Spectral efficiency is a measure of the performance of encoding methods that code information as variations in an analog signal.

Any such encoding will occupy an amount of bandwidth, and within that bandwidth it is capable of transmitting bits at a certain rate. The number of bits per second that can be transmitted per Hz of bandwidth defines the encoding's spectral efficiency.

As an example, an encoding using a single kilohertz of of bandwidth to transmit a thousand bits every second has a spectral efficiency of one.

The maximum spectral efficiency one can hope for in a channel with a certain signal to noise level , is given by the Shannon-Hartley theorem.

Low spectral efficiency does not necessarily mean that a coding scheme is inefficient. As an example, consider Code Division Multiplexed Access (CDMA) spread sprectrum which is not particularly spectrally efficient encoding scheme, when considering a single channel, but the fact that one can "layer" multiple channels on the same spectrum means that the spectrum utilization for a multi-channel CDMA system can be very good nonetheless,