There are some people out there who are under the impression that business metrics and KPIs are one in the same, but this is simply untrue.
Metrics and KPIs are most definitely two separate things that tell you completely different stories about how your campaigns are performing. In this article, we’re going to delve into those differences and talk about the different ways in which these two types of data should be analyzed and used to help grow your brand.
A business metric is a quantifiable measure that is tracked and collected as data. Metrics provide valuable insights on how campaigns and marketing endeavors are performing. These metrics can (and should) be used to inform business decisions moving forward. Metrics can be very focused and specific, or broad and general.
Here are some examples of broad business metrics:
- Sales revenue
- Customer loyalty and retention
- Monthly profit or loss
- Hours dedicated per process
And here are some more specific metrics within broader categories:
- Reach (specific to social media)
- Most improved keyword rankings (specific to SEO)
- Click through rate (specific to paid search)
Why are business metrics important?
As mentioned above, business metrics are used to develop KPIs and inform important business decisions as the company grows. If you are not tracking and analyzing metrics, you are losing out on major growth potential.
Key Performance Indicators
KPIs are informed and shifted by metrics. A KPI is also a measurable value, but this is what actually demonstrates how effective your company has been at working towards and achieving certain business objectives. KPIs can be set at multiple levels to better evaluate and track the overall performance of the business. Low-level KPIs may focus on processes occurring in departments such as sales, marketing, HR, etc., while high-level KPIs are concerned with the overall performance of the company.
Klipfolio does a really good job of outlining how to define a KPI:
“Let’s say your objective is to increase sales revenue this year. You’re going to call this your Sales Growth KPI. Here’s how you might define the KPI:
- To increase sales revenue by 20% this year
- Achieving this target will allow the business to become profitable
- Progress will be measured as an increase in revenue measured in dollars spent
- By hiring additional sales staff, by promoting existing customers to buy more product
- The Chief Sales Officer is responsible for this metric
- Revenue will have increased by 20% this year
- Will be reviewed on a monthly basis”
Why are KPIs important?
KPIs set standards for various departments, and help to communicate what is important within the goals of the company. They guide employee behavior by providing succinct, clear, and relevant information. High-level KPIs set a standard for how all employees should perform to maintain alignment with the rest of the departments, while low-level KPIs provide direction for specific endeavors within each of those departments that will move each department towards achieving the high-level goals.
In short, simplified words:
- KPIs are used to measure performance and success.
- Metrics are nothing more than numbers within a KPI that help track performance and progress.
Basically, you can’t have a KPI without metrics to inform and guide it, but you can have metrics stand alone without a KPI.
Both of these measures are extremely important to evaluate before literally any and every decision you make regarding future actions with your business. You should never make a decision just because it “feels like the right thing to do.” All moves you make should be carefully calculated and informed by numbers and statistics based on your competitors’ results as well as your own, generated by past campaigns and endeavors. Don’t be afraid of trial and error, as long as your trials are informed by concrete data and analytics. Business metrics and KPIs can do this for you.