Your Guide to Leading vs. Lagging Indicators for Businesses
Posted: Mon Jan 20, 2025 6:05 am
Leading and lagging indicators are critical, time-based metrics for forecasting business performance and analyzing past trends. Both are essential to understanding economic trends and predicting future events.
Keep reading to better understand the differences between leading and lagging indicators as we go through these topics:
What are indicators?
Leading vs. lagging indicators for businesses: The differences
Examples of leading indicators
How to use leading indicators
Examples of lagging indicators
How to use lagging indicators
Feel free to jump to any topic. Then, join our community of marketers by signing up for our newsletter and get your dose of the latest digital marketing tips for free!
Don’t miss our Marketing Manager Insider emails!
Join 200,000 smart marketers and get the month’s hottest gcash database news and insights delivered straight to your inbox!
Enter your email below:
Enter your work email
(Don’t worry, we’ll never share your information!)
cta44 img
What are indicators?
search bar icon
Definition of indicators in business
Indicators are pieces of data that measure business or economic conditions and predict future trends.
Indicators are essential for organizations because they help measure your strategies’ effectiveness and improve them.
Think of indicators like your car’s dashboard, which tells you your speed, fuel level, outside temperature, and other critical stats that alert you to any potential issues. Leading and lagging indicators are two types of indicators for businesses.
Leading vs. lagging indicators for businesses: The differences
Now that you know what indicators are, let’s look at the differences between leading and lagging indicators for businesses. The table below summarizes their differences:
Leading indicators Lagging indicators
Definition Leading indicators are pieces of data that provide insights into future performance. Lagging indicators are pieces of data that analyze past performance and events.
Examples – New market growth
– Sales pipeline
– Customer satisfaction – Annual revenue
– Sales cycle length
– Customer churn rate
Uses – Forecasting economic and market trends
– Strategic planning
– Risk management – Evaluating business performance
– Comparing your performance vs. industry benchmarks or competitors
– Identifying and confirming new trends
Let’s dive into each one:
What is a leading indicator?
search bar icon
Leading indicator definition
A leading indicator is data that provides insights into future performance.
Leading indicators can help you predict your business’s future performance and economic trends. These data points provide forward-looking insights and inform your strategies.
While a leading indicator is a critical part of performance monitoring, it may not always show the whole picture. You can’t create accurate predictions by looking only at individual leading indicators.
For example, customer satisfaction is a leading indicator that tells you how likely customers are to repurchase and recommend your business. A high customer satisfaction rate may inform you that your revenue will likely remain the same or increase.
However, you must also consider economic conditions and even lagging indicators (which we’ll discuss later) for a well-balanced prediction. Economic conditions may influence your customers’ purchasing habits — for instance, consumers may spend less during a recession.
Keep reading to better understand the differences between leading and lagging indicators as we go through these topics:
What are indicators?
Leading vs. lagging indicators for businesses: The differences
Examples of leading indicators
How to use leading indicators
Examples of lagging indicators
How to use lagging indicators
Feel free to jump to any topic. Then, join our community of marketers by signing up for our newsletter and get your dose of the latest digital marketing tips for free!
Don’t miss our Marketing Manager Insider emails!
Join 200,000 smart marketers and get the month’s hottest gcash database news and insights delivered straight to your inbox!
Enter your email below:
Enter your work email
(Don’t worry, we’ll never share your information!)
cta44 img
What are indicators?
search bar icon
Definition of indicators in business
Indicators are pieces of data that measure business or economic conditions and predict future trends.
Indicators are essential for organizations because they help measure your strategies’ effectiveness and improve them.
Think of indicators like your car’s dashboard, which tells you your speed, fuel level, outside temperature, and other critical stats that alert you to any potential issues. Leading and lagging indicators are two types of indicators for businesses.
Leading vs. lagging indicators for businesses: The differences
Now that you know what indicators are, let’s look at the differences between leading and lagging indicators for businesses. The table below summarizes their differences:
Leading indicators Lagging indicators
Definition Leading indicators are pieces of data that provide insights into future performance. Lagging indicators are pieces of data that analyze past performance and events.
Examples – New market growth
– Sales pipeline
– Customer satisfaction – Annual revenue
– Sales cycle length
– Customer churn rate
Uses – Forecasting economic and market trends
– Strategic planning
– Risk management – Evaluating business performance
– Comparing your performance vs. industry benchmarks or competitors
– Identifying and confirming new trends
Let’s dive into each one:
What is a leading indicator?
search bar icon
Leading indicator definition
A leading indicator is data that provides insights into future performance.
Leading indicators can help you predict your business’s future performance and economic trends. These data points provide forward-looking insights and inform your strategies.
While a leading indicator is a critical part of performance monitoring, it may not always show the whole picture. You can’t create accurate predictions by looking only at individual leading indicators.
For example, customer satisfaction is a leading indicator that tells you how likely customers are to repurchase and recommend your business. A high customer satisfaction rate may inform you that your revenue will likely remain the same or increase.
However, you must also consider economic conditions and even lagging indicators (which we’ll discuss later) for a well-balanced prediction. Economic conditions may influence your customers’ purchasing habits — for instance, consumers may spend less during a recession.