KPIs and metrics are the blue or red pill that a business must carefully decide to take—they often determine whether a company will pursue its goals in an active (tactical) or aggressive (strategic) manner.
In business parlance, specific to functions such as data analytics, project management or business intelligence, these terms are often used generously. Metrics and KPI are quantitative and often serve two diverse functions although they are interrelated.
Let’s get to the business by first understanding what each of them are before diving into the difference between them.
Even though people use the terms KPI and metrics synonymously, there is a fine line that differentiates the two.
“KPIs are a quantifiable or measurable value that reflects a business goal or objective (strategic) and how successful the business is in accomplishing that goal or objective. A metric is also a quantifiable or measurable value, but it reflects how successful the activities taking place are (tactical) to support the accomplishment of the KPI.”
In short, KPIs and metrics are key measures of performance. KPI is a more generic term which represents the particular set of metrics or measures which are used by an organization to check the effectiveness of its strategic goals.
Whereas, a metrics is a measurable value used to evaluate the performance of a project or its components. We shall make it more emphatic with examples as we move forward in this blog.
You need to remember that all KPIs are metrics, but not all metrics are KPIs. Let’s take a detailed look at this formula and understand the definition of each of these words.
Well, you could say that - but let’s look at a more professional definition, shall we? 🙄
A Key Performance Indicator (KPI) is a performance indicator that you can use to assess whether or not your business goals are being met. They act as benchmarks against which you can track progress towards key objectives in the short, medium and long term.
For example, if your business goal is to increase MQLs by 20% for a given quarter, then your KPIs would include Organic traffic, Lead quality, Lead conversion rate, Customer acquisition cost (CAC) to name a few.
The metrics of a successful blog for your business, such as traffic, engagement, and bounce rate, should be trending upwards.
Some of the most important KPIs that you would have to track would be-
These ‘key’ strategic indicators will provide you with the data on your blog’s performance; whether your blogs are being viewed by people and whether it is gaining the traction that you desire.
According to an article published in Forbes, “A good KPI is specific, measurable and impactful to overall business goals.” After all they are called Key Performance Indicators because they are an integral part of measuring a specific company objective.
An important part of SaaS analytics is metrics as they help us answer questions about the overall health of the business. While they may be loosely tied to targeted objectives, they are not the most important numbers and may not give clear indications about whether you’re on track.
Various different metrics that may not be very relevant for you to make critical decisions but are still important for overall business. When a company is looking to improve, they often look at their metrics so they know what needs to change and why.
For example, there's no point in having 5 million followers on Facebook if you can’t convert those fans into customers or revenue.
However, other metrics are valuable even though they might be hard to track down—for instance a certain type of web traffic known as referral visits from search engines like Google is important because it means people found your site through searches and were interested enough in what you do/sell that they clicked through to visit again.
Let's explore the subject of metrics further with the help of an example.
If you are using Mailchimp for your email marketing campaign, some of the most critical metrics that every marketer should track to measure how successful your campaign is include-
These metrics would offer insights around how your subscribers respond to your emails, how many of them clicked the links in your message, how many new subscribers are added, how many unsubscribed.
These metrics would thus act as a guide when measuring the performance of your email campaigns. Thus, marketers can make informed decisions and level up their efforts based on this information.
Once you have the right metrics in place, what next? Have the right dashboard in place that serves your needs fully. This can be quite an undertaking. In order to fully benefit from the data, you need to be able analyze and communicate your findings.
This is where Dataflo’s live KPI dashboard helps you view all your metrics in one place. It reduces the hassle of tracking each metric separately, and the customization feature allows you to build your own metrics dashboard or choose a pre-built dashboard.
KPIs and Metrics are often used interchangeably. However, it's important not to confuse them: a misstep in interpreting your measurements may mean you're tracking incorrect data that doesn't align with your organization's goals.
