How to choose the best KPIs for your eCommerce Business

When you run an online store, there are literally a thousand key performance indicators to measure. Keeping track of all of it, while necessary, can make your head spin after a while.

However, these KPIs can paint a picture of how your store is doing, where your customer’s biggest pain points are, and your ultimate opportunities for growth.

Every bit of data that you have is a KPI in one way or another. Whether or not it’s useful depends on the goals you set and if you know what to do with it.

How to Set KPI Goals for Success

If you’re choosing the best KPIs to focus on for your eCommerce store, you need to decide on an ultimate goal for your eCommerce site.

Choosing KPIs based on your overall goals will help you focus your attention on where you want to grow and what steps you should take next. Otherwise, it’s possible to get wrapped up in all of the data that you have.

I’ve outlined a few common scenarios that would drive common eCommerce goals and what KPIs would directly impact them:

Boosting Conversion

For example, say you’re getting a lot of traffic, but your conversion rate is low. You would choose your KPIs based on getting a higher amount of customers through your conversion funnel rather than driving traffic to your site.

 

 

 

 

 

 

 

 

KPIs for conversion

KPIs to focus on:

  • Visits/Traffic
  • Bounce Rate
  • Failed Discovery/Browse Abandonment Rate
  • Checkout Abandonment Rate
  • Conversion Rate

The theme here is to focus on the KPIs that are found along your sales funnel. If one of these is particularly high (or particularly low, like your conversion rate) that is where you need to focus your test and action plan.

Driving Traffic

However, if your conversion funnel is yielding a higher conversion rate, but your traffic isn’t as significant as you’d like, you’d focus on KPIs around your traffic, where it’s coming from, and how to improve it.

KPIs for traffic 

KPIs to focus on:

  • Channel Group
  • Channel
  • Visits
  • Bounce Rate
  • Conversion

For driving traffic, you want to look at your traffic and sources, and how well those convert. After all, there’s no point in driving traffic if they’re not going to boost your conversion too. For your on-site metrics, focus on where your visits are coming from and look for opportunities.

To illustrate in the screenshot above, we can see that, at 5.6 percent, there is a pretty significant conversion rate for Google AdWords. It might be worth it to push more budget towards that channel to bring even more valuable traffic to your site.

Alternatively, you could test other channels where you aren’t bringing in very much traffic at all. While Twitter, Youtube, and LinkedIn aren’t doing much for your conversion rate, Pinterest only brought in 10 visits, but had a 10 percent conversion rate. It might be interesting to test a few Pinterest ads for your action plan.

There are also a few off-site KPIs you should look at through each of your channels’ analytics, for example:

  • Social CTR (click through rate)
  • Engagement rates
  • Social shares

Improving Average Order Value (AOV)

You might be in a situation where your traffic and conversion are great—but your customers aren’t quite spending as much as you’d like. In this case, you’d want to focus on customer behavior on your site and personalization KPIs.

KPIs for AOV

KPIs to focus on:

  • Order Count
  • Revenue
  • Average Order Value

AOV= Revenue / Order Count

While AOV is a KPI in itself, you want to take a look at the revenue that’s generated as well as your order counts. It would also be a good idea to measure this against visits and your channel sources, which will show you which of your channels are providing customers who spend the most.

For example, if you can see that there’s one channel where customers are ordering a little less than others, you can offer bundled products to these customers in particular, or implement a threshold for a coupon.

Let’s say your Instagram traffic is purchasing a bit under the average for your store. Create a 10% off coupon that’s Instagram exclusive with an attainable spending threshold to drive up AOV for this channel.

On the other hand, seeing which of your channels bring in customers who spend the most can also help you reallocate your resources into that channel to boost traffic and conversions from it.

AOV= Revenue / Order Count

While AOV is a KPI in itself, you want to take a look at the revenue that’s generated as well as your order counts. It would also be a good idea to measure this against visits and your channel sources, which will show you which of your channels are providing customers who spend the most.

For example, if you can see that there’s one channel where customers are ordering a little less than others, you can offer bundled products to these customers in particular, or implement a threshold for a coupon.

Let’s say your Instagram traffic is purchasing a bit under the average for your store. Create a 10% off coupon that’s Instagram exclusive with an attainable spending threshold to drive up AOV for this channel.

On the other hand, seeing which of your channels bring in customers who spend the most can also help you reallocate your resources into that channel to boost traffic and conversions from it.

Increasing Repurchase Rate

Perhaps your problem isn’t necessarily conversion, traffic, or AOV, but more that your customers don’t reconvert as much. Then you would focus on the KPIs geared towards bringing your customers back to your store.

KPIs for Repurchase Rate 

KPIs to focus on:

  • Channel
  • Repeat vs New order
  • Order count
  • Revenue
  • Average Order Value

To focus on your repurchase rate, look at your new vs repeat customers and orders. Notice that your repeat customers order more than new customers, so put an action plan in place to turn your new customers into repeat customers.

A great way to do this is to incentivize these new customers with a great email campaign. Offer something special to get them to come back, like an exclusive look at new products and priority on ordering them. You could also offer a discount or free shipping if you don’t already offer it.

Reducing Marketing Spend

Maybe everything is more or less going well for your online store, but you’d like to ideally drive down your marketing costs to improve your bottom line. The KPIs around your marketing spend and ROI would be the most useful for this goal.

