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Performance tracking has never been easier. With the rise of modern self-service BI tools, everyone can monitor relevant performance indicators in a matter of seconds. But this is not without problems. Having the ability to analyze your data fast and efficiently doesn’t always mean you are doing it correctly. Businesses extract data from several internal and external sources, which makes it difficult but necessary to filter this data and only keep what's relevant for the company. This is done with the help of KPIs and metrics.
KPIs and metrics are often considered the same thing in day-to-day business contexts. However, while they work similarly, they are not used for the same purposes. Just memorize this statement for later: all KPIs are metrics but not all metrics are KPIs. That being said, this post will cover the main difference between metrics and KPIs and some examples and tips for efficient performance tracking.
Let’s kick it off with the answer to the popular question, are metrics and KPIs the same?
What Are KPIs?
Essentially, Key Performance Indicators or KPIs measure performance or progress based on specific business goals and objectives. A pivotal element to consider is the word "key", meaning they only track what is truly relevant to the company's strategic decisions.
A good KPI should help you and your team understand if you are making the right decisions. They act as a map of business outcomes and are the strategic indicators that will move the company forward. Examples of KPIs can be sales growth, customer retention, or customer lifetime value. Companies usually visualize these measurements together with the help of interactive KPI reports.
What Are Metrics?
Metrics are quantitative measurements used to track the performance of specific business processes at an operational and tactical level. They help provide context to the performance of key business goals but are not critical to its success like KPIs are.
While some of them might be tight to objectives, metrics are not the most important indicators for monitoring strategic actions. However, they are still relevant to informing businesses about the progress of their different activities. Some examples of metrics include the lead-to-conversion ratio, Return Rate, and Acquisition Costs by Marketing Channel.
Now that we have a basic understanding of the definition of both indicators, let's dive deeper into the difference between KPIs and metrics.
KPIs vs Metrics: What Is The Difference?
KPIs and metrics are often considered synonyms. But this is not how it actually works. While they are both quantitative measurements, they are used for different purposes. Simply put, KPIs need to be exclusively linked to targets or goals to exist, and metrics just measure the performance of specific business actions or processes. Let’s see some of the KPI and metrics differences in more detail.
- Communication: The first difference between KPI and metrics is what they communicate. As mentioned above, KPIs are strategic indicators exclusively used to communicate the progress of your business goals. On the other hand, metrics are used to track specific areas or processes that might be working towards that goal. For example, let's say you want to sell 20% more in the next year; your main KPI would be the number of products or subscriptions sold to date. Now, to monitor the progress of that goal in detail, you would need to track various metrics such as the number of website visitors, best-performing sales channels, the performance of your sales agents, and any other that helps you understand which actions are contributing to achieving your goals and what could be improved. In summary, a KPI can be seen as a collection of metrics that impact your journey to achieving your goals.
- Objective: Another important difference between metric and KPI is the objective. A good KPI is always tight to an outcome. You expect it to go up or down to reach its target. Metrics, on the other hand, measure the impact of the day-to-day performance of different business areas, and, as seen with the sales example, only some of them help you track the success of your strategic actions. The important takeaway here is that metrics and KPIs are not mutually exclusive - that’s why they are often taken as the same thing. A KPI will need a collection of metrics to track its success; you just need to make sure you are using the right metrics to track it. Remember: while all KPIs are metrics, not all metrics are KPIs.
- Focus: Another key difference between metrics and KPIs is their level of focus. KPIs have a high-level perspective. They represent key business goals that are relevant for various departments. On the other side, metrics are considered lower-level indicators, and they track activities or processes that are specific to a department or business area. Following the example of increasing sales by 20%, it is likely that each department will play a role in achieving that goal. For instance, the marketing department might need to focus on boosting promotions, the sales team might need to focus on developing strategies to efficiently turn leads into paying customers, the logistics team can focus on improving the shipping experience, and the product team can focus on finding strengths and weaknesses in production. Consequently, each department must track different metrics that work towards that general business goal.
KPIs vs Metrics Examples
Let’s put these differences into perspective with some metrics vs KPI examples created with a modern KPI tool:
1) Sales growth metric and KPI
Let’s start by going a bit more into detail with our example of increasing sales by 20% by the end of the year. A big goal like the one of sales growth is relevant for various departments across a business, such as management, sales, marketing, and production. Each of these departments will track its own metrics to understand how its activities contribute to the general goal. Here we will focus on a sales metric vs KPI example.
