Want to Grow Your Online Store? Then Pay Attention to These KPIs for Ecommerce
Key Performance Indicators Should Drive Action
Investopedia describes key performance indicators as “specific, numerical marketing metrics that organizations track to measure their progress towards a defined goal within their marketing channels. Key performance indicators help eCommerce businesses better understand their customers and keep their marketing and business on track.
KPIs are vital eCommerce metrics used to track success for short and long-term campaigns. They’re like guideposts or parameters that reflect the quality of your marketing strategy. Investors and marketers will pay attention to sales revenue, leads, and cost per acquisition, but there are other eCommerce metrics that warrant attention too.
General Types of KPIs
Key performance indicators (KPIs) can be divided into different categories such as sales, marketing, customer service, and user experience. Defining a set of eCommerce KPIs for your business will depend on your goals. A hint: They should always be directly linked to a crucial business outcome. It’s worth paying attention to industry standards, so long as you know that not all companies or campaigns will need the same KPIs.
At the same time, you also want to be aware of vanity metrics. These statistics like video views and social media page likes may look great, but they don’t necessarily translate into meaningful ROI. Unless, of course, the aim of one of your marketing campaigns is to increase page likes as part of a larger effort to grow your social media presence.
eCommerce KPIs are intrinsically linked to “conversions.” Best practices encourage eCommerce store owners to have specific conversions. For instance, instead of saying, “we want to increase leads,” you should quantify what that means, so a better KPI would be “we want to increase leads by 50%. As a measure of eCommerce success, KPIs should always add value to your company.
What KPIs Should I Focus on For My Ecommerce Business and Customer Satisfaction?
eCommerce KPIs worth focussing on are quantitative and qualitative. Quantitative is measured solely by number, like click-through-rates, and qualitative is a characteristic of a process or business decisions, like customer reviews, for instance. eCommerce KPIs address four areas:
- Marketing
- Financial
- Customer leads
- Site & Content
Once you’ve established marketing goals and their related KPIs, you’ll need to monitor them with analytics tools like Google Analytics. Recording results and readjusting strategies is an important and ongoing part of the marketing process. When you do reach your initial KPIs, then you can set new ones.
eCommerce KPIs should be reviewed at times relevant to your goal. Some goals are yearly, while others have a six-month cap. You can monitor KPIs every four weeks, although some marketing campaigns need constant tracking with A/B testing to improve efficiency.
Important KPIs to Track If You Want Your Ecommerce Business to Succeed
At Comrade Digital Marketing agency, we monitor many eCommerce KPIs, and pay special attention to the ones below.
Conversion Rates
Conversion rates—one of the most indispensable key performance indicators—determine the percentage of website visitors who have completed a conversion (do what you want them to do). This can be anything from signing up for a subscription, downloading something, or upgrading a service.
While there are plenty of conversion rates to measure, it’s crucial to remember they should always evaluate the potential of a lead becoming a paid customer. When calculating, be wary of vanity metrics and poor quality data. For instance, campaigns pages with a 100% conversion rate seem incredible until it’s revealed that a landing page only had one visitor.
Average Order Value
Average Order Value (AOV) is another important metric in the eCommerce industry. It tracks the average dollar amount spent when a customer orders from your store. Knowing your online businesses’ Average Order Value helps evaluate your overall marketing and pricing strategy because it provides the metrics needed to measure the long-term value of each customer.
When you increase order value, you can offset customer acquisition costs to reduce your payback period and increase ROI, which allows you to pump more revