At the end of the day, each KPI is linked to what you want to achieve in your business. For example, if you’re already getting a lot of traffic to your e-commerce store but your conversion rate is low, you may want to concentrate on increasing conversion rather than driving traffic.
Measuring the right KPIs can help you with pretty much everything: from increased marketing and sales to optimization and expansion. In addition, this is what our guide can you do: identify relevant and actionable KPIs to make your business boom.
Why are KPIs important?
Would you not agree that most business and marketing decisions are largely guided by data? Ultimately, how can you improve something if you can’t measure it?
A few weeks ago, Bill Gates raved about this bestselling book by legendary venture capitalist John Doerr in a blog post. Doerr’s bestseller Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs essentially reveals how Intel President Andy Grove’s transparent goal setting system of Objectives and Key Results (OKRs) helped Silicon Valley giants like Intel and Google achieve immense growth.
Key Performance Indicators or KPIs are measurable metrics or quantifiable data points that drive action to meet your OKRs, that is, your business objectives.
Therefore, when you track the right KPIs, you walk away with the knowledge to devise more focused strategies to boost your online sales as well as understand which factors could be impeding your growth.
Types of eCommerce KPIs
On an organizational level, KPIs can be of various types and align the daily tasks of employees to the overall objective of an organization. KPIs can be predictive, are largely qualitative, and pertain to various aspects of a business’s operation. However, eCommerce KPIs fall into either of one the following five categories:
- Project Management
- Customer Service
How to choose KPIs for your eCommerce business
Measuring the right eCommerce KPIs is seminal to the growth of your online business. However, you cannot pick up a metric and start tracking if it does not guide you in making the correct business decisions.
Now, if you want to know which metrics are relevant for your e-commerce store, you need to ask these three important questions:
- Which industry do you operate?
- What is the growth stage of your business – that is, do you qualify as a startup, are you just breaking even, or do you have an established presence?
- What are your goals for your business at this stage?
Once you have concrete answers to your questions, it is time to make sure that you factor in the following things before you start measuring your KPIs:
Measurable: Make sure your KPIs are quantitative to generate relevant data points
Relevant & Specific: Each KPI must contribute to an overall objective you are trying to achieve
Time-bound: But they definitely need to be measured within a certain period (weekly, quarterly, or annually) so as not to skew your other data points.
Achievable: There is no point setting a goal if you cannot achieve it at a particular stage in your business (FYI, a KPI is considered “met” if you achieve at least 70% of the target).
Pro tip: A good way to create actionable strategies to focus on one overall objective in a period and assign 4-5 relevant, measurable, and achievable KPIs aligned with it.
The most relevant KPIs to increase sales and revenue in your eCommerce business
There are a number of parameters you need to track other than the number of sales and your net profit margin to charter the growth of your eCommerce business. Let us check out the most relevant KPIs that can help you increase sales and revenue in your eCommerce business.
It is a no-brainer that if people are not aware of your brand or products you will not be making any sales on your eCommerce website.
You can get a fair idea about your product visibility easily by tracking your product page metrics on Google analytics. Essentially, the only people who’re looking up your products are those who want to make a purchase or those who are already loyal customers.
Why is this KPI important?
Product visibility is an essential metrics to track as it can give you a fair idea why you are not making as many sales as you should or help you devise strategies to surpass your previous sales targets.
Conversion in digital marketing terms is any desired action taken by a visitor on a particular website. On an eCommerce portal, this would mean a visitor actually going through with a purchase.
You can easily calculate the conversion rate using the following formula
Number of sales/number of visitors = conversion rate
For example, if three visitors out of 100 made a purchase on your website, your conversion rate is 3%.
According to this BigCommerce article, the typical conversion rate across e-commerce stores is about 1%to 2% and that if everything went right, your conversion rate would be 2% at most.
However, the conversion rate does vary according to industry and it’s an important KPI to track because it tells you how good your website is in convincing passive visitors to take actions.
We’re all guilty of this, aren’t we? With the number of shopping apps on our phones, it’s almost second nature of all digital citizens to window shop on an app or eCommerce website.
According to the Baymard Institute, the shopping cart abandonment rate on eCommerce websites is as high as 69.89%! As noted by them, this is due to a number of factors: complicated check out process, high shipping cost, competitive pricing, declined credit card, or visitors who simply didn’t come with the intention of making a purchase.
Therefore, measuring cart abandonment rates can tell an interesting story that you’d otherwise have to figure out based on elaborate guesswork.
Product Purchase KPIs
Product purchase is a KPI that can be broken down into micro KPIs for effective tracking. In other words, you would be tracking the following conversion metrics on your e-commerce site:
Increased brand loyalty means you’ll be generating a lot of revenue from your repeat customers, sometimes up to 80%. Repeat purchase trends can give you an overall idea of customer behavior over their lifetime on your website and can help you streamline your targeting strategies.
Average order value
Average order value indicates how much a customer spends on your e-commerce portal on each visit. Tracking this metric can help you devise strategies to convince your customers to spend more on your site the next time they visit.
Order gap analysis
Order gap analysis is a KPI that tracks the average time between each consecutive order placed by a customer. This metric can help you refine your retargeting strategies to convince a customer to make purchases from you more frequently.
The advocacy metric is great for analyzing how successful your products have been in promoting loyal customers to recommend your e-commerce store to their friends and family. This metric essentially measures the efficacy of word of mouth and referral marketing statistics.
Letting existing customers root for your brand is a low cost but effective way of reaching deeper into your target demographic pool. A great way advocacy works are through user-generated content such as product reviews, blog posts, or even photo and video impressions and reviews by influencers on social media.
Retention (Marketing KPI)
According to Bain and Company, a 5% increase in retention rate can lead to a whopping 25% to 90% increase in profit margins!
Retention percentage is a great KPI to track for a number of reasons. If your products have been well received by your customers, you’re on your way to generate repeat revenue through brand loyalty and even gain new customers through advocacy.
eCommerce growth can be tricky to navigate when you’re setting up a store. However, identifying the right KPIs for your business can go a long way to ensure explosive growth in no time. At the end of the day, they give you quantifiable takeaways that can help you create more focused and actionable strategies to reach out to your target demographic.
Are you measuring any of these KPIs for your eCommerce business? Let us know in the comments!
Lastly, if you’d like to talk to a specialist who can guide you about the right KPIs for your eCommerce business, please reach out to us.