The terms Key Performance Indicators (KPIs) and metrics are often used interchangeably—and that's understandable.
Both are used in the vast world of Business Intelligence (BI). And, to be fair, there are loads of overlaps between KPIs and metrics.
If you’re looking to understand the differences between KPI vs. metrics, then you need to continue reading this guide.
We’ll take a deep dive into their nuances, uses cases, effective tracking methods, etc.
Table of Contents
- What are metrics?
- What are KPIs?
- KPI vs Metrics: How are they different?
- 3 tips when measuring KPIs and metrics
- Consolidate all your data with Polymer
What are metrics?
Metrics are units of measurement that analyze performance on a process level.
They're tied to the production and outcomes of specific business activities. However, metrics are not always indicative of progress toward business goals.
Here's the thing: Every analytics report from virtually any tool will contain metrics.
Ad management platforms, for example, may report a high number of impressions. Meanwhile, Search Engine Optimization (SEO) analytics tools may identify high keyword rankings.
Neither of these metrics often automatically translates to relevant business results.
For high keyword rankings and ad impressions to be relevant, they must lead to clicks and conversions. Otherwise, they're what the BI community calls "vanity metrics."
TL;DR: Some metrics can make performance look optimal to outsiders, but don't contribute to future data-driven decisions.
10 examples of metrics
Here are ten examples of commonly-tracked metrics to help you understand them:
- Social media followers: Brands and influencers like to flaunt the size of their social media following as if it reflects meaningful business success. Unfortunately, follower growth is far from helpful, particularly if user engagement and conversions remain low.
- Impressions (website, banner ads, social media posts, etc.): This metric tracks the number of times content is seen by an audience. However, targeting higher impressions may not result in higher conversions.
- Running total of content published: Content calendar and blogging software may track the number of posts you published over time. This number is meaningless if a larger volume of published content doesn't congruently increase conversions and user engagement.
- Pageviews: Pageviews measure the number of pages opened and viewed by users. It sounds like a good measure of popularity, but it's only useful with additional information like audience demographics, conversion rate, session duration, and pages per session.
- Paid traffic: Similar to pageviews, paid traffic is a metric that's only helpful with additional information. For one, you need to consider how many visitors you generate for every dollar you spend on ads.
- Running total of conversions: Conversions like downloads and purchases naturally accrue over time. You may have millions of sales in total, but that number can be misleading especially if you haven't closed opportunities recently.
- Email subscribers: An increasing number of email subscribers may mimic business growth, but it's rarely a reliable measure of success by itself. Some of your email subscribers are inactive, others only subscribed for a freebie, while the majority never intended to buy products in the first place.
- Average word count: Content length is often measured for SEO and productivity tracking, but it doesn't supersede content quality. Google repeatedly stated that word count isn't a ranking factor because it doesn't measure quality and helpfulness—factors that actually matter to readers.
- Social media engagement: Getting likes, shares, and comments are great, but you need to find a way to convert your audience. Remember, conversion rates on social media greatly depends on other factors such as brand authority, buyer confidence, product quality, pricing, audience targeting, and more.
- Bounce rate: This metric measures the likelihood of users to leave a website without clicking on anything else. The problem is, users may "bounce" away from a page even if they liked and read the content from top to bottom.
Metrics don't always measure business aspects that affect your bottom line.
This isn't to say they're completely useless.
On a process level, metrics are useful in gauging the effects of strategic shifts. Some metrics are also necessary for calculating KPIs—while others are considered KPIs themselves.
What are KPIs?
Unlike raw metrics, KPIs measure performance pertaining to specific business goals. They gauge how close you are to accomplishing objectives and help you make future data-driven decisions.
To integrate KPIs into actionable strategies, structure them with the following components:
- Measure: Define the values you need to measure and your method of measurement. This can focus on operational efficiency (team quotas), project objectives (task completion), and time-bound outcomes (monthly revenue).
- Data sources: Where will you obtain data for measuring your KPI? Specify the analytics tools and trackers you need.
- Frequency: Set how often to update KPI data. Some companies track KPIs on a monthly basis or longer, while others commit to weekly or even daily updates.
- Target: A KPI is most useful if it aligns with a definite goal. To make your KPI more actionable, set a realistic deadline for each target value.
KPIs serve as benchmarks to help evaluate if your team is going in the right direction strategy-wise. Since they reflect real-world business results, KPIs reliably measure the effectiveness of your decision-making process.
10 examples of KPIs
Check out these examples of KPIs in various business use cases:
- Monthly Recurring Revenue (MRR): MRR directly measures sales performance on a monthly basis. To calculate your MRR, multiply your average revenue per user by your total active customers.
- Year-on-Year (YoY) growth: YoY growth compares current revenue with that over the past 12 months. It's a top-level KPI that measures overall business profitability and health.
- Customer Acquisition Cost (CAC): CAC measures how much you spend to acquire new customers. You can calculate your CAC by adding your marketing and sales costs, and then dividing the result by the number of new customers.
- Customer Lifetime Value (CLV): CLV is the average revenue businesses stand to gain from a single customer throughout their life cycle. It depends on multiple metrics and smaller KPIs, like the average transaction value, customer purchase frequency, and customer lifespan.
- Customer retention rate: Customer retention is a vital KPI for subscription-based businesses and service providers. It impacts other composite KPIs like MRR and CLV.
- Conversion rate: Conversion rate measures the likelihood of users to take a desired action. It can be utilized to track different actions or "conversions," like purchases, downloads, and email subscriptions.
