KPI – what is it? What are Key Performance Indicators?

In the world of e-commerce and Marketing Automation, data is everywhere, but its mere presence does not guarantee success. Companies analyse reports, dashboards and charts, yet they often struggle to assess whether their actions are actually bringing them closer to their business goals.

This is where KPIs come in – as a filter that separates relevant information from noise.

Well-chosen KPIs help you understand the condition of your company, assess the effectiveness of processes and make informed decisions based on figures rather than intuition.

In the rest of this article, we will show you:

• what exactly KPIs are,
• how to link them to business goals,
• how to plan key performance indicators so that they really support the company's development.

What are KPIs and why do companies need them?

KPIs are key performance indicators that help measure the degree to which business and operational goals are achieved within a specified time frame. In practice, KPIs show whether the actions taken in sales, marketing, customer service, finance or HR are actually delivering the expected results.

Key Performance Indicators – their key importance lies in the fact that they are closely linked to the organisation's priorities. They enable companies to assess the effectiveness of processes, monitor the efficiency of resource utilisation and respond more quickly when an area needs improvement.

In e-commerce and marketing automation systems, KPIs often operate in real time, enabling a quick response to changes in customer behaviour.

KPIs are also a management control tool - they support decision-making, priority setting and the evaluation of teams or individual employees. From an organisational perspective, KPIs strengthen a data-driven organisational culture and build accountability for results.

KPIs and business objectives: how to combine them?

Key performance/efficiency indicators should be directly derived from business objectives in order to have real decision-making value. If an indicator does not support the achievement of a strategic or operational objective, it becomes just a number in a report. A number that introduces unnecessary noise.

The process of linking KPIs to business objectives should start with a clearly defined goal, such as increasing revenue, increasing the number of customers or improving customer loyalty. Next, key performance indicators are defined to assess progress over a given period. Such KPIs are closely linked to overall business objectives and show whether marketing, sales or operational activities actually support their achievement.

In practice, this means that KPIs do not measure ‘activity for activity's sake,’ but rather results – e.g., the impact of a campaign on revenue, customer satisfaction, or customer acquisition cost. This enables the organisation to make informed decisions and better manage the relationships between goals and results.

The SMART method - practical planning of key performance indicators (KPIs)

The SMART method helps to create KPIs that are unambiguous, measurable and realistically assessable. It is one of the most commonly used approaches to planning key performance indicators.

According to the SMART method, each KPI should be:

• S (Specific) - specific, clearly defined and understandable,
• M (Measurable) - measurable, based on numerical data,
• A (Achievable) - achievable with available resources, but ambitious,
• R (Relevant) - relevant to business objectives,
• T (Time-bound) - time-bound.

The use of the SMART method ensures that KPIs are not abstract, but actually support decision-making and the evaluation of the effectiveness of activities.

In the e-commerce and Marketing Automation environment, this approach facilitates regular analysis of results at regular intervals and prevents the measurement of indicators that have no impact on the company's development.

Examples and types of KPIs in e-commerce and marketing

The types of KPIs in e-commerce and marketing show how different areas of the company influence the achievement of business goals.

In an omnichannel environment, KPIs are particularly important. They combine data from multiple customer touchpoints: from advertising campaigns, through e-commerce, to customer service. This allows the organisation to better understand the relationships between marketing activities, sales and long-term customer value.

Well-chosen KPIs not only enable the assessment of current performance, but also support trend forecasting and planning for further company development based on figures rather than guesswork.

Read also: Omnichannel – what is it and how does it work? >>>

Sales KPIs: revenue, margin and customer value growth

Selecting the right sales KPIs allows you to measure the direct impact of your company's activities on revenue and profitability. These indicators are often the most decisive factors in determining the health of a company and its ability to scale its operations.

The most important sales KPIs include:

• revenue and revenue growth,
• gross margin and net profit in a given period,
• average cart value (ACV) or average order value (AOV),
• number of customers/number of transactions.

The growth in customer value over time (see: Customer Lifetime Value), i.e. the company's ability to generate repeat revenue, is also becoming increasingly important. Thanks to sales KPIs, teams can make better decisions about investment, marketing, recruitment, cross-selling and up-selling, rather than focusing solely on one-off transactions.

