Why KPIs need to be few
Every KPI you adopt creates organisational gravity. Teams optimise toward what gets measured. A team facing 30 KPIs optimises toward none of them. A team facing 3 KPIs has clarity on what matters.
The hardest part of KPI design is saying no to interesting metrics. “Time on site” is interesting. It’s almost certainly not a KPI for an e-commerce brand. “Email open rate” is interesting. It’s a tactical metric, not a KPI.
A useful test: would the CEO and CFO both agree this number drives the business? If yes, it’s KPI-worthy. If it’s a leading indicator, a diagnostic, or an output of the real KPI, it’s a metric, not a KPI.
Common e-commerce KPIs
For a typical DTC business:
- Revenue, top-line outcome
- Contribution Margin, revenue minus variable costs
- CAC, customer acquisition cost
- LTV / CAC ratio, sustainability indicator
- Repeat purchase rate, engine of LTV
- Blended ROAS, paid efficiency
Usually 3-5 are designated as primary KPIs the company is genuinely tuned around. The rest are operating metrics that support them.
KPI cascading
KPIs work best when they cascade from company → team → individual:
- Company KPI: Revenue growth
- Marketing team sub-KPI: New customer count + CAC
- Paid social channel sub-KPI: Paid social CAC + new customer count
- Media buyer KPI: Daily CAC against target, plus pacing
Each level supports the one above. When the media buyer hits their target, the channel hits its target, the team hits its target, the company hits its target.
KPIs vs OKRs
Often confused:
- KPI, an ongoing measurement, watched continuously
- OKR (Objectives and Key Results), a time-bounded goal with concrete results
KPIs are how you watch the engine. OKRs are how you drive specific change. A team can have KPIs and OKRs simultaneously: KPIs track “are we healthy?” while OKRs track “are we hitting this quarter’s specific bets?”
Common mistakes
- Too many KPIs. 30 KPIs is no KPIs. Pick the few that genuinely drive the business.
- KPI without a target. A number without a target is decoration. Every KPI needs an expected level.
- Changing KPIs constantly. Quarterly shifts destroy accountability. Pick a KPI and live with it for at least a year.
- Measuring what’s easy, not what matters. The hardest-to-measure metrics are often the most important (LTV, incremental ROAS). Invest in measuring them properly.
FAQ about KPI (Key Performance Indicator)
What is a KPI?
KPI (Key Performance Indicator) is a metric the business has chosen to optimise against. KPIs are the handful of numbers leadership watches continuously. Most other metrics are operational or diagnostic.
How many KPIs should we have?
For a company, 3-10 KPIs at most. Teams have their own sub-KPIs that cascade up. More than 10 KPIs at any level effectively means no KPIs, teams cannot prioritise across them.
What is the difference between a KPI and an OKR?
KPIs are ongoing metrics watched continuously. OKRs (Objectives and Key Results) are time-bounded goals with specific results. KPIs are how you watch the engine. OKRs are how you drive specific change.