Reduce marketing spend KPIs

KPIs to focus on:

  • Paid Channels
  • Visits
  • Order Count
  • Revenue
  • Total Marketing Cost
  • Cost/Order
  • ROI
  • Customer Acquisition Cost (CAC)
  • Conversion Rate

In the case above, I’ve filtered for only Facebook to show how it’s performing. There’s a lot to analyze if you think you’re spending too much on marketing, but the most important metric is ROI. While the example, in this case, is 129.4 percent, which is rather good, we can ultimately boost this by improving the conversion rate from this channel.

As we can see above, we’re spending €7,313 on Facebook ads, which is bringing in €17,582 in revenue. This means that each visit we’re bringing in only costs us €0.18, but the conversion rate is only 0.4 percent.

AOV= Revenue / Order Count

While AOV is a KPI in itself, you want to take a look at the revenue that’s generated as well as your order counts. It would also be a good idea to measure this against visits and your channel sources, which will show you which of your channels are providing customers who spend the most.

For example, if you can see that there’s one channel where customers are ordering a little less than others, you can offer bundled products to these customers in particular, or implement a threshold for a coupon.

Let’s say your Instagram traffic is purchasing a bit under the average for your store. Create a 10 percent-off coupon that’s Instagram exclusive with an attainable spending threshold to drive up AOV for this channel.

On the other hand, seeing which of your channels bring in customers who spend the most can also help you reallocate your resources into that channel to boost traffic and conversions from it.

What’s really to look at here is cost-per-order, which ends up being €44.81 per order. To get a good idea as to whether or not this is a high number, look at your average order value:

Reduce marketing spend KPIs #2

This means you’re giving up a little more than 40 percent of your margins for these orders, though you’re bringing in tons of traffic with these ads.

What can you do?

Test your Facebook Ad targeting so you’re not casting such a wide net. It’s great that people are clicking on your ads, but if they’re not converting, they may not be the people you want to target.

Tracking your KPIs for the Best Results

In order to properly understand your eCommerce store’s performance, you need to be a scientist. It’s time to test and track the KPIs you’ve selected for a determined length of time. I recommend, at the minimum, one month to get enough data to analyze.

If you have a lot of traffic, you might be able to track your results after a shorter amount of time, but in the long run, this will depend on your eCommerce site and the flow of traffic and purchases you have. If you have less traffic, or are in more of an ebb part of the natural ebb and flow of business, you might need to extend your testing period to two to three months.

Make sure you’re comparing your results to comparable time periods. Ecommerce stores have natural business cycles, like any other business. It’s important to compare it to a similar stage in your business cycle and growth. We recommend testing it against the same time period for the previous year.

Once you’ve determined your goals and what KPIs you’re going to track, keep detailed records of your results, and set concrete goals for each of your KPIs.

For example, if your traffic was “X amount” during the same time period last year, say you want to improve it over a three month period by 20 percent. Setting concrete goals will allow you to measure the success of your campaigns over the time period that you test. It will also show you how aggressive to be in your campaigns when you create your action plan.

Putting Together an Action Plan Based on Your Results

When you put together an action plan to achieve your results, think about your ultimate goal that you first defined. Look at your results and think about the concrete goals you want to achieve. Ask yourself based on your past results how you can achieve those goals.

Let’s look at a practical example:

Say you get decent traffic and conversions, and you want to test a campaign to bring customers back to your store for purchase. Let’s say you have a lot of new customers, but your churn rate is far too high.

Time to think like a scientist:

Say you want to bring 5 percent of your new customers back to purchase from you within three months. You think that a remarketing email campaign will bring that many customers back and push them to convert. That’s your hypothesis.

Outline exactly how your plan will take place:

  • What is the overall strategy of this remarketing email campaign?
  • How often will you send these new customers emails?
  • Which customers will receive the campaigns and why have you chosen those customers?
  • What incentive are you giving your customer to come back (discounts, free shipping, loyalty points, etc)?
  • Is your result measurable, and what KPIs will you focus on to measure your results?

Once you have your plan in place, all that’s left is to implement it and record your results. Focus on the KPIs you’ve chosen as your most important metrics, and measure the data over your test period.

Compare your results with the same KPIs from the same period last year. This will show you the differences that your tests have made. Be sure to note any potential variables that might skew the results of your campaign, so that you can replicate the test again later.

When your test is finished, analyze your results. Write down every change that you saw over your test and see if you’ve reached your goal. Then, take a look at other KPIs that you weren’t focusing on and see if there was an impact on those instead. You might be surprised how many of them are linked based on customer behavior.

With your results, you can see how you’ll implement future tests on your eCommerce site and what you can expect from your campaigns. Maybe your campaign didn’t meet your goal- that’s perfectly fine. It means your hypothesis was a bit off, or maybe you can tweak your campaign so it works better for your customers.

Think critically about your results, and always ask yourself how you can improve your tests for next time.

While all KPIs are useful in one way or another, keeping an eye on the KPIs that directly impact your goals will help you keep your campaigns focused. Concentrating on goal-oriented KPIs for your eCommerce store will help you zero in on the exact data that you want to analyze.

By choosing the most important KPIs to track, you can clearly follow your store’s progress and growth, as well as measure the effectiveness of your campaigns.

 

ABOUT THE AUTHOR


Whitney Blankenship

Whitney Blankenship is the Content Marketing Manager at Divvit, a SaaS company that offers you insights into your ecommerce store to help you save time and money! When she’s not writing killer articles, she’s playing video games, painting, and travelling

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