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KPI vs. Metrics: What is the Difference?

KPI vs Metric Difference

What gets measured gets managed.

You've probably heard this quote before in entrepreneurial circles, as it’s been repeated so many times it’s become almost cliche.

Now that technology has enabled us to track and measure pretty much every aspect of an online business, the idea remains true. However, the difficulty in accessing all this data is that we constantly need to ask ourselves what to focus on.

After all, when you see all these different metrics in your analytics dashboard, it can be quite overwhelming to manage and gain actionable insights from the data.

When it comes to business performance, a few key terms are often confused and used interchangeably, such as "KPI" and "metrics."

Are KPIs the Same as Metrics?

There are certain key performance indicators (KPIs) that are tracked to measure the success of a company. However, some people use the terms "KPIs" and "metrics" interchangeably. Are KPIs and metrics actually the same thing?

The answer is no. KPIs are a subset of metrics, meaning that all KPIs are metrics, but not all metrics are KPIs. KPIs are specific measurements that are used to track progress towards specific goals. On the other hand, metrics can be any type of data collected as part of routine business operations.

So what's the difference between KPIs and metrics? Basically, KPIs are chosen because they are important to track, and they provide insights into how well a company is performing. The difference is in the word KEY. Like Key Accounts or Key Leadership Competencies, these are the most important among the metrics at hand. 

That is why it’s so important to understand the difference between a metric and a key performance indicator (KPI). 

If you're looking to find more about which KPI you should focus on for your client’s reporting, then read on.

What Is a Metric?

metrics

To put it simply, a metric is a category of quantifiable data relevant to a company's performance.

The airline industry, for example, relies on metrics to measure fuel efficiency and passenger satisfaction. Hospitals use metrics to measure patient satisfaction and infection rates. Companies use metrics to measure sales growth and employee productivity in the business world.

A few examples of business metrics include:

  • Traffic

  • Leads

  • Revenue

  • Profit

  • Profit margin

However, since anything that can be measured can be considered a metric, this means that there are countless metrics that businesses keep track of, from website traffic to conversion rates, to Facebook shares, and the list goes on.

In theory, that sounds great. The more data, the better, right?

In practice, though, this overwhelming amount of data overload can often become a distraction.

It’s easy to get so caught up in improving various metrics that you forget to ask yourself whether the changes will really affect your client’s bottom line. 

After all, is getting more likes on social media really that important? If those likes aren’t converting to sales, then probably not. However, if one of the main goals for the quarter is to increase your client’s presence on certain social channels, it may be. 

“Most people use statistics like a drunk man uses a lamppost; more for support than illumination.” ― Andrew Lang.

That’s why you need to identify which metrics are key performance indicators so that you can prioritize them. And they will not be the same for every client or quarter. 

The Benefits of Metrics

In a world where technology is constantly evolving, businesses are forced to keep up to remain competitive. One of the most important aspects of any business is its marketing strategy. A well-executed marketing strategy can make or break a company. 

To create and measure an effective marketing strategy, businesses need to rely on metrics. Metrics are quantitative measurements that track the results of marketing campaigns and activities. There are many benefits of using metrics in marketing.

  • First, metrics provide businesses with granular insights into how well particular campaigns, tactics, and activities are performing and allow organizations to track progress over time. This helps managers identify areas where they need to make changes to improve results.

Although the CTR on a new ad may not be a KPI for the client, understanding its performance will help your agency optimize that particular ad to improve performance and increase revenue (which likely is a KPI).

  • Second, metrics allow businesses to compare their performance against competitors’ performance. This helps businesses identify areas where they excel and areas where they need to improve.

For example, your client’s SEMrush visibility score may not be as important a performance indicator as organic traffic, but it will give your agency a clearer view of how that client is performing as compared to the competition.

  • Third, looking at the broader metrics helps organizations identify the key performance indicators (KPIs) most important to an organization’s success and how they connect to each other.

All metrics should eventually feed into a KPI. Email deliverability may not be the KPI for your client, but the portion of those email recipients who convert to customers most likely will be. Your agency needs to understand and optimize that metric (deliverability rate) to achieve the KPI (email revenue).  

What is a KPI?

A KPI, otherwise known as a key performance indicator, is a metric used to track and measure a company's or organization's progress towards specific, important goals.

