Marketers are renowned for throwing around all sorts of buzzwords and acronyms, many of which are used interchangeably including metrics and KPIs. While the odd misuse here and there won’t cause any major harm, it’s words have weight and it is important to go back to basics and understand the difference between the two, and how they both play a role in effective marketing performance tracking.
In this back-to-basics article, we’ll define KPIs and metrics and the relationship and differences between the two to ultimately show you why you need both.
Learn the difference between KPIs and Metrics
What are metrics?
Metrics are quantitive measurements that track day-to-day business activities. There are a huge number of metrics that could be tracked by a business, from click-through rates of individual emails to follower counts on social platforms.
What are KPIs?
Key performance indicators, or KPIs, are performance measurements that teams and businesses use to track progress towards goals. ‘Key’ is the crucial word here — KPIs should be a small list of important metrics that act like vital signs of the company’s health. They could be things like customer lifetime value or monthly recurring revenue (MRR).
KPIs vs. Metrics: Key differences and examples
KPIs can be metrics, but not all metrics can be KPIs. Now you understand why the two can often be mistakenly used interchangeably.
The biggest difference between the two is that KPIs are macro-goals that are tied to business targets, where metrics happen on a micro level and are connected to team or individual activities. Those activities may have an impact on your KPIs, but they are not considered to be a vital sign of business health.
For example, a marketing team in a SaaS company may use the following as KPIs:
Customer acquisition cost
Customer lifetime value
Monthly recurring revenue
Valid sign ups
Churn rate
Website visitors
Zoom out, and that same marketing team could be keeping an eye on the following set of metrics:
Email opens
Email click-throughs
Impressions on paid media
Click-throughs on paid media
Social followers
Social engagement
Organic visitors
Keywords in top 10 placements
eBook downloads
Webinar attendees
Brand awareness and sentiment
This metrics list is in no way comprehensive. The average marketing team is absorbing a huge number of metrics day in, and day-out. If every single one of these had a goal attached and the same scrutiny applied as KPIs, it would be impossible to focus efforts on the things that actually lead to a business’s success.
How to identify KPIs for your business
The importance of KPIs cannot be understated. These are your company’s north stars, they should guide the decisions every team and individual makes, and will determine the health of your business.
Whether you’re reading this and realizing you’re tracking a bunch of metrics and calling them KPIs, you’re choosing KPIs for the first time, or you’re about to give your KPIs a refresh for the new year, take the time to go through these steps to land on a set of strategic, important KPIs:
Identify the macro annual goals for the businessIt’s likely your business already has overarching goals that have been approved by leadership and other stakeholders. It could be new business growth, annual recurring revenue, or a profitability increase. Whatever they are, write them down and make sure they are specific and measurable.
Consider the things that contribute to those goalsThere will be a number of major things that ultimately help the business reach those goals. For example, if an increase in profitability is a goal (and it probably is), new business will play a role, but so will customer retention, churn reduction, and customer expansion.
Focus on the leading indicators
If the above exercise revealed a high volume of metrics, narrow it down to those that have the most impact. This will reveal the key performance indicators your business should focus on.Give each KPI an owner
It’s a good idea for each team to ‘own’ some KPIs that are relevant to their responsibilities. This will help ensure the entire company is focused on the health and growth of the business.
KPIS vs. Metrics: The final word
It’s understandable that metrics and KPIs get confused. KPIs are, at the end of the day, a set of metrics that are key to a team or organization’s performance over time. Getting clear on the difference between the two will help focus company efforts on the things that really matter, ultimately driving better outcomes for the business as a whole.
