Metrics, Indicators and KPIs

First lesson of the Business Metrics and KPIs course, free to read: about 15 minutes, 3 exercises and 3 quiz questions. This is the catalogue's base lesson; in the student space, it is rewritten for your profile.

Objectives

Distinguish data, metric, indicator and KPI
Formulate a precise KPI (definition, formula, scope, period, target)
Break a business objective down into a metric tree

KPI definition Metric tree SMART objectives

Every company measures things. But measuring a lot is not the same as steering a business. This lesson sets out the vocabulary and the method for choosing the right indicators.

From a number to a KPI

A data point: “order 1042 is worth 58 euros”.
A metric: an aggregated measure, such as “1,250 orders in March”.
An indicator: a metric interpreted against a reference, such as “+8% orders compared with February”.
A KPI (Key Performance Indicator): an indicator that is chosen because it directly reflects a strategic objective and is used to make decisions.

The same number can be a KPI for one team and a simple metric for another: the email open rate is a KPI for the CRM team, but not for the chief financial officer.

The KPI sheet

Two people calculating “average order value” often get two different values: with or without taxes? with or without cancelled orders? The remedy is a KPI sheet:

fiche_panier_moyen = {
    "nom": "Average order value",
    "definition": "Average amount of a validated order",
    "formule": "revenue excl. VAT of validated orders / number of validated orders",
    "perimetre": "all channels, excluding cancelled and refunded orders",
    "source": "orders table (commandes) in the data warehouse",
    "frequence": "weekly",
    "responsable": "sales management",
    "objectif": "65 euros excl. VAT in Q4 2026",
}

The target must be SMART: specific, measurable, achievable, realistic, and time-bound. “Improve the average order” is not; “go from 58 to 65 euros excl. VAT by the end of December” is.

Actionable KPIs versus vanity metrics

The number of followers or page views almost always goes up and feels good, but it doesn’t tell you what to do. A good KPI is actionable: when it moves, you know which decision to consider. A simple test: “if this number drops by 10% tomorrow, what do I do?” With no answer, it isn’t a KPI.

Limit yourself to 3 to 7 KPIs per dashboard. Beyond that, nothing is “key” any more.

The metric tree

A global KPI is broken down into levers that teams can act on. For an online shop:

revenue = visitors x conversion rate x average order value

def chiffre_affaires(visiteurs, taux_conversion, panier_moyen):
    return visiteurs * taux_conversion * panier_moyen

base = chiffre_affaires(50_000, 0.02, 58)        # 58,000 euros
print(base)

# impact of a 10% increase in each lever
print(chiffre_affaires(55_000, 0.02, 58) / base - 1)    # +10%
print(chiffre_affaires(50_000, 0.022, 58) / base - 1)   # +10%
print(chiffre_affaires(55_000, 0.022, 63.8) / base - 1) # +33.1%: the effects multiply

Each branch has its team: acquisition for visitors, product for conversion, marketing for order value. When revenue drops, the tree tells you where to look.

Key takeaways

A KPI reflects an objective and is used to make decisions.
Document each KPI in a sheet so that everyone calculates it the same way.
Break global KPIs down into actionable levers.

Exercises

Solutions and tests stay on the server. In the student space, your code is run and checked, and the tutor gives hints before the solution.

CodeDifficulty 1Python in the browser2 hints

Simulate the revenue levers

Write chiffre_affaires(visiteurs, taux_conversion, panier_moyen), then calculate base for 40,000 visitors, a 2.5% conversion rate and an order value of 60 euros, and gain_conversion, the relative increase in revenue if the conversion rate rises to 2.75%.

def chiffre_affaires(visiteurs, taux_conversion, panier_moyen):
    pass

# base = ...
# gain_conversion = ...

CodeDifficulty 2Python in the browser2 hints

Check a KPI sheet

Write fiche_complete(fiche) that returns the sorted list of required fields that are missing or empty among: ‘nom’, ‘definition’, ‘formule’, ‘perimetre’, ‘frequence’, ‘responsable’, ‘objectif’. An empty list means the sheet is complete.

CHAMPS = ['nom', 'definition', 'formule', 'perimetre', 'frequence', 'responsable', 'objectif']

def fiche_complete(fiche):
    pass

Multiple choiceDifficulty 11 hint

Vanity metric

For an online shop whose objective is to increase profitable sales, which indicator is the least actionable?

Conversion rate
Total number of followers on a social network
Average order value excl. VAT
Gross margin rate

End-of-lesson quiz

What distinguishes a KPI from a simple metric?

It is more precise
It reflects a strategic objective and is used to make decisions
It is always expressed as a percentage

Which objective is SMART?

Increase revenue
Be the best
Reach 3% mobile conversion by March 31, 2027

Revenue = visitors x conversion x order value. If all three increase by 10%, revenue increases by:

10%
30%
33.1%