A KPI, or key performance indicator, is a way to measure how well a company is doing in a specific area. For example, a company may track the number of new customers acquired each month as a KPI for their sales team or "percentage of repeat customers" as a KPI to track the success of their customer retention efforts.
Metrics are more general measurements that give you information about how a business or project is doing. For example, a metric for a manufacturing company could be the number of defects per batch, which gives information about the quality of the products being produced.
KPIs and metrics are often used interchangeably, but they have different uses and applications. KPIs are specific targets that a company wants to reach, while metrics provide more general information about a company's performance. Here are three industry-specific examples of how metrics and key performance indicators differ:
KPI: Increase in sales - A retail company's KPI may be to increase sales by a certain percentage within a specific time period. This is a specific and quantifiable target that the company wants to achieve.
Metric: Foot traffic - A metric that a retail company may use is the number of foot traffic in the store. This metric gives general information about the number of customers visiting the store but it doesn't indicate if the company is reaching its goal of increasing sales.
KPI: Occupancy rate - A hotel's KPI may be to increase the occupancy rate, which is the percentage of rooms occupied. This is a specific target that the hotel wants to achieve.
Metric: Guest satisfaction - A metric that a hotel may use is guest satisfaction, which is measured by a survey. This metric gives general information about how satisfied guests are but it doesn't indicate if the hotel is reaching its goal of increasing occupancy rate.
KPI: On-time delivery rate - A manufacturing company's KPI may be to increase the on-time delivery rate, which is the percentage of orders delivered on or before the promised date. This is a specific target that the company wants to achieve.
Metric: Production output - A metric that a manufacturing company may use is the production output, which is the number of units produced per day. This metric gives general information about the company's production but it doesn't indicate if the company is reaching its goal of increasing on-time delivery rate.
Not all metrics can be used as a KPI. For example, while website traffic may be a metric for a marketing team, it may not be a suitable KPI for measuring the success of a sales team's performance. A more appropriate KPI for the sales team would be the number of sales closed or the revenue generated.
If you enjoyed this article, you might also like our articles on KPI examples and KPI types.
