Don’t Confuse KPIs and Metrics

The sheer amount of data digital marketers have to deal with is overwhelming. Wading through the data-bog, searching for the right figures is part of the fun. But with so much data, things can get confusing. A common challenge is making the right distinction between metrics and KPIs.  Your geometry teacher likely told you that all squares are rectangles, but not all rectangles are squares. Same goes for metrics and KPIs. All KPIs are metrics, but not all metrics are KPIs.

A metric, generically speaking, is a measure of something. The list is long, but some examples of common ones are traffic metrics (unique visitors, visits, page views), advertising metrics (impressions, clicks, CTR), or sales metrics (conversion rate, average sale price). There is probably some upward limit on the sheer number of metrics that could possibly exist, but for the sake of our conversation, it’s more or less infinite.

A KPI, or key performance indicator, is also a measure of something. The distinction between it and metrics is basically how important the measure is to the business. Metrics that track critical business performance aren’t mere metrics, they’re metics that directly predict business outcomes. The same measure may be a metric to one business and a KPI to another – it really all depends on the business.

Take pageviews, for example. For a media property, pageviews may be a KPI because the business monetizes pageviews in the form of display advertising. It stands to follow that the more pageviews the company gets, the more revenue they’ll drive. Conversely, for a B2B company where pageviews are not directly related to revenue, pageviews may be a mere metric: they’re important but not a direct driver of a business outcome.

The other distinction worth drawing is related to the numbers. You will always have fewer KPIs than metrics. In fact, you should be extremely selective about what metrics to promote to KPIs because the you’ll want only the best predictors of business outcomes to be KPIs. You should be able to quickly glance at your 3-5 KPIs to draw conclusions about the direction of your business.

How many KPIs does your company measure? Do you think it’s too many?

2 Comments

  1. Great point! How would you recommend companies move from data paralysis to creating meaningful KPIs? Is there a process you go through to help determine you true key indicators?

    • With so much data readily available, it is definitely a challenge. Most companies are in business to make money. KPIs should represent the metrics that track and correlate very closely with this end goal. For example, a media company who monetizes through ad revenue driven by impressions on their website, page views is a KPI. Page views should correlate very closely with revenue according to their business model. On the other hand, a SaaS company who generates revenue through subscriptions to a piece of software wouldn’t want to use page views as a KPI, as page views aren’t close enough to their end goal of driving revenue to be a reliable measure. A SaaS company might want to use something like a lead conversion rate as a KPI to track their acquisition efforts, as that metric will closely reflect revenue driven from new business, and perhaps the lifetime value of those subscriptions as well.

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