- KPI: Sales Growth
The image above is a visual representation of our main KPI: sales growth. With information such as the current period vs. the previous one, a percentage of sales based on a target, as well as sales revenue by a sales representative, we can see at a glance if targets are being met or not. But, to fine-tune the strategies, we also need to know how the different activities are performing, which can be done with the help of various sales metrics.
- Metric: Lead to conversion ratio
A great sales metric to measure for this specific goal would be the lead-to-conversion ratio. It measures the number of interested people who actually end up turning into paying customers. Which eventually translates into an increase in sales. This metric, generated with professional sales reporting software, is useful as it provides deeper insights to make strategic decisions. If your lead conversion rate is low, then you need to think of alternatives to motivate potential customers to become actual customers. Some other metrics to measure for this goal could include the lead-to-opportunity ratio and net profit margin, among others.
2) Customer experience KPI vs. metrics
Studies say that a 5% increase in customer retention can lead to a 25% increase in profit. Now imagine that with this information in mind, you want to set a goal of increasing your retention rates 10% by the end of the year. Now, this goal can also be relevant to different departments. For instance, the marketing team would need to generate attractive campaigns to get customers to buy again, while the product team might need to focus on developing quality products.
- KPI: customer retention
Customer retention directly affects your revenue. When a customer is happy with your service or product, he or she will likely come back to make another purchase. Since your goal is to increase your retention rates by 10%, the image above would be your main KPI. A good way to measure your success is by setting a target percentage based on market benchmarks and realistic business numbers. Now let’s look at some product-level metrics that are useful for this specific goal.
- Metric: Return Rate & Return Reasons
The rate of return is a great metric to track to understand customer retention. If your clients are returning what they bought, it is likely that they will not come back to make another purchase. In order to extract deeper conclusions from the rate of return, the product team can track the return reasons metric. As seen in the image above, this metric lists the main reasons customers return their products. Here we see that 28% corresponds to defective items. Lowering this by 28% can have a direct impact on increasing the retention rates. Therefore, a focus area would be to improve product quality. Other valuable customer retention metrics for production can include the repeat purchase ratio or the perfect order rate.
3) Logistics KPIs vs metrics
In logistics and warehouse management, ensuring the entire supply chain is efficient is of utmost importance to achieve success. One of the most popular KPIs to measure success is the order cycle time, which measures the time it takes a company to ship an order from the moment it was placed up to when it leaves the warehouse, without considering shipping time. Naturally, businesses want to keep this KPI as low as possible as it means all areas of the supply chain, including inventory management, picking and packing, and transportation, are working as expected. Let’s explore this in more detail below.
- KPI: order cycle time
The order cycle time is an important KPI as it can shine a light on other issues in your supply chain. It is used to evaluate the efficiency of fulfillment processes, and it can significantly influence customer satisfaction. Unlike other KPIs that we mentioned above, the order cycle time needs to be tracked in shorter periods of time, such as weekly or daily, as it can be affected by multiple unexpected factors like an influencer sharing your product and generating an unexpected increase in demand. That being said, without considering unexpected events, this KPI can still be optimized by measuring different metrics. Below, we will discuss an example of one.
- Metric: dwell time
As mentioned above, there are many processes and people involved in achieving a successful order cycle time. Therefore, there are several metrics, including picking accuracy, shipping time, equipment utilization, inventory accuracy, and many more, that you can measure to evaluate and optimize your order cycle time in a professional online dashboard. Today, we will focus on dwell time. This metric measures the average hours drivers spend in the warehouse waiting for orders to be loaded or unloaded from the trailer. Some of the most common reasons for an increase in dwell time include vehicle delays, loading complex or heavy orders, tedious check-in processes, and order volume, among others. It is important to mention that having some level of dwell time is really unavoidable and should be considered in your order cycle calculations. However, some of the reasons we just mentioned are easily preventable. Therefore, you should keep a close eye on the metric to ensure you can spot solvable inefficiencies as soon as possible.
4) Customer service KPI vs metrics
Customer service can make a difference regarding how loyal a customer is to your business. If their issues are solved quickly and efficiently, then the customer will likely return to buy again and even recommend your product or service to their friends. On the contrary, a customer who has a bad support experience can be disappointed and never come back to buy again, even if you are offering the best products. With that in mind, a popular KPI for the support department is customer satisfaction. In the example above, we can see a business that has 71% of positive feedback. They want to increase it to 80% by the end of the quarter. Let’s see how they would do it.
- KPI: Customer service satisfaction rate
As mentioned above, measuring customer satisfaction in your service department is of utmost importance as it can influence your entire customer-business relationship. Usually, this KPI is measured through a survey with the answers divided into different categories from the most negative to positive reviews. It is a great practice to measure this KPI against a target to evaluate the development in a more detailed way. Plus, setting a target can help you be more realistic about what you can actually achieve and avoid setting unattainable goals.
