What does KPI mean?

The abbreviation KPI stands for Key Performance Indicator. KPIs are critical key performance indicators that help quantify, analyze, and optimize business areas and marketing goals. So a KPI is a number that is important for the performance of an advertising measure. The examples below show what typical KPIs are.

KPIs form a data and decision-making basis for well-founded product, marketing and other corporate policy. They are therefore an important instrument of quality assurance and improve competitiveness. Only by measuring performance can concrete measures be tested and theoretical assumptions (verified or falsified).

The concept of the Key Performance Indicator is not industry-specific, but is of general importance and applicable to all areas of technology, business administration and production. Wherever a performance is created, it needs to be assessed and improved, key performance indicators are generated. The trick lies in identifying and generating critical key figures.

Common KPI examples

General KPIs

  • Cost
  • Throughput
  • Availability
  • Effectiveness
  • Error rate
  • Time exposure

KPIs in online marketing

First-order KPIs (metrics)

The first-order performance indicators in online marketing are characterized by the fact that they occur directly in the web analysis. The website visitor is recognized by a tracking script (cookie, tracking pixel) and this date is minimally processed or filtered.

Examples of 1st order KPIs:

  • Click Through Rate of a hyperlink (CTR)
  • Page Views
  • User Sessions
  • Unique Visitors

Second-order KPIs (conversions)

Second-order KPIs are defined based on the use case. Classic use cases in online marketing are the sale of goods from an online shop, the distribution of downloadable products or the development of target group lists such as e-mail distribution lists or address databases.

Examples of 2nd order KPIs:

  • Leads (target group structure, e.g.: registrations, contacts)
  • Sales (product sales)
  • Downloads (distribution of software/media)
  • Length of stay

Second-order KPIs are characterized by the fact that they require knowledge of a business logic and thus have to be defined and implemented in online marketing. The implementation takes place via rule sets or event triggers, which appear in the web analysis as conversions.

Third-order KPIs

Third-order KPIs are only linked to web analytics metrics to a limited extent. They reflect the success of corporate goals and can nevertheless come from production, customer service, personnel management or classic marketing and direct marketing. A typical 3rd order KPI metric is the Net Promoter Score, which maps customer satisfaction according to a scientific approach and requires a survey of the target group.

Examples of 3rd order KPIs:

  • Net Promoter Score (NPS)
  • Average Order Value
  • Customer Lifetime Value

Especially with third-order key performance indicators, the complexity is arbitrarily scalable. The selection of values should therefore be made in a structured process by deconstructing the process chains to be optimized and each critical step is accompanied and optimized in an appropriate way by KPI-based reporting.

KPI in omni-channel marketing

Online marketing is increasingly integrated into holistic marketing concepts (multi- and omni-channel). At the same time, more modern control concepts (controlling) in online marketing are being further developed. There is a trend towards more complex online marketing KPIs. This trend is also being driven within the framework of the startup culture, which expands technological and professional boundaries with growth hacking and agile approaches.

This results in more complex KPIs that make measurable, for example, the transfer of customer segments from the website to the local store (“media jump”) or the sales of certain products in the online shop after contact with distant touchpoints (“customer journey”).

KPI Marketing = Performance Marketing (!)

The term KPI marketing means that a measurable marketing strategy is pursued. In KPI marketing, important KPIs (performance indicators) are monitored and integrated into target definitions. The same thing happens with performance marketing. KPI marketing and performance marketing are “number driven” or in german “number driven”. Both refer to the operational control and review of marketing measures using KPIs.