Marketing KPIs: acquisition cost, conversion and campaign effectiveness

Marketing KPIs assess how effectively marketing activities translate into customer acquisition and activation. E-commerce is not just about reach or number of clicks, but about the real impact of campaigns on sales and business goals.

The most commonly used KPIs in marketing include:

• cost per lead (CPL),
• customer acquisition cost (CAC),
• conversion rate (CR),
• return on ad spend (ROAS).

With the help of KPIs, you can assess whether your marketing budget is being used effectively and which channels generate the best quality traffic.

It is also important to measure the effectiveness of campaigns in the long term – not only in terms of new customers, but also their subsequent activity and value. This allows marketing teams to make informed decisions about budget allocation and optimisation of activities.

Retention and operational KPIs: customer loyalty and processes effectiveness

Retention and operational KPIs measure the long-term value of customers and the effectiveness of internal company processes. They determine the stability of the business and its resilience to market changes.

In the area of retention, KPIs such as the following are of key importance:

• customer loyalty,
• customer satisfaction,
• churn rate.

These indicators show whether the company is able to maintain customer relationships and respond to their needs in the long term. In e-commerce, retention KPIs are closely linked to Marketing Automation, which allows for personalised communication and increasing customer value over time.

On the other hand, operational KPIs focus on process efficiency and include: average order fulfilment time, timeliness of deliveries, customer service response time, and effective use of resources and employees. Analysing these performance indicators allows you to quickly identify bottlenecks and areas for improvement.

How to select key performance indicators for your business and avoid falling into the trap of so-called ‘vanity metrics’?

To select key performance indicators, you should focus only on those KPIs that have a direct impact on the achievement of operational and business goals. The most common mistake is to measure indicators that look good in a report but do not translate into real results - these are the so-called vanity metrics.

The first step is to determine which business goals are currently a priority: revenue growth, new customer acquisition, customer loyalty improvement or cost optimisation.

On this basis, you can select KPIs that will show progress in a given area and allow you to assess the effectiveness of your actions. Key performance indicators should be closely linked to strategic and operational goals, rather than to the activity of teams alone.

The second element is to limit the number of KPIs. Too many indicators make it difficult to set priorities and blur responsibility. In practice, it is better to monitor a few well-chosen KPIs than dozens of metrics that do not lead to specific actions. Each KPI should clearly indicate whether a given area needs improvement or is developing according to plan.

It is also worth regularly verifying whether the measured KPIs still make business sense. Changing customer needs, new sales channels or a different stage of the company's development mean that some indicators lose their significance. Remember that the number of followers on social media – although it looks good – does not always translate into increased sales or new customers.

Analysing KPIs at regular intervals allows you to eliminate vanity metrics and focus on those that really support business growth.

Summary – KPIs

KPIs, or key performance indicators, are the foundation of informed performance management in e-commerce and marketing. They allow you to translate business and operational goals into measurable data that truly supports decision-making, priority setting, and performance evaluation.

Well-chosen KPIs allow you to understand the condition of your company, identify areas for improvement, and effectively utilise resources - from marketing budgets to teamwork. The key factor here is not the number of indicators, but their connection to business goals and regular analysis over time.

In practice, KPIs should be clearly defined, measurable, time-bound and constantly reviewed. Only then do they cease to be ‘nice numbers in a report’ and begin to serve as a real tool supporting the company's development.

Frequently asked questions (FAQ)

What does KPI stand for?

KPI is an abbreviation for Key Performance Indicators. These are measurable values that show the extent to which a company is achieving its business or operational goals.

What are some examples of KPIs?

Examples of KPIs include revenue, conversion rate, customer acquisition cost, customer loyalty, and customer churn rate. Specific KPIs always depend on the business objectives and the area that the company wants to monitor.

How to calculate KPIs?

KPIs are calculated based on a clearly defined formula and numerical data from a specific period.

It is crucial that the calculation method is consistent over time and allows for comparison of results (month to month, quarter to quarter, year to year) and monitoring of progress in key areas of the company and assessment of trends.