Short definition
A KPI is a quantifiable measure tied directly to a business goal — the metric you watch to know whether the business is moving in the right direction.
In depth
KPIs differ from generic metrics in that they are chosen for decision-making. A service business's marketing KPIs typically include qualified leads per month, CPL, close rate, CAC, LTV, and revenue per channel. The discipline is choosing few KPIs and reviewing them on a recurring cadence — weekly for operational KPIs, monthly for marketing performance, quarterly for strategy. Vanity metrics (impressions, social followers) are not KPIs unless tied to revenue.
Example
An agency replaces a 47-metric monthly report with five KPIs (qualified leads, CPL, close rate, revenue, NPS). Decisions get faster and budgets shift toward the channels actually moving them.