Create goals for marketing

Choosing the right KPIs is essential for any organization looking to improve performance. However, simply selecting KPIs is not enough; they must also be tracked and analyzed regularly to identify trends and take corrective action if necessary. By using KPIs, companies can improve their performance and achieve their goals.

Not everything that can be counted counts and not everything that counts can be counted. - Albert Einstein

If you prefer a fun quote:

drinking mezcal

All tequilas are mezcals, but not all mezcals are tequilas. - John McEvoy

For example, if a company wants to increase sales by 10%, they would track the number of sales-qualified leads generated versus their goal.

S.M.A.R.T goals can also help differentiate what a metric vs. KPI is.

However, goals aren't KPIs, but KPIs support your goals. Your SMART goal is the result you want to attain, and the KPI shows you if you're on the right track.

kpi

Here are some examples of the most common KPIs based on business types:  

Professional Service KPIs

SaaS KPIs

Retail KPIs

Online Media / Publishing KPIs

eCommerce KPIs

Bookings

PQLs (Product Qualified Leads)

Capital expenditure

Unique visitors

Users

Utilization

MRR (Monthly Recurring Revenue)

Customer satisfaction

Page views

Conversion Rate

Backlog

Churn

Sales per square foot

Share ratio

Cart abandonment rate

Revenue leakage

Cost per acquisition

Average customer spend

Social referral growth

Cost per acquisition

Effective billable rate

ARPU (Average Revenue Per User)

Stock turnover

Time on site

AOV (Average Order Value)

 

Lifetime value

Shrinkage

 

Profit

As you can see, KPIs vary based on the business model and industry, although they all have a direct impact on a specific business objective.

The Benefits of KPIs 

There are many benefits of using KPIs in marketing, including improved decision-making, more accurate forecasting, and better allocation of resources. 

One common KPI for marketers is customer acquisition costs (CAC), which measures how much money is spent acquiring new customers. This is an important KPI for understanding the growth potential of a client as well as the profitability of that sale. 

Here are a few more benefits of using KPIs:

  1. They help businesses track their progress and identify areas where they need to make changes to achieve their goals.

  2. KPIs can help your agency make better decisions about where your client should allocate resources and how to improve sales, conversion rates, website traffic, customer lifetime value (CLV), etc.

  3. They can motivate employees to achieve specific goals and improve their productivity.

  4. KPIs can help businesses assess their competitive position and identify areas where they need to improve.

  5. They provide a framework for setting targets and measuring progress over time.

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KPI vs. Metrics: What is the Difference Between Them?

The clearest way to define this difference is that metrics are broad, and KPIs are focused. Metrics can be attached to almost every part of an organization’s standard business processes. But one key difference between a KPI and a metric is that metrics don’t need to be tied directly to a strategic objective. 

A KPI, on the other hand, is a performance metric directly related to business objectives. This could be revenue growth, user acquisition, and so on, but the key point is that the KPI is tied to a specific goal.

Here are a few other key differences between KPIs and metrics:

KPIs are focused. 

Metrics are not limited to one result or dimension.

KPIs can be more granular. 

Metrics cover a broader range.  

KPIs can be used over longer periods.

Metrics are usually shorter term.  

KPIs focus on results

Metrics focus on processes and problems. 

 

KPIs are often easier to understand

Needs interpretation

KPIs may be measured in a variety of ways

Metrics are usually tied to specific data.

How do KPIs and measures differ? Ask yourself these questions: 

  • Will a fundamental change in this metric impact the business? 

  • What results or dimensions of the business are you trying to measure? 

  • How will you measure it? 

  • What is the purpose of your measurements? 

  • How will you know if you are successful? 

  • How will you know what to change next time around? 

Everything that you track in your business is a metric, but only a few of these metrics are directly relevant to your main business goal, which makes them key performance indicators. 

In other words, all KPIs are metrics, but not all metrics are KPIs.

When to use KPI or Metrics?

There is no one-size-fits-all answer to this question, as the answer will vary depending on the organization and the specific situation. However, a few general guidelines can help to make the decision.

One key factor to consider is whether the organization is looking for overall trends or specific details. KPIs may be more appropriate if they are looking for overall trends. If they are looking for specific details, then metrics may be more appropriate.

Another factor to consider is how complex the data is. If the data is complex, then metrics may be more appropriate. KPIs can be used for complex data, but they need to be simplified to be effective.

The final factor to consider is how much time and effort the organization wants to put into collecting and analyzing data.

