Key Performance Indicators

Key Performance Indicators, often shortened into KPIs, are quantifiable measurements of performance that evaluate the success of an organization towards a particular objective. Besides representing your team’s targets, they also provide insights that help your company make better business decisions and move forward strategically. Organizations use key performance indicators on different departments and at multiple levels.

Key performance indicators are often divided into two categories of measurement. They can be quantitative, which means that a number is measured against a benchmark, or qualitative, which is not measured by numbers but instead expressed through feelings, opinions, etc.

Why KPIs Matter

Key performance indicators help monitor the progress of your organization and the many teams that fall under it, such as marketing, sales, finance, and HR, among others. It makes sure that your teams are all moving in the same direction and sharing the same overall goal/s.

Having KPIs also means looking at your organizational health and identifying any areas for improvement or are at risk. Depending on the value, it can also reveal more information about your customers. These then provide information that would help your business adjust its efforts as necessary. Moreover, performance indicators help gauge your progress over time. The decisions derived from KPIs are also data-driven.

Image of Harry Rosen’s well-performing social media post.

Key Performance Indicators vs Metrics

KPIs and metrics may be used interchangeably, but they do not refer to the same thing.

KPIs help measure how well your organization is performing. Moreover, they give insights that support your business strategy. Some important key performance indicators in eCommerce are average order value, customer lifetime value, and customer acquisition cost.

Meanwhile, metrics track the status of everyday business activities. They may have an impact on your business, but they are not as critical as KPIs. Unlike KPIs, they do not have targets over a particular timeframe. However, one or two metrics can form a KPI.

Elements of a Good KPI

The following characteristics should help you determine if a KPI would provide useful information on the performance of your company or eCommerce tech team:

  • Creates an impact. Your chosen KPIs should be based on metrics that affect the success of your business. It should be relevant, otherwise, you risk misdirecting your efforts.
  • Measurable. You should be able to calculate your KPIs easily. What’s more, the data must be tracked accurately to ensure that you have an effective indicator.
  • Timely. The results of your KPI should be simultaneous so that you can make adjustments promptly. Previous data can be relevant in tracking trends alongside real-time data.
  • Actionable. Your KPI must inform your business strategy, from assessing marketing campaigns and UX strategies, to predicting performance for long-term planning.

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