- Metric: Average resolution time
There are many metrics you could track to evaluate your efforts toward increasing customer satisfaction, and the average resolution time is one of the best and most important ones. After all, the least you expect from a business when you contact them with an issue is to help you solve it quickly. In the example above, we see the average resolution time in minutes divided by standard and special requests. Each type of request is complemented with a trend line to help you identify pick times and use them as improvement opportunities. For instance, we can see that during weeks 4 and 8, special requests increased their resolution time. This is an important insight to extract as you can prepare your agents to answer these requests more quickly and increase satisfaction rates.
If you want to see more KPI examples like these, check out our library with examples from different industries, functions, and platforms.
Tips & Best Practices For Measuring KPIs And Metrics In The Right Way
We've covered the definition of key performance indicators and metrics and went into the differences of business metrics vs KPIs. In this section of the post, we will go through 5 tips that will help you efficiently measure your goals and performance.
1. Separate metrics from KPIs
Measuring everything really means you are measuring nothing. When it comes to separating KPIs from metrics, you need to consider what is most important for your business. Any type of indicator can be a metric, but if this indicator does not provide any valuable information to make you improve, then you should discard it.
Tracking the wrong metrics can lead to a waste of time and resources that could be easily avoided. Measuring too much can get confusing and misleading. To avoid this, make sure you pick only the KPIs that really bring value to your goals and leave any unuseful information behind. More on this in the next point.
2. Choose the right KPIs
Choosing the right KPIs to measure is probably the most important step to track your strategies efficiently. To help with this purpose, there are some KPI tracking techniques that you can use. Here we will explain two of them: the SMARTER and the Six A’s methods.
- SMARTER: This KPI tracking practice stands for Specific, Measurable, Attainable, Relevant, Time-bound, Evaluate, and Reevaluate. It works as a list of requirements that your KPIs have to meet in order to be considered useful. As mentioned throughout this post, they should be specific to your goals, realistic to your business reality, and flexible to change with the evolution of strategies.
- Six A’s: This method stands for Aligned, Attainable, Acute, Accurate, Actionable, Alive. Just like the SMARTER criteria, this practice also aims to evaluate the relevance of a KPI, and it is useful for businesses that have too many indicators and need to narrow it down to a few.
By applying these methods, you should be able to narrow it down to around 2-5 critical KPIs per business goal. This helps you keep your analysis process specific and avoid misleading information that can affect the way you interpret your data.
An important thing to keep in mind here is that you should always revisit your KPIs. If you found a better approach to achieve your goals, then you should make sure you are tracking the right data. You can do this by monitoring your KPIs regularly with weekly or monthly reports. Once your KPIs have been defined, you have all the information you need to start making strategic decisions and thinking about long-term actions.
3. Make your KPIs and metrics visually driven
Once you’ve selected your KPIs and metrics, it is time to transform them from plain values and numbers into actionable insights. This is done through the use of a range of data visualizations that will help you tell a story with your indicators and collaborate through them. Plus, it is a well-known fact that the human brain processes visual information way faster than numbers and that they are more accessible and easier to understand for a wider audience. Therefore, picking your graphs and charts carefully can make a difference in your analysis process.
That being said, it is not as easy as picking a KPI and representing it with a pie chart. Each type of graph and chart has its own purpose and use cases, and you should be careful when picking them. We recommend you carefully think about your goals and what you are trying to communicate and then choose the visual that best suits your needs. This is an important point, as picking the wrong visual can end up misleading your analysis and damaging your strategies.
4. Get a centralized view with an interactive dashboard
KPI and metrics are valuable tools for businesses. While key performance indicators tend to be more important, metrics are also useful to get a bigger picture of the performance of a department or specific area. Today, there are several online data visualization tools that offer a range of dashboard options to visualize your KPIs and metrics in a centralized way. Let’s look at it with an example of digital marketing.
**click to enlarge**
The example above was created with a professional dashboard generator, and it is the perfect mix of the metrics and key performance indicators needed to track the ROI of your marketing actions. Getting a centralized view like this one helps marketers get a complete picture of their marketing efforts to make smart strategic decisions.
If you want to see more dashboard examples like this one, then we recommend you take a look at our library with 80+ templates from different industries, functions, and platforms to get inspired!