- Customer Satisfaction Score (CSAT): CSAT is perhaps the most important KPI in customer experience. This KPI is formulated to measure customer satisfaction through various stages of their journey—from onboarding to the post-sales experience.
- Net Promoter Score (NPS): NPS is a KPI that tracks customer loyalty—more specifically, the likelihood of your customers recommending your brand. It is measured on a scale of -100 to 100.
- Click-Through Rate (CTR): CTR is a valuable KPI in marketing campaigns as it measures the number of impressions that lead to action. Some examples of activities that track CTR are email blasts, paid ads, on-page Conversion Rate Optimization (CRO), and Search Engine Optimization (SEO).
- Churn rate: Churn rate—also referred to as customer attrition rate—measures the percentage of customers that cease doing business with you. Tracking this KPI is imperative to reducing revenue losses, maximizing CLV, and optimizing CAC.
Overall, KPIs paint a clearer picture of business performance than plain metrics. They're more actionable, refined pieces of data that will move your business forward with informed decisions.
KPI vs. metrics: How are they different?
It's worth mentioning that while not all metrics are KPIs, all KPIs are metrics.
KPIs and metrics exist in the BI space as units of measurement. Furthermore, some metrics can be refined into KPIs with supplementary information, including targets and other related metrics.
The differences between KPIs and metrics lie in their use cases, timeframe, focus, and tracking methods.
1. Use cases
Both KPIs and metrics are useful in their own ways.
While some metrics are considered pointless, others show decision-makers and business leaders the complete picture in terms of operational efficiency and marketing performance. Some examples are lead-to-conversion ratio, organic website traffic, First Contact Resolutions (FCR), and pages per session.
These metrics help evaluate specific processes and internal workflows. In turn, you can monitor these metrics to determine how different tactics influence process-level performance.
KPIs, on the other hand, are geared towards measuring progress towards business objectives. They're designed to guide high-impact decisions that lead to measurable results.
Some examples of goal-driven KPIs are:
- Organic traffic growth per month
- Operational cash flow
- Number of customers retained
- Inventory-to-sales ratio
- Number of on-time deliveries
- Blog posts published per month
2. Timeframes and targets
Raw metrics aren't tied to specific business objectives. They aren't bound to any timeframe, which can be worked into future strategies.
However, metrics can be calculated based on past data. For example, pages per session may use data collected over 30 days.
With the right tool, metrics can be tracked in real-time. But just like the utility of these metrics, real-time data doesn't provide any significant advantage to decision-making.
If you assign timeframes and targets to metrics, then they can function more like KPIs.
Keep in mind that a structured KPI includes a target value and a predetermined due date. If these components, along with a defined measurement method and frequency, are present, any metric can be refined into an actionable KPI.
For example, if a good chunk of your sales comes from social media traffic, you can turn "follower count" as a KPI. Just attach a target value, timeframe, measurement method, and tracking frequency.
3. Scope of focus
KPIs and metrics differ greatly in terms of scope.
Again, KPIs focus on business goals and results. This makes them indispensable for planning strategies, tracking progress, and making business decisions.
MRR, for instance, is a composite KPI that depends on other data, including average revenue per user and total customers. It's useful for evaluating revenue streams, assessing customer success, and the overall financial health of the business.
Metrics, however, only measure data around specific processes. They're low-level indicators that track task-level efficiencies, which are often siloed to specific departments and teams.
For example, "average word count" is a metric used by marketing teams. It's intended to track productivity and content depth, but isn't relevant to any business goal.
4. Tracking methods
Finally, KPIs and metrics involve different tracking methods.
Metrics are the natural byproduct of various software, from analytics tools to social media management software. These platforms usually consolidate metrics into reports—often compiled into automated reports and tool dashboards.
For KPIs, more advanced data management and BI solutions are required.
Initial setup is also needed before KPI data can be collected and tracked. You need to connect your data sources, build charts or tables, and piece the sections together into a unified dashboard.
Polymer is an advanced BI solution that enables you to aggregate, visualize, and export your KPIs. It streamlines KPI and metric tracking with modern features, like:
- Easy-to-use connectors: Use Polymer's direct integrations with popular data sources for seamless imports. Some of the supported platforms are Zendesk, Facebook Ads, Jira, Google Drive, and Google Sheets.
- Drag-and-drop report builder: Turn data into actionable insights with the block-based report builder. Convert data sets into heatmaps, line plots, bar charts, pie charts, and pivot tables.
- Interactive data visualizations: House all your KPIs in Polymer and compile them into interactive reports. This provides decision-makers with in-depth data without sifting through spreadsheets.
3 tips when measuring KPIs and metrics to scale your business
- Manage metrics and KPIs into dashboards. Use tools like Polymer or Google Sheets to create data dashboards for sales, eCommerce, SEO, and more. Dashboards organize and present data using tables and visualizations.
- Set SMARTER goals. SMARTER stands for Specific, Measurable, Attainable, Relevant, Time-Bound, Evaluate, and Re-evaluate. It's widely used as a guideline for tracking KPIs and metrics.
- Only use visualizations where they matter. Pivot tables, pie charts, timelines, and line plots are created for visualizing certain data types. Using them on incompatible data sets will only overcomplicate your tracking process.
Consolidate all your data with Polymer
Businesses often have oodles of data pulled from various sources.
Without the right data management strategies and tools, data analysis becomes a total nightmare.
Stay on top of your business KPIs and metrics with Polymer. With its modern and responsive interface, you can convert dozens of data sets into readable, visual reports in no time.
Get unrestricted access to Polymer's data management features today. Click here to start your 15-day free trial.