How KPIs and Metrics Work Together

tracking KPIs

To effectively track and improve your client's performance, you need to use a combination of Key Performance Indicators (KPIs) and metrics. KPIs are specific, measurable goals you want your company to achieve, while metrics are the tools you use to track progress towards those goals. By aligning your KPIs and metrics, you can ensure that both work together to improve your business.

One common mistake is using the wrong metric to measure a KPI. For example, if you're trying to increase revenue, you might use marketing qualified leads as a metric and sales qualified leads as a KPI.

However, if you're trying to increase customer satisfaction, you might use customer reviews or NPS ratings as a metric and customer retention rate as a KPI. Another mistake is not setting any KPIs at all - without specific goals to aim for, it's difficult to know whether or not your agency is driving improvements. 

How to Choose the Right KPIs and Metrics

When it comes to choosing the right KPIs and metrics, there are a few things you need to take into account. You need to make sure that the KPIs and metrics you choose are aligned with your business goals and that they are relevant to your industry. You also need to make sure that the data is accurate and can be tracked on time.

Once you have narrowed down the list of KPIs and metrics, you need to decide which ones will be most useful for tracking progress and measuring success. The most important thing is to use a combination of both top-down and bottom-up metrics to have a complete picture of how your business is performing.

Simply put, top-down means going from the general (e.g., increased revenue) to the specific (e.g., organic traffic needed to drive that growth). Bottom-up means going from the specific (e.g. total visitors) and calculating your way up to what general goal (e.g. revenue) can be driven by that metric. 

How to Use KPIs in Your Business

facebook ad conversion kpi

Now that we’ve discussed the main difference between a metric and a KPI, you’re probably wondering how to identify which KPIs you should be using to grow your business. 

Here is a three-step process to help you identify which KPIs to use in your business:

Step 1: Pick One Main Business Goal for the Year

When people discuss KPIs, they usually talk about strategic objectives and business goals. Regardless of the goal, the first step is to clearly understand exactly what you’re trying to achieve. 

However, instead of simply creating a long list of all your business goals, consider setting one specific business goal for the year to provide more clarity and help you choose which KPIs to focus on.

For example, in his article “What I Learned Growing an 8-Figure Business”, the founder of AppSumo and Sumo, Noah Kagan, shares that the team has one clear goal in any given year.

Here are a few examples of their goals in recent years:

  • 2014 - 1 billion visitors across Sumo

  • 2015 - $1 million ARR (annual recurring revenue)

  • 2016 - $5 million ARR

“I could ask anyone on the Sumo team — whether they work in marketing, support, customer success — and they know the goal,” explains Noah.

“Have one clear goal for your business and make it visible DAILY to EVERYONE on your team,” he advises.

What should that goal be? Of course, it depends on your situation, but here are a few helpful questions to ask yourself:

  • Is the business already profitable? Set a revenue goal.

  • Does the business barely break even? Set a profitability goal.

  • Are you working with a venture-funded startup that you are helping turn into a unicorn ($1B valuation)? Set a user growth rate goal.

Also, keep in mind that while dreaming big is great, staying grounded in reality is also important, so make sure that your goal is something that you can realistically achieve in one year.

Step 2: Identify Which Metrics Have a Direct Impact on Your One Business Goal

Now that you have set your business goal for the year, it’s time to take a look at all the important metrics currently being tracked in the business.

All these metrics are at least somewhat relevant to the performance of the company, but the reality is that the majority of them are not directly related to your primary business objective. This means that while you still want to keep an eye on them, these metrics don’t necessarily qualify as key performance indicators.

In this step, you need to ask yourself which metrics are the most valuable when evaluating the progress towards the overarching goal.

As you can imagine, the most important KPI is the metric you use for your goal since it is the clearest indicator of progress. For example, if you have set an annual revenue goal, the most valuable KPI will be daily, monthly, and quarterly revenue.

Also, the common advice populated online appears to be to pick 5-10 KPIs, although Noah Kagan advises just picking 3 KPIs to focus on. After all, do you really have 5-10 metrics that are key performance indicators? Probably not.

However, these can increase as you drill into each individual team or business unit. 

For example, your paid search team could have 3 KPIs (cost, revenue, cost of acquisition), and your SEO team could have their own set of KPIs (organic traffic, conversion rate, revenue).  

Step 3: Create a Schedule for Reviewing KPIs to Ensure That You’re Progressing Towards Your Business Goal

Once you have identified the KPIs to focus on, you need to make sure that you review them regularly.