KPIs are strategic indicators that cater to long-term goals and help us determine the measures that are relevant, have the biggest impact on our company’s goals, and can be easily measured. Metrics, on the other hand, are used to calculate standard business processes; however, they aren’t necessarily the most important metrics that need to be measured.
Let’s look at some of the major differences between KPIs and metrics along with examples mentioned in the image below.
The advent of data-collection tools has made it easier to track all your marketing initiatives in one place. But with so many metrics available, figuring out which ones are most important can be challenging.
Several companies fail to identify the correct KPI to track and end up spending a lot of time and money calculating unnecessary metrics on their dashboards that don’t yield any results.
Corporate Global Executive and author Pearl Zhu, in her book ‘CIO Master:
Unleash the Digital Potential of It’, says, “Selecting the right measure and measuring things right are both art and science. And KPIs influence management behavior as well as business culture.”
Now that we have understood the difference between KPIs and metrics, let’s look at some examples. Mentioned below is a list of KPIs and the respective metrics that could be used to quantify them.
To learn more about the key differences between KPI and Metrics, visit our Resources page.
MRR is one of the most valued KPIs in Sales. Monthly Recurring Revenue (MRR) calculates the total predictable revenue that a company earns from a series of subscriptions in a given month. MRR analyzes the financial standing of a project and helps predict the organization’s total earnings in the future based on their active subscriptions.
The best part of tracking MRR is that it enables you to track the performance of your product across irregular subscription terms. This is done by averaging the diverse pricing plans into a consistent amount that can be tracked every month.
Tracking MRR can help companies improve their cash flow and ROI of their businesses. Because MRR is a recurring metric, it enables organizations to make the most of all business opportunities.
MRR = Number of subscribers in a monthly plan * average revenue per user
If a marketing team wishes to increase its sales growth by 10% by the end of two quarters, they shall track the Lead-to-Customer Ratio for each month. Lead-to-Customer Ratio tracks the number of interested customers, or leads, who got converted to customers and made a subscription.
Lead-to-Customer Ratio is a crucial metric to track because it reveals whether a certain marketing tactic is attracting more people to subscribe to the product or not. A high Lead-to Customer Ratio means a higher percentage of sales revenue.
By measuring the Lead-to-Customer Ratio, the team can decide which ad campaigns are attracting the most customers and increasing the total sales for a product or a service. The team can focus on pooling their resources into the campaigns that are profitable and discontinue the ones that are not yielding good results.
Lead-To-Customer Conversion Rate = No. of qualified leads that resulted in sales / Total number of qualified leads * 100
Customer Acquisition Cost is the amount of money a company spends in order to acquire a new customer. It includes the marketing and advertising costs and the bonuses and commissions paid in order to convince a potential client to become a customer.
CAC is usually calculated along with Customer Lifetime Value (CLV), which is the revenue that a customer would bring to a company with recurring purchases over a long period of time.
To calculate CAC
CAC = (Total Sales & Marketing Cost) / (Number of Customers Acquired)
Calculating CAC and CLV together helps the organization analyse the overall value of a new customer to the company. The Customer Acquisition Cost needs to be lower than the Customer Lifetime Value for the acquisition to be profitable.Calculating CAC gives an organization a good understanding of the Return on investment as well as the profitability of their product.
You might want to know how to reduce the customer acquisition cost (CAC)
New Visitors is a metric that measures the total number of unique visits to your website. Tracking New Visitors helps a company determine the actual size of their audience. It also helps establish the performance of the marketing campaign.
Tracking New Visitors plays a crucial role in assessing the customer behavior and how they enjoy your content on the websites. If an organization has more unique visitors compared to returning visitors, that means that there is something missing in their content quality.
They should consider restructuring their marketing strategy to turn these new visitors to returning visitors and then into potential clients.
Customer experience is a crucial KPI to measure if your product or service is being received well by the customers. Customer satisfaction and company growth go hand in hand, which is why it is one of the top KPIs that companies track. Assessing customer experience could tell you if that product is profitable to the company.
