What are KPIs and how are they used in a strategy?

Key Performance Indicators (KPIs) are the so-called “key performance indicators”—metrics that allow businesses to evaluate the effectiveness of marketing campaigns. Want to know how they are defined and the benefits of using them? More details below!

Difference between a metric and a KPI

The previous definition includes two terms that must be distinguished: what a metric is and what KPIs are. Although they are often used as synonyms, there are important differences between them. Metrics can be considered the foundation on which KPIs are built.

• Numerical value: while metrics are numerical values used to analyze the results of an action or initiative, KPIs are based on those figures to establish an evaluation.
• Concept calculation: metrics are expressed as percentages or units, and key performance indicators use those data as a reference.
• Objectivity/subjectivity of information: metrics are objective figures, and depending on the KPI tools used, different interpretations can be made.

Not all metrics are used for all KPIs, but KPIs do rely on those metrics depending on the defined objectives. These Key Performance Indicators are used both in the world of marketing and communication and in project management, with particular relevance in sales and business evaluation. That is why in specialized programs such as the Master in Project Management, the Master in Marketing Management, and the Master in Marketing and Sales Management at EAE Barcelona, students are taught how to make the most of these tools.

Types of KPIs

Key performance indicators can be classified in different ways. The most common structure organizes KPIs into several categories:

• Sales KPIs: number of units sold, conversion rate, average revenue per customer.
• Social media KPIs: reach, engagement, link clicks, conversion rate from social networks.
• Customer-related KPIs: user retention rate, acquisition of new customers, customers influenced by brand recommendations.
• Industry-specific KPIs: depending on the sector, different factors are used to measure performance. Examples include:
  • Logistics: delivery times, time between purchase and delivery, etc.
  • Retail: stock replenishment when products run out, introduction of new products to encourage repeat visits and customer loyalty.

These are some of the main performance indicators to consider when defining a strategy to evaluate KPIs for a business or organization. They can also be aligned with SMART objectives, which are measurable and relevant goals set by a company.

Benefits of KPIs

Using key performance indicators provides multiple advantages for businesses. The main benefits include:

1. They allow companies to objectively measure performance results.
2. They help achieve defined objectives by evaluating the effectiveness of actions and adjusting strategy when necessary.
3. They make it easier to combine global goals with specific targets.
4. They help communicate performance value to teams.
5. They enable clear comparison of a brand’s evolution or specific products/services over time.

How to create a good KPI

Once the benefits of KPIs are defined, the next step is implementation. How do you create an effective KPI? Although each case is different, the main steps are:

1. Define the objective to be measured and the company’s strategic goals.
2. Identify which metrics are useful to determine whether the strategy is on track (sales, costs, customer satisfaction, new customers, social media growth, talent retention, etc.).
3. Clearly define the selected KPI. It must be specific, measurable, realistic, and evaluated over a defined time period.
4. Track the indicator and share results with relevant teams.

Finally, each company must determine which metrics are most important for its activity. Based on these, it becomes possible to evaluate whether implemented actions are truly effective.

Examples of KPIs

To better understand KPIs, here are some practical examples used in real companies and by professionals:

• Customer conversion KPI: also known as conversion rate, it measures the effectiveness of sales actions (e.g., how many messages are needed to acquire a certain number of users).
• Lead conversion KPI in digital marketing : measures how many website visitors or campaign users complete a desired action, such as subscribing to a newsletter or downloading an e-book.
• Return on investment KPI: known as ROI, it evaluates the financial efficiency of an investment and the cost of achieving profitability.
• Email marketing open rate KPI: measures how many recipients open marketing emails, helping evaluate subject lines, timing, and engagement.
• Lead time KPI: used in logistics, it measures the time between order placement and delivery.

KPIs vary depending on business goals and industry. Each company must define what matters most to its operations and select indicators accordingly.

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