5. Rely on interactivity
Interactive data analysis has become one of the biggest competitive advantages in the analytical world today. Think about your analytical process as a movie. Your KPIs are the main characters that help you achieve your goals, and your metrics are the side characters that will help you measure the performance of your strategies towards achieving those goals. Your dashboards are the scenery where everything comes together, and you can tell your data story. And interactivity will help you bring everything to life in a compelling way.
Modern KPI reporting tools provide multiple interactivity features to help you navigate and explore your data more thoroughly. For example, a drill down feature enables you to go into lower levels of hierarchical data all in one chart. Let’s say your goal is to increase sales in the US. For that, you are visualizing a chart with sales by country. A drill down would enable you to click on the USA value and adapt the entire chart to see sales by state. Likewise, an even deeper drill down would enable you to see sales by city of each state. Other interactivity options allow you to change the time period, translate the text in your charts, and much more.
By making your KPIs and metrics interactive, you’ll ensure that you can extract the maximum potential out of them. A static view of data no longer makes the cut in today’s fast-paced world, where decisions must be made in an accurate and agile environment.
6. Stay away from vanity metrics
Vanity metrics refer to the indicators that may look good on paper but are not useful to inform future business strategies. In some cases, vanity metrics are used to show improvement, but they are actually indicators that are not actionable or related to anything you can consider really significant. A great example of a vanity metric would be with social media followers. Imagine you implemented a campaign that attracted 10.000 new followers to your Instagram. Now, that might seem like a success at first hand, but if from those 10,000 followers, only 50 bought your products or service, then the metric becomes useless.
To avoid facing the issue of vanity metrics, you need to keep your analysis as objective as possible. When choosing the KPIs and metrics you will monitor, always ensure they reflect the truth. While metrics such as the number of followers or likes might seem exciting, they can also point you in the wrong direction. BI tools offer various KPI and dashboard templates that can point you in the right direction to avoid making this mistake.
7. Set realistic targets
The last tip for measuring metrics and key performance indicators correctly is setting achievable targets. For your KPIs and metrics to be efficiently measured, you need to know where you are headed, and targets make this possible. Here you need to be careful not to set unrealistic targets such as a 50% increase in sales in a year when your average increase from the past years has been 5%. When building targets, consider attainable values based on your business context as well as some industry benchmarks. This way, you will ensure you are working towards achievable goals and avoid getting stacked or disappointed by setting unrealistic values.
8. Define a monitoring schedule
Another great practice that will help you measure your metrics and KPIs successfully is to define a monitoring schedule. This will help you ensure you can stay on top of any insights while still having time to plan and carry out your strategies. Given that metrics often track activities that are more operational, they can be monitored on a short-term basis and even in real-time. KPIs, on the other hand, often track strategic goals that are more meaningful when tracked for a longer period of time, such as a month, a quarter, or even a year.
Professional online BI tools, such as datapine, provide you with intelligent data alerts that will notify you as soon as your KPIs and metrics need your attention. All you have to do is predefine a goal or a threshold value, and the tool will notify you as soon as they are achieved. Leaving you more time to focus on other important tasks rather than constantly monitoring your data.
9. Reevaluate your process
As you’ve learned by now, choosing KPIs and metrics is not a task that can be taken lightly. You need to line up a well-thought-out plan to ensure you are tracking the data that will help you measure the success of your strategies and goals but also find improvement opportunities to constantly grow. And, just like many other business-related processes, it requires reassessments to be successful. Our advice is to always take the time to rethink your strategy. Are these metrics still valuable for measuring our efforts? Should we add a couple more? Are they still aligned with our goals?
In doing so, you’ll ensure your resources are used well and that your efforts pay off with successful strategies and continuous organizational growth.
Key Takeaways From KPIs vs. Metrics
As we reach the end of this post about key performance indicators vs. metrics, we hope you have a deeper understanding of how these two differentiate themselves. The important takeaway from this post is to remember that there would be no KPIs without metrics; both are critical to ensure a healthy return on investment from your different business activities.
KPIs and metrics are invaluable tools for performance tracking. Every day more and more businesses turn to BI dashboard software to get a centralized view of their most important indicators interactively and intuitively. Getting access to modern dashboard technology allows teams to stay connected and work together towards common business goals.
To keep your mind fresh, here is a small summary of the main differences between metrics and KPIs:
- KPIs measure performance based on key business goals, while metrics measure performance or progress for specific business activities.
- KPIs are strategic, while metrics are often operational or tactical.
- Metrics are lower-level indicators specific to a department, while KPIs can be tracked by various departments working towards the same goal.
- Metrics provide context to your business activities, and KPIs allow for strategic decision-making.
If you are ready to start generating your own KPIs and metrics, then test our professional KPI tracking software for 14 days free!