Companies strive to keep their existing customers satisfied because they might return to make more purchases from them. Customer satisfaction is built over trust and product quality. There are several metrics that can be tracked to evaluate customer satisfaction such as Customer Lifetime Value, Retention Rate, and Churn Rate.
Churn Rate is a quantitative measure to calculate the number of customers lost in a duration of time. For example, if a company has 1,500 loyal customers at the start of the year and makes a profit of $15,00,000, and by the end of the year, only 1,000 customers remain, while the other 500 leave, the churn rate would be 33%.
The churn rate indicates the company’s health and the reception of its product in the market. Churn rate can be used by companies to identify the key factor that is costing them customers and rectify it by implementing new marketing strategies.
Customer churn rate formula = Total number of Lost Customers over the period ÷ Total Customers at the Start of Time Period
Key Performance Indicators would not exist without metrics and both of these quantitative measures are used by businesses to track the performance and financial health of a company.
Various organizations often commit the mistake of not using the correct KPIs that are aligned to the company’s goals. Evaluating the wrong Key Performance Indicators and metrics costs the company a lot of time and effort without yielding the right results.
Now that we have understood the difference between KPIs and metrics, let us look at how companies use both of these measures to assess the performance of their organization’s targets and goals.
Tracking Key Performance Indicators and business metrics are the backbones of any SaaS company. Since almost all marketing happens through digital channels, tracking both KPIs and metrics becomes necessary. KPIs and metrics act as a roadmap to reaching your desired goal.
Both KPIs and metrics are dependent on each other. Key Performance Indicators are a series of metrics and are incomplete without them. However, tracking metrics without a clear set KPI would have a detrimental effect on the company’s financial health. Calculating vanity metrics or KPIs that are not aligned with the company’s long-term goals does not give you a clear picture of whether a particular ad campaign is gaining a profit or not.
Let’s look at a basic example of how Key Performance Indicators and metrics are used by SaaS businesses to measure the performance of their marketing strategies. Let’s go back to the blog example.
If you want to increase your blog traffic by 20% within the next two quarters, simply measuring the social media shares for your blog link will not be able to calculate your progress, and so, it will not be considered a KPI, but a metric. Instead, if that metric translates to the number of people who became recurring visitors of the blog, or generates new leads, then Total Website Visits becomes a KPI.
On the other hand, if the majority of recurring blog visitors are coming from referrals or organic search, then those will be the KPIs and Social Media shares will just be considered a metric and not a KPI.
In today’s day and age, digital marketing has been thriving. Companies rely on Key Performance Indicators and metrics to evaluate the success of their organic and paid campaigns. Critical judgements and executions are carried out on the basis of the data collected by a series of technically curated KPIs for a specific product or campaign.
Organizations that operate on a larger scale calculate and track a separate set of KPIs and metrics for each project or department. In such cases, keeping all the data organized and in one place becomes essential. Professional dashboard tools enables them to do that in a matter of a few clicks.
According to an article published in MIT Sloan Management Review, “Expanding how people engage and interact with dashboards will expand how people engage and interact with KPIs.”
Dashboards also make it effortless to view the data at a glance and also share it with your teammates at the click of a button. Dataflo’s customizable dashboard enables you to view all the important metrics in one place, which simplifies the process by leaps and bounds.
Through this blog, we attempted to learn the key differences between the two and how they can be used to grow your company.
The most important thing to remember is that KPIs are made up of a series of metrics and are incomplete without them in tracking the performance of a company’s growth. Knowing the difference between the two and smartly tracking your KPIs and metrics on dashboards not only save you time but also gives you a holistic view of your business performance.
As the competition in the SaaS industry becomes fierce, it is becoming critical to use quantitative measurements such as KPIs and metrics to stay at the helm of the market.
Various SaaS companies even calculate the major KPIs and metrics of their competitors in the market to see how their product or service is performing compared to everyone else.
As popular management consultant and author Peter Drucker says, “If you can’t measure it, you can’t manage it.”
Let us do a quick rundown of all the important points from this blog:
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