What Are KPIs And How To Define Them

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Key performance indicators (KPIs) are a set of quantifiable measurements that you can use in your business to measure long-term progress and performance. There are several kinds of KPIs and depending on your business, you can choose a specific set of performance indicators to measure.

KPIs are measured from one point in time to another. They provide objective measurements of your company’s progress to determine whether your existing strategies and operations are effective.

You can use your KPI measurements to set future goals and deadlines in every area of your company, including sales, marketing, human resources (HR), and customer service departments. They can be used to define the future direction of your business and compare your progress to other businesses within your industry.

KPIs And Metrics

Different KPIs can be used in different departments or you can apply the same measurements across your whole company. For example, if you’re a retailer, you might use monthly sales or loyalty card sign-ups as KPI metrics to determine your progress.

Key performance indicators and metrics are often used interchangeably but there are key differences between the two. KPIs are the targets that you’re tracking and they impact the future success and direction of your business.

Metrics are measurements of the day-to-day activities that impact your business’s success. They’re not always as essential as KPIs but are still important to track.

How To Define Your KPIs

Key performance indicators are unique to your business. You can define short-term and long-term performance indicators, depending on your overall goals.

The different types of KPIs to consider when determining which metrics to measure are as follows.


KPIs that focus on the financial side of your business can relate to your profits, losses, revenue, return on investment, and budget. Arguably the most important financial measurement is net income, which refers to the total amount of revenue that you have after expenses, taxes, and loan repayments.

Customer Or Client

Performance indicators that are centered around customers and clients may include measurements of customer satisfaction, client retention, and customer service efficiency. Many companies choose to measure customer lifetime value (CLV) and customer acquisition costs (CAC).

CLV indicates the total amount of money that the customer has spent on your products or services since their first point of contact with your business. CAC is the total amount of money that your business has spent on acquiring new customers, including the costs of marketing, lead generation, and sales.


Defining operational KPIs can measure the progress of your current business operations. You can look at the total time it takes to fulfill your orders in the warehouse, the total number of products that have been lost, damaged, or stolen each year, or the cost of transportation.

The idea behind this type of key performance indicator is to identify where you can increase operational efficiency and reduce losses throughout your day-to-day business operations. You may want to use different KPIs to focus on each specific area of operation within your business.