In particular, it’s often best to review your KPIs in the following four intervals: 

  • Weekly

  • Monthly

  • Quarterly

  • Annually

That way, if you are agency is getting off track, you’ll be able to quickly identify it and take the appropriate measures to correct course.

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How to Set KPIs for Your Employees

You can’t expect people to improve their performance if they don’t know what criteria are used to evaluate performance.

That’s why in addition to setting business-wide and departmental KPIs, you should also identify KPIs for each individual role within the company.

For example, if you run a digital marketing agency, you may start out as a one-man or a one-woman show, but you will inevitably need to hire people as your business grows. At this point, you need to identify what their KPIs will be.

Here are a few ideas of KPIs for common roles in an agency:

  • Writers: You can evaluate writers based on producing an agreed amount of content per week, meeting deadlines, and the overall feedback that clients give their work.

  • Marketers: Marketers can be evaluated based on the effectiveness of their campaigns - for example, the number of backlinks per month, new email subscribers per month, the percentage increase in monthly traffic, and so on.

  • Salespeople: You can evaluate a sales team by the number of daily cold emails or cold calls, weekly sales presentations, their close rate, and the number of new clients they acquire each month.

Also, you may want to consider developing a standard operating procedure for what should be done when an employee fails to meet a KPI target.

This will allow you to identify the cause of the problem and provide the necessary support for employees (i.e., mentorship, additional training, etc.).

Why You Should Never Use a Single KPI to Measure Performance

“When a measure becomes a target, it ceases to be a good measure,” goes the adage known as Goodhart’s law. 

Although a single goal can be a good top-level goal for a company, it can have an adverse effect when applied at the KPI level. This means that when you give someone an incentive to prioritize a specific metric, they will inevitably optimize for that metric, although this can often lead to unintended consequences.

In the article“Unintended Consequences and Goodhart’s Law,” data scientist Will Koehrsen provides an example that we’re all familiar with:

High school seemed like one long series of memorizing content for a test, then promptly forgetting it all so I could stuff my brain full of info for the next one, without any consideration of whether I really knew the concepts.

The author points out that although this strategy worked quite well, given the way success in high school was measured, it’s probably not the best approach if you want a great education.

This happens in the business world as well.

Anytime you use one metric to evaluate someone’s performance, this can lead to employees trying to game the metric, often to the detriment of the company’s main objective. It’s not that the employee is trying to do anything malicious, it’s simply how humans often respond to incentive structures.

Koehrsen gives an example of a call center manager implementing a policy where the employees are compensated solely based on the number of calls they make. It seemed like a great idea...until they realized that the policy unintentionally incentivized employees to be rude to customers so they could move more quickly to the next call!

If the single KPI is the number of leads generated, this can shift the team’s focus exclusively to lead quantity without any concern about lead quality. Their numbers might look great, but if none of those leads convert to sales, it wastes the sales team’s time and does not drive additional revenue. 

These provide good examples of why you shouldn’t use a single KPI to measure performance. Instead, as Noah Kagan suggests, set three KPIs for the organization and three KPIs for each role within it.

Providing a more balanced incentive structure to the organization often leads to individual behavior more conducive to achieving your primary business objective.

Best Practices for Identifying & Monitoring KPIs and Metrics

Identifying and monitoring key performance indicators (KPIs) and metrics is essential for any business looking to improve its performance. However, not all KPIs and metrics are created equal, and businesses must carefully select the ones that best align with their strategic goals. 

Once selected, these KPIs and metrics should be tracked regularly to identify trends and opportunities for improvement. This article provides best practices for identifying and monitoring KPIs and metrics.

1. Choose the Right Metrics for Your KPIs

To ensure that your company is on track for success, you need to establish key performance indicators (KPIs). However, not all KPIs are created equal. You need to choose the right metrics to ensure your goals remain manageable and achievable.

selecting metrics to dashboard

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One important factor to consider when choosing KPIs is the company's stage of development. Startups, for example, should focus on growth metrics such as revenue or user adoption rates. On the other hand, established businesses may want to track profitability or market share.

Another key consideration is the type of business you're in. If you're in the service industry, you may want to focus on customer satisfaction or net promoter score. If you're in a manufacturing business, you may want to track inventory turnover or return on assets.

2. ​​Make Sure That Your KPIs Are Measurable.

To measure the success of your client’s business, you need to track KPIs (key performance indicators) that are measurable. That way, you can track your progress and make necessary adjustments. Some common KPIs include revenue, profit, customer satisfaction, and employee satisfaction. Make sure that the KPIs you choose are relevant to your client’s business, those you can impact, and those your team can easily track.

3. Make Sure Your KPIs and Metrics Are Accurate.

To make informed business decisions, it is important to use accurate data. This means ensuring that your key performance indicators (KPIs) and metrics are reliable. Unfortunately, there are many ways to manipulate data to present a false picture of success. 

One way to ensure the accuracy of your data is not to use Excel or Google Sheets. These tools can be altered, or formula calculation errors might show inaccurate results. 

Another way to ensure accuracy is to perform regular audits of your data. Compare actual results against targets or goals that you have set. Identify any discrepancies and investigate the causes.

It is also important to be aware of common pitfalls that can lead to inaccurate data. For example, using averages can hide fluctuations and give a false impression of stability.

4. KPIs and Metrics Need to Be Actionable.

For a company to improve its performance, they need to have key performance indicators (KPIs) and actionable metrics. This means that the data being collected is not just for tracking purposes, but is being used to make decisions and improve operations. Without this level of analysis, a company can get bogged down in data that is not useful. 

One of the most important aspects of having actionable KPIs and metrics is ensuring they are aligned with the company's strategy. This means that the data is focused on what is important to the business and helps achieve its goals. There are a number of different ways to go about setting up KPIs and metrics, but it is critical that they are relevant to the organization. 

Another important consideration when it comes to KPIs and metrics is making sure that they are regularly updated.

How to Track Your Metrics and KPIs

There are a variety of online tools that can help you track your progress, including Google Analytics and our very own Agency Analytics. Utilizing these tools will give you a better understanding of your business's performance and where it can be improved.

Managing Metrics and KPIs With a Dashboard

Hopefully, we have given you enough information to help you decide which KPI you should be tracking.

KPI dashboards are an essential tool for managing metrics and KPIs. A dashboard can help you keep your business on track by tracking key data points and displaying them visually appealingly. 

There are many different software options available for creating dashboards, so choosing one that will fit your needs is important. Once you have selected a dashboard software, you need to decide which metrics and KPIs to track. 

You will want to integrate your existing data into your software. This data can come from a variety of sources, such as Google Analytics, Shopify, SEO reporting, customer surveys, or call tracking. 

There is no right or wrong answer when choosing metrics and KPIs; the most important thing is to make sure that they are relevant to your client’s business. Once you have settled on a set of metrics and KPIs, it's important to track them regularly and review them often. This will allow you to identify any areas of improvement and make changes as needed.

How to Create the Perfect KPI Report

As an agency providing services for your client, you’ll want to send a KPI report every week, bi-monthly, or monthly and build that relationship with them. 

To create the perfect KPI report, the first step is to gather all of the data you will need for your report from your dashboard. Ideally, use an automated data retrieval method so that your team isn’t spending hours copying and pasting numbers. 

There’s a plethora of metrics you can use to create a KPI report. 

Once you have all your data in hand, it's time to start analyzing it.

The next step is analyzing your data, and identifying which trends or patterns stand out. Once you have identified these trends, you can begin to create an executive summary based on them. Creating annotations and goals is a great way to highlight your agency’s progress toward achieving those KPIs. 

Then you can automate your KPI reporting to your clients on a weekly or monthly basis.

Summary

As we’ve discussed, you can’t grow a business without first having clarity on your goals.

In addition to making it clear to everyone in the company to prioritize, by setting clear business goals, you can then identify which data should be considered a metric and which should be considered a KPI.

In particular, to identify which metrics are KPIs, we suggest the following 3-step process:

  1. Set a single, annual goal for your business

  2. Identify several KPIs that will help you stay on track to hit that goal

  3. Consistently review those KPIs on a weekly, monthly, and quarterly basis and make adjustments accordingly

This approach may sound overly simplistic, but as we’ve discussed, one of the main benefits of differentiating between metrics and KPIs is to take the overwhelming amount of data at your fingertips and turn it into actionable insights that keep your client’s business on track.

Written by

Agota Bialobzeskyte

Agota Bialobzeskyte is a content strategist that helps entrepreneurs grow their businesses with value-packed content that readers adore. She has over eight years experience in the digital marketing field and loves to share her knowledge with the industry.

Read more posts by Agota Bialobzeskyte ›

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