What is a KPI?
KPI is an abbreviation for Key Performance Indicator — a term for indicators that are essential to your business. A KPI tells you how effectively you are performing in relation to your objectives. In everyday business language, a KPI is often referred to as a "key metric".
What does KPI stand for?
KPI stands for Key Performance Indicator.
More precisely, a KPI is a measurable value that is set, monitored, and optimised with the aim of developing the business — both at an overall level and at individual levels within the organisation, where KPIs are set to support the achievement of the overarching KPIs.
We distinguish here between low-level and high-level KPIs:
- Low-level KPIs, which are KPIs linked to specific departments and primarily used by department managers and employees to ensure the department is moving in the right direction in relation to the company's high-level KPIs.
- High-level KPIs, which are overarching KPIs for the business and are primarily used by management to get a broad sense of the company's development.
Examples of KPIs
Every business has KPIs — something that indicates how the company and/or its individual departments are performing.
There are thousands of KPIs, and it is all about finding the ones that are relevant to measure for your business's success. Below you will find some typical KPIs that most businesses work with at an overall level (high-level KPIs).
Examples of typical high-level KPIs:
- Revenue
- Profit
- Website visitors/traffic
- CPA (Cost per Acquisition)
- CLV (Customer Lifetime Value)
Why work with KPIs?
It is essential that you measure, monitor, and always maintain an overview of how your business is performing. And even if you may not have come across the term "KPI" before, it is certainly something you are already working with — if not consciously, then subconsciously.
For example, when you look at the day's revenue figures, the number of orders on your website, or the ROAS on your Google Ads — whatever you are looking at, these are some of your KPIs.
Your KPIs are an indicator and help you clarify:
- Are we on the right track?
- Are we reaching the goals we have set?
- Do we need to do something differently?
- Where should we focus our efforts?
Without your KPIs, you simply do not know how things are going, whether you are on the right track, or whether you generally need to change your approach.
And that is precisely why your KPIs are essential to your business.
How do you find the right KPIs?
When working with KPIs, the first and foremost task is to find the right ones — the indicators that are truly important for your business and objectives.
What the right KPI is therefore depends on your company, department, and goals.
The right KPI for an SEO department might be revenue and organic traffic, while the right KPI for a CRO and UX department might be conversion rate, time on site, and so on. The overarching KPI that all departments work towards might, on the other hand, be CPA, profit, or similar.
Here is how to identify the right KPIs for you:
- What is the overarching objective?
- What is our desired outcome from our efforts?
- How does this contribute to our overarching KPI?
- How can we measure the result? And how will we know we have achieved it?
- Is our KPI SMART?
This process is used to identify the right key metrics that are relevant for the business as a whole as well as its individual departments.
We recommend identifying 2–6 relevant KPIs per "department" to measure, for the sake of clarity and effectiveness.
Your KPIs must be SMART
For your KPIs to be useful and effective, they must meet certain specific requirements. These requirements fall under the concept of SMART.
SMART stands for:
- Specific: That the KPI is specific.
- Measurable: That the KPI is measurable.
- Achievable: That the KPI is attainable and realistic.
- Relevant: That the KPI is relevant to your business.
- Time-bound: That there is a time frame for the KPI — i.e. when the goal must be achieved.
If your KPIs meet these requirements, they are in all likelihood good KPIs that you can put to use in your business!
Would you like help selecting and achieving your KPIs?
Are you struggling to find the right KPIs? Or perhaps to meet the KPIs you or your management have set?
We work with KPIs on a daily basis and are ourselves measured on our performance.
Together with our clients, we achieve their goals! Shall we help you too?
Call us on 30 12 42 72 and let's have a no-obligation chat.
