Lesson 6: Managing Key Performance Indicators (KPIs)

Reputable business consultant Peter Drucker once noted that “If it cannot be measured, it cannot be managed.” This statement could not be more appropriate for innovation and marketing, as the goal is to bring new, competitive products to the market that consumers desire. A pivotal need for marketers is to measure success, and this task is unlikely without identifying key performance indicators (KPIs). KPIs are metrics that tell management how successful the organization is at achieving goals and objectives that lead to success (Parmenter, 2020). In other words, KPIs should signal to organizations what they are or are not doing well.

Scholars suggest the ten most essential KPIs: profitability, quality of service, growth, customer satisfaction, financial stability, cash flow, market share, security, business efficiency, and planning efficiency (Hennyeyova et al., 2021). Many of these indicators are measured differently for marketers based on their goals and objectives. The following sections will review marketing KPIs for other targets.

More KPIs to Consider

Accordion

Select each item to learn more.

Business Objectives. Accordion 1 of 3.

When exploring the overall success of a marketing plan, managers observe several KPIs. For example, total sales and revenue growth look at the revenue increase over a period, whereas incremental sales revenue explains how many new or repeat customers the organization has. Too many repeat customers may benefit from income but not total revenue. This could signal unsuccessful marketing and promotional activities (Gomez Albrecht et al., 2025). Gross margin, or profitability, is one of the most watched KPIs in an organization, as it signals how well the company generates gross profit from sales (Gomez Albrecht et al., 2025).

New Product Success. Accordion 2 of 3.

Organizations use several methods to assess new products. When comparing industry research and development (R&D) expenditures, organizations use a percentage of sales approach. By dividing R&D dollars by total sales, organizations can gauge if they are spending more or less on developing new products than the rest of their industry (Gomez Albrecht et al., 2023).

When organizations are interested in how the consumer perceives new products, organizations may consider Time to Value (TTV), which measures how long it takes for new consumers to realize the value of your product (Gomez Albrecht et al., 2023). A more popular measure is the product adoption rate, calculated by dividing the number of new users by total users. This indicates if you need to focus on activating new users (high product adoption rate) versus providing support for existing users (low product adoption rate).

Return on Investment. Accordion 3 of 3.

One of the most important KPIs is the return on investment or ROI. ROI is a versatile metric that measures the profitability of an investment. ROI is used to measure the profitability of new product launches, promotional and advertising campaign effectiveness, and profits based on R&D. ROI is calculated by subtracting sales from costs, dividing by the costs, and multiplying by 100.

What KPIs are the Right KPIs?

Although KPIs are primarily dependent on industry standards, Mahwinney (2022) suggests a few essential tips to identify the correct performance indicators for your business. First, choosing KPIs explicitly related to your business goals is critical. As business goals are refined to be more specific, KPIs provide a measurable component to gauge the success of reaching goals. Focus on a few KPIs, as choosing too many may lead to lost focus.

Second, considering the stage of a company’s growth is also essential. Companies may consider validation in earlier stages, whereas more established companies may consider customer lifetime value (Mahwinney, 2022). This is the same for innovations and marketing, where product adoption rate may be more important than profitability in the short term.

Third, organizations must choose if they use KPIs measuring past or future performance. Past or lagged indicators measure what has already happened. An example would be the prior year’s sales. On the other hand, Future, or leading performance indicators, such as conversion rate, predict what is soon to occur (Mahwinney 2022). Either perspective can be used to indicate success or benchmark marketing and organizational success.

As we started with a quote, we conclude with a quote—Pearl Zhu suggests, “The use of KPIs is meant to improve and transform organizational performance.” If we choose the right KPIs for marketing, our innovations will have the potential to be more successful.

References

Gomez Albrecht, M., Green, M., Hoffman, L. (2025). Principles of Marketing. Rice University. https://openstax.org/details/books/principles-marketing

Hennyeyová, K., Janšto, E., Šilerová, E., & Stuchlý, P. (2021). Influence of Key Performance Indicators in Marketing on the Financial Situation of Wine Producers Using ICT. AGRIS online Papers in Economics and Informatics, 13(665-2022-469), 49-58.

Mawhinney, J. (2022, September 28). What is a KPI? How To Choose the Best KPIs for Your Business. Hubspot. Retrieved May 16, 2023, from https://blog.hubspot.com/marketing/choosing-kpis

Parmenter, D. (2020). Key performance indicators: developing, implementing, and using winning KPIs. John Wiley & Sons.