Key Performance Indicator (KPI)
Definition
Metrics that indicate progress toward business objectives.
Example Use Case
A digital agency tracks KPIs like conversion rate and customer acquisition cost to measure campaign success.
A key performance indicator is a metric chosen because it measures progress toward a specific objective, not merely because it is available. The distinction matters: traffic, impressions, and follower counts are metrics, but they are only KPIs if the objective actually depends on them.
Good indicators are few and paired with a target and a timeframe. “Increase qualified demo requests by 20% this quarter” can be tracked and acted on; “improve marketing” cannot. A small set also keeps attention where it belongs, because a team optimising twenty numbers simultaneously is optimising none of them.
Every KPI also invites a question about what it fails to capture. Optimising click-through can damage conversion quality, and optimising conversion rate can reduce volume. That is why outcome measures should be balanced against at least one counter-metric, so that improving the number does not quietly harm the business. See KPI dashboard.
