance, improve operational efficiencies, make informed decisions on marketing campaigns, and save money.
Difference Between a KPI and Metric
A clear definition of the difference between a KPI and metric is that metrics are general, and KPIs are focused measurements.
As a specific measurement, KPIs are used to track progress towards specific company goals.
A metric is anything that measures processes. Metrics can be any type of data collected as part of routine business operations. When these data points are accumulated, they form KPIs.
KPIs are a subset of metrics—which means that whilst all KPIs are metrics, not all metrics are KPIs. KPIs are tied to business targets, whilst metrics are tied to processes or business tasks.
Although both KPIs and metrics are quantitative measurements, the focus is on different areas. In order to exist, KPIs must be associated with goals.
To dive a little deeper into KPIs vs metrics, let’s consider the differences in communication.
The function of KPIs is to indicate the progress of your goals, whereas metrics monitor specific processes that work towards your goals.
For example, say your business has a goal to increase sales of a certain item by 50% over a specific period of time. The KPI is the number of items sold.
The metrics, however, may include:
- SEO status of product and category pages.
- Specific page website visits.
- Specific page engagement rates.
Let’s look at another example. If your business’s goal is to increase customer retention rate by 10% over a certain time period, the KPI is customer retention rate.
The metrics that support this KPI might include:
- Returning customers
- Website return visitors
- Website engagement metrics
Another difference between KPIs and metrics is objectives.
To consider the difference between KPIs and metrics, think about:
- Whether a significant change in a metric would impact the business.
- The purpose of the measurement you plan to track.
- How you will know if you are successful and what to change for next time.
An effective KPI is closely linked to an outcome. Because metrics measure different business processes, they won’t all assist with tracking results. As such, KPIs and metrics are not consistent with each other.
A KPI requires multiple metrics to track success. The key is to use the right metrics to measure variables as accurately as possible.
Another crucial difference between KPIs and metrics is the focus level. Offering a high-level overview, KPIs symbolize relevant business goals. Metrics are typically assigned to processes in a specific business area. As such, metrics provide a lower-level overview.
Let’s follow up with the previous example—the business goal to increase sales of a certain item by 50% over a specific period of time. We mentioned that the relevant KPI is the number of items sold.
As a KPI, sales growth is a biggie. One that impacts different parts of the business. Metrics will be tracked through sales, marketing, management, and production departments to monitor how each activity or task is adding to the overall KPI.
A relevant sales metric for a sales growth KPI is lead to conversion ratio.
Calculating the number of prospects that convert to paying customers, an increase in this ratio equals an increase in sales. If the lead conversion rate is low, then actions must be taken to encourage prospects to become customers.
Other appropriate metrics to measure for this KPI include net profit margin and lead-to-opportunity ratio.
Why It’s Important to Understand the Difference
Choosing the KPIs that deliver the most meaning to your goals is key.
As is targeting the metrics that support those KPIs.
When choosing KPIs, stick to the notion of Specific, Measurable, Attainable, Relevant, and Timebound. This is a helpful list of characteristics that your KPIs must have. All your chosen KPIs should be relevant to your goals and achievable to your business reality, with the flexibility to change if the need arises.
It’s important not to simply measure business processes with metrics. For value and best ROI, you need to manage them with the strategic use of KPIs.
Find out how to integrate your business’s data from multiple sources with Reporting Ninja integrations.
There is a distinct difference between KPI and metrics. By working strategically to align your business’s metrics and KPIs will ensure that they both work in tandem to enhance your company.
KPIs are the metrics of managing business processes that culminate in successful business operations and achieving objectives.
While KPIs and metrics are crucial for delivering business progress directional insights, they offer varying benefits to harness greater results.
KPIs can help you track overall progress. Use them to monitor how close you are to reaching your business goals. KPIs can also assist with identifying both potential issues and measuring success. This enables you to take step in quickly to resolve issues before they become big problems.
By contrast, metrics deliver an understanding of the causes of problems. When you understand how metrics relate to each other, you can make smart choices about allocating your resources.
Getting to grips with KPIs and metrics sets you on the right path to achieve greater business results.
In summary, this is how KPIs and metrics differ:
- KPIs are strategic goals, whereas metrics are typically tactical or operational.
- KPIs measure performance based on key business goals.
- Metrics track progress or performance for set business tasks.
- Metrics provide context to your business tasks.
To help set your KPIs and metrics, turn to Reporting Ninja.
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