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.