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Key Performance Indicator

Understanding Key Performance Indicators (KPIs) for marketing and business

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This comprehensive guide to KPIs is designed for startup founders, new CEOs, and marketing managers wanting to build a business culture of accountability and sustainable growth.

 

KPIs are often used to monitor performance, identify areas for improvement, and make informed decisions based on data-driven insights. KPIs can be applied to a wide range of industries and functions, including finance, marketing, operations, and human resources.

 

Illustration representing KPIs

What are KPIs (Key Performance Indicators)?

KPIs or “Key Performance Indicators” are quantifiable metrics used to measure the ongoing progress of an organization, team or individual toward specific goals.

 

These goals can be related to any aspect of the business, including sales, marketing, customer service, and operations. KPIs help businesses track performance over time and identify areas for improvement.

 

Though most companies track similar KPIs, these are flexible metrics that ladder up to goals decided at the organizational level and broken down by business unit, team, and individual to achieve the larger company goal.

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Illustration representing goals, KPIs, and targets

OKRs vs. KPIs

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OKRs or Objectives and Key Results are often used interchangeably with KPIs, because they both measure progress towards goals, but there are some important differences.

 

OKRs are a goal-setting framework used to define and track progress towards achieving specific objectives. They're typically set on a quarterly or annual basis and are designed to align an organization, team or individual towards a common goal. The objectives are qualitative and aspirational, while the key results are specific, measurable, and time-bound milestones that help to track progress towards achieving the objective.

Illustration representing KPIs

KPIs are quantitative measures used to evaluate the success of an organization, team or individual in meeting specific performance targets. KPIs are typically set on a regular basis and are used to measure ongoing performance.

 

In other words, KPIs are more focused on measuring and improving ongoing performance, while OKRs are focused on setting and achieving the broader objectives.

Why are KPIs important?

KPIs are important because they help businesses measure success and progress towards their goals. By setting specific KPIs, businesses can track progress over time, identify areas where they are falling short, and make data-driven decisions to improve performance. 

Assess Health: KPIs at the company-wide level help provide a realistic view of the company’s financial and operational health.

Track Progress: KPIs provide clear goals and milestones to help individuals, teams, and businesses track progress.

Improve Performance: KPIs highlight shortcomings and bottlenecks while providing objective data that can be used to make adjustments and improve performance.

Provide Accountability: KPIs provide objective standards with which to measure individual and department-wide performance.

Objective accountability is particularly important in large organizations where there are thousands of staff members and overly subjective management styles can cascade into large performance problems.

What Makes A Good KPI?

Icon representing what makes a good KPI

A good KPI should be a useful and relevant measure that helps an organization track its progress towards specific objectives and make informed decisions. 

 

Here are some key characteristics of a good KPI:

 

  • Aligned with organizational goals: A good KPI should directly relate to the organization's strategic objectives and priorities. It should provide insights into the organization's progress towards achieving these goals and contribute to the overall success of the business.

 

  • Specific and measurable: A KPI should be clearly defined and quantifiable, allowing for objective measurement and comparison. Avoid using vague or qualitative terms that can be open to interpretation.

 

  • Relevant and actionable: A good KPI should be relevant to the organization's industry and context, providing insights that can drive informed decision-making and actions. It should help identify areas where improvements can be made and guide resource allocation.

 

  • Timely and up-to-date: A KPI should provide real-time or near-real-time data so that decision-makers can react promptly to changes in performance. Regularly updating KPIs ensures that they remain relevant and useful for decision-making.

 

  • Simple and easy to understand: A good KPI should be straightforward and easy for stakeholders to comprehend. Avoid using overly complex metrics that may be difficult for employees and other stakeholders to grasp and act upon.

 

Illustration representing what makes a good KPI

Types of KPIs

There are KPIs for every part of a business, but the following categories are the most common.

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  • Financial KPIs focus on measuring the financial health and performance of a business. Examples include revenue growth, gross profit margin, net profit margin, return on investment (ROI), and earnings before interest, taxes, depreciation, and amortization (EBITDA).

  • Operational KPIs measure the efficiency and effectiveness of a company's operations. Examples include production output, production downtime, cycle time, order fulfillment rate, and inventory turnover.

  • Customer KPIs evaluate the company's performance in attracting, retaining, and satisfying customers. Examples include customer satisfaction, customer retention rate, customer acquisition cost, customer lifetime value (CLV), and net promoter score (NPS).

 

  • Human Resource KPIs focus on evaluating the performance, satisfaction, and engagement of an organization's workforce. Examples include employee turnover rate, employee engagement, employee productivity, time to hire, and training effectiveness.

 

  • Quality KPIs measure the level of quality in products, services, or processes. Examples include defect rate, first-pass yield, customer complaints, and on-time delivery rate.

 

  • Sales KPIs measure the effectiveness and performance of a company's sales efforts. Examples include sales revenue, average deal size, conversion rate, lead-to-sale ratio, and sales cycle length.

 

  • Marketing KPIs assess the effectiveness of a company's marketing efforts. Examples include website traffic, social media share of voice, sentiment analysis, lead generation, cost per lead, customer acquisition cost (CAC), and customer lifetime value (CLV), and overall marketing ROI.

 

  • Innovation KPIs help organizations track their ability to develop and launch new products, services, or processes. Examples include the number of new patents filed, R&D spending as a percentage of revenue, and the percentage of revenue from new products or services.

 

  • Environmental, Social, and Governance (ESG) KPIs evaluate an organization's performance related to environmental, social, and governance factors. Examples include greenhouse gas emissions, water usage, diversity and inclusion metrics, and corporate governance practices.

 

These categories are not exhaustive, and KPIs may vary depending on the specific industry, organization, and strategic goals.

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How To Set Strong KPIs

The following systematic process can be used to set strong KPIs in a business or organization. We’ll use a fictional ecommerce company to illustrate this process.

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1. Define the business’ strategic objectives.

Clearly define the organization's strategic objectives and priorities. It’s important to understand the mission, vision, and long-term goals to make sure the selected KPIs align with and support these objectives.

 

Our fictional ecommerce company has a mission to build a strong customer brand with a diversified product portfolio. The company identifies the following strategic objectives to support its long term goals: launch successful new product lines, increase customer loyalty, and build a strong team culture with low employee turnover. 

 

One of the most important benefits is that it allows marketers to understand their customers better. This information helps executives and business leaders build strategies that prioritize the highest-impact customer segments, allowing business units to operate more efficiently.

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2. Identify key performance areas.

With objectives defined, the next step is to match strategic objectives to key performance areas (KPAs) or focus areas that contribute to the achievement of those goals. KPAs provide a framework to understand the critical aspects of the organization's performance that need to be measured and monitored.

Our ecommerce company identifies its primary KPAs as customer satisfaction, product development, and employee engagement.

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3. Select relevant KPIs.

For each key performance area, identify the most relevant and meaningful KPIs that will provide insights into the organization's performance. Remember to consider the key characteristics of a good KPI, such as alignment with objectives, specificity, measurability, relevance, simplicity, and comparability.

They identify the following KPIs to measure ‌progress in each KPA. For customer satisfaction, the two primary KPIs selected are Net Promoter Score (NPS) and Customer Retention Rate. For product development, the two primary KPIs selected are New Product Lines Launched and Revenue Concentration Ratio. For employee engagement, the two primary KPIs selected are Employee Engagement Scores and Employee Turnover Rate.

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4. Set targets and benchmarks.

For each KPI, establish a target or benchmark that represents the desired level of performance. Targets can be based on historical performance data, industry benchmarks, or aspirational goals that challenge the organization to improve.

Illustration representing setting targets and benchmarks

Net Promoter Score (NPS):
Target: Achieve and maintain an NPS of 60 or higher.
Benchmark: Compare against the ecommerce industry average of 50.

 

Customer Retention Rate:
Target: Maintain a customer retention rate of 50% or higher.
Benchmark: Compare against the ecommerce industry average of 20-40%

 

New Product Lines Launched:
Target: Launch one new product line per year.
Benchmark: This is a measured, conservative goal based on the business’ existing product line, customers, and branding goals.

 

Revenue Concentration Ratio:
Target: Make sure no single product line accounts for more than 30% of total revenue.
Benchmark: New product lines will need to receive heavy marketing focus.

Employee Engagement Scores:
Target: Achieve and maintain an average employee engagement score of 80% or higher.
Benchmark: Compare against the global average of 20%.

 

Employee Turnover Rate:
Target: Maintain an employee turnover rate below 10% annually.
Benchmark: Compare against the ecommerce industry average of 20-30%.

 

5. Collect and analyze data.

Establish a system to collect, store, and analyze the data needed to track KPIs. This may involve using software tools, databases, or spreadsheets to gather and process the data, as well as setting up a reporting structure to communicate the results to stakeholders.

Our ecommerce company sets up a company-wide portal to track KPIs and assigns input management to department heads, with reports being automatically generated and distributed to the company and key stakeholders monthly.

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6. Monitor and review KPIs regularly.

Regularly track and review KPIs to track progress towards strategic objectives and identify areas for improvement. This may involve monthly, quarterly, or annual performance reviews, depending on the KPIs and the organization's needs.

They opt to do quarterly performance reviews with KPIs being a central component of performance assessment and feedback.

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7. Communicate to and engage stakeholders.

Make sure that relevant stakeholders, including employees, management, and external partners, are aware of the KPIs and their importance to the organization's success. Encourage engagement and buy-in by communicating the purpose and benefits of the KPIs and involving stakeholders in setting and reviewing KPIs.

Our ecommerce company meets with department heads to have them updated on the finalized company KPIs.


Department heads are instructed to further define employee-specific targets and get ready to present them to their teams. The company holds an all-hands meeting to present broad KPIs, followed immediately by department breakouts, where the department heads share individual targets with their staff.

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8. Adjust and refine KPIs as needed.

Continuously evaluate the effectiveness of KPIs and make adjustments as needed to ensure they remain relevant, meaningful, and aligned with strategic objectives. This may include adding new KPIs, removing outdated or less relevant KPIs, or modifying existing KPIs based on changes in the organization's goals or industry context.

As part of the quarterly performance reviews, their executive team fields feedback from department heads on their KPIs and adjusts KPIs, targets, and benchmarks based on their feedback and overall company performance.

 

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LinkedIn’s Tools Help Your Team Meet & Exceed KPIs

With millions of professionals worldwide, LinkedIn is an indispensable platform for businesses aiming to reach their KPIs. Not only does it provide a rich pool of potential clients, employees, and collaborators, but it also offers a unique suite of solutions to help businesses hit and exceed growth targets.

 

 

 

  1. LinkedIn Advertising solutions offer precise audience targeting, boosting KPIs such as lead generation, sales, and brand recognition.

     

  2. LinkedIn Sales Navigator provides advanced search and lead recommendation features, promoting relationship building with prospects and potentially increasing sales growth.

     

  3. LinkedIn Premium features, including InMail, advanced search filters, and profile view insights, enhance networking capabilities, lead generation, and recruitment efforts.

     

  4. LinkedIn Learning can facilitate team skill improvement and professional development, which can positively impact overall team competence and productivity.

     

  5. LinkedIn Talent Solutions are excellent for businesses focused on hiring and talent acquisition KPIs, enabling more efficient attraction, recruitment, and retention of top talent.

     

The power of LinkedIn's paid solutions is in their interconnectedness. By combining these tools, businesses can create a comprehensive strategy to achieve KPIs. 

 

Learn more about how LinkedIn Business Solutions can help.

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