What Are KPIs? A Guide to Key Performance Indicators

What Are Key Performance Indicators?

Key performance indicators (KPIs) are specific metrics companies choose to quantify their performance and measure progress toward their unique goals. Which means goals play a huge role in choosing key performance indicators.

That also means every company's KPIs will be slightly different.

And they can range in scope from affecting the entire organization to a particular department, team, or even individual project.

Metrics vs. KPIs

Metrics are any quantitative measures you use to track and assess business activities. They're raw data about your business and its departments-and there are countless ones you can measure.

KPIs are also metrics. But they're the specific ones that indicate how well you're achieving business goals.

Here's a quick overview of the main differences:

	KPIs	Metrics
Purpose	Performance evaluation against business goals	General tracking and reporting
Importance	Critical for business success	Not always important but can be
Selection	A few, based on importance to your business	Many available

Benefits of Implementing KPIs

KPIs provide a clear, quantifiable way to evaluate performance.

More specifically, they help with:

• Objective measurement: KPIs offer a way for you to determine whether you're moving in the right direction to meet your goals. For example, you might use revenue growth, customer acquisition rates, or social media engagement as KPIs to measure success toward specific department goals.
• Identifying problems: Regularly monitoring your KPIs can highlight areas where performance is lagging. For example, if website traffic is a KPI and suddenly drops, it could indicate issues with search engine optimization (SEO), content, or technical matters.
• Making informed decisions: KPIs help you base your decisions on concrete findings rather than guesswork. For example, if your marketing campaigns aren't achieving your intended conversion rate, you can take steps to optimize your ads and content for conversions.
• Ensuring alignment: KPIs serve as a common language for everyone to see if they're on track

Types of KPIs

While your specific KPIs will depend on your business and departments, these are some of the main ones:

Financial KPIs

Financial KPIs measure a business's financial performance. And provide insight into its overall health.

Examples include:

KPI	Formula	What It Measures	Sample Use Case
Revenue growth	((Current period revenue - previous period revenue) / previous period revenue) x 100	Ability to make more money over time	Assessing the impact of a new pricing strategy
Gross profit margin	((Revenue - cost of goods sold) / revenue) x 100	How profitable the business is	Evaluating profitability after implementing a new system
Return on investment (ROI)	(Revenue from investment - cost of investment) / cost of investment	How successful or effective investments are relative to others	Measuring the financial return of a marketing campaign

Marketing KPIs

What are KPIs in marketing? They're the metrics you choose to evaluate progress toward your marketing goals.

Examples of marketing KPIs include:

KPI	Formulas	What It Measures	Sample Use Case
Website traffic	Sum of visits per month	How many visits a website gets	Tracking the impact of an SEO campaign on monthly website visitors
Social media engagement	Sum of all engagements (likes, comments, etc.)	Effectiveness of social media campaigns	Gauging the success of a social media campaign
Conversion rate	(Number of conversions / number of visitors) x 100	Efficiency of marketing efforts in generating leads or customers	Determining how effectively a landing page drove sing-ups

Sales KPIs

Sales KPIs focus on the sales team's ability to:

• Manage the sales pipeline
• Bring in new deals
• Convert prospects into new customers and business opportunities

Examples include:

KPI	Formula	What It Measures	Sample Use Case
Sales growth	((Current period sales - previous period sales) / previous period sales) x 100	Ability to grow and acquire customers	Evaluating the success of a new sales strategy over a quarter
Sales conversion rate	(Number of new customers / number of leads) x 100	Efficiency of sales processes and strategies	Assessing the effectiveness of a new sales pitch in closing deals
Average deal size	Total sales revenue / number of deals closed	Average value of a typical sale	Analyzing the revenue impact of upselling to customers

Operational KPIs

KPIs in business operations evaluate the efficiency of a business's behind-the-scenes work, ensuring that all internal operations run smoothly and effectively.

Examples include:

KPI	Formula	What It Measures	Sample Use Case
Employee turnover rate	(Number of departures / total number of employees) x 100	Employee retention	Monitoring the impact of new HR policies on employee retention
Inventory turnover	Cost of goods sold / average inventory	Management of inventory levels and carrying costs	Assessing the efficiency of managing goods

Customer Experience KPIs

Customer experience KPIs measure how customers perceive the business and their level of satisfaction. And are essential for understanding and improving customer loyalty.

Examples include:

KPI	Formula	What It Measures	Sample Use Case
Net Promoter Score (NPS)	(Total positive responses / total responses) x 100	Customer loyalty and satisfaction	Gauging customer satisfaction after releasing a major update
Customer satisfaction (CSAT)	% of promoters (scores 9-10) - % of detractors (scores 0-6)	Overall customer happiness	Evaluating customer satisfaction with your brand
Customer effort score (CES)	Average rating of customer effort on a scale from "very easy" to "very difficult"	Ease of customer interactions	Measuring the ease of navigating the new user onboarding process
Churn rate	(Number of customers lost during period / total customers at start of period) x 100	Rate at which customers abandon your business	Assessing the impact of a new competitor on customer retention

How to Choose and Measure Your KPIs

If you want to thrive in a competitive market, a strategic KPI framework can help you drive success and growth.

Here are the steps to selecting and measuring the right KPIs for your business:

1. Identify Your Priorities

Start by identifying what successful performance would look like. And use that to inform your broad, long-term goals.

Examples might include:

• Increasing market share
• Boosting profitability
• Expanding product lines

Then, solidify those goals for your organization. Which will help in defining departmental goals.

And all these goals should be SMART:

• Specific: It should be clear and provide enough detail
• Measurable: It should be something you can easily track with the metrics (these will become your KPIs)
• Achievable: It should be something you can realistically attain
• Relevant: It should logically align with your vision
• Time-bound: It should include some sort of timeline for when you want to see results

Your KPIs will naturally emerge once you've determined your goals.

For example, let's say one of the main marketing goals is to increase website conversion rates by 30% in the next year to support the business's overall goal of increasing revenue by 10% over the next year.

Your marketing KPIs might be:

• Website conversion rate
• Click-through rate (CTR) from organic (unpaid) search engine results
• Click-through rate from paid search engine ads

2. Balance Leading and Lagging Indicators

It could be helpful to split your indicators into two types: leading and lagging.

Leading indicators are metrics that help to predict future outcomes. And help you make adjustments early on to better reach goals.

Lagging indicators are the metrics that reveal how effective your past efforts are. And help you see clearly whether you reached your goals.

To get a well-rounded view of your performance, combine leading and lagging indicators.

Using the same example from above, both CTRs are leading indicators. And website conversion rate is a lagging indicator.

3. Benchmark Against Industry Competitors

Competitive benchmarking is when you compare your business's performance against that of your rivals. Which helps you understand what needs improvement and where you stand in the market.

After you've determined your KPIs, do some research to see how you compare against your rivals. You can do this by reading competitors' annual reports, industry studies, etc.

You can also gather competitive insights using Semrush tools.

For example, Organic Research can help you uncover a lot of SEO-related metrics that you might be using as KPIs. Like total keyword rankings.

And Social Tracker (part of Semrush Social) makes it easy to see how your social media marketing efforts stack up against your competitors.

4. Set a Review Cadence and Measure Results

Regularly reviewing KPIs helps you track progress and make informed decisions.

The exact frequency depends on your KPIs. But common frequencies include:

• Daily: For dynamic metrics that change frequently (e.g., social media engagements)
• Weekly: For metrics that benefit from regular monitoring but don't require daily attention (e.g., organic traffic)
• Monthly: For more strategic metrics that take time to show significant changes (e.g., customer retention rate)
• Quarterly/annually: For metrics that provide a broad overview of business health (e.g., revenue growth)

Then, use appropriate tools to measure your KPIs.

As an example, let's illustrate how to track organic search rankings with Semrush's Position Tracking tool.

Enter your domain and configure the tool in a few steps.

Click the "Overview" tab.

You'll see a graph of your visibility and how it's changed over time.

Scroll down to the "Rankings Overview" section. You'll see a table of your keywords and their positions.

You can then use this information (and information on your other KPIs) to build reports and dashboards to easily review performance. Visuals like charts and graphs highlight trends to help you understand the data.

Semrush's My Reports is one place you can track and report on KPIs.

Simply select one of the ready-to-use templates or start a report from scratch (depending on your needs).

Use the widgets on the left-hand menu to guide your report creation.

You can also add commentary to provide more insight into what each KPI is showing. Which makes it easy for anyone to understand and interpret the results.

Further reading: KPI Reports 101: A Beginner's Guide to Business Metrics

Common KPI Pitfalls to Avoid

Here are some common KPI pitfalls to avoid:

Setting Too Many KPIs

You might believe that tracking more data will provide a more comprehensive view of performance. But this really just makes it easy to lose focus on what truly matters.

Limit your KPIs to only ones that align with your goals.

Focusing on Vanity Metrics

Vanity metrics are numbers that look good on paper but don't necessarily mean much in terms of performance (like total views for a specific page). And they can give you a false sense of success.

Instead, prioritize meaningful KPIs that reflect on your desired outcomes.

Failing to Communicate the Importance of KPIs to Everyone

Individual employees may not understand how their work contributes to their larger department or the company. Which makes it less likely that your KPIs will be taken seriously.

Clearly communicate the importance of each KPI. Explain how they align with business goals and how individual contributions can be impactful.

Choose and Track of Meaningful KPIs

Without carefully chosen KPIs, you won't have any idea of how you're progressing toward goals. Or whether you eventually meet them.

Which is why you should take the time to set goals and pick a select number of metrics to use as your KPIs.

From there, Semrush tools can help with much of the tracking.

Sign up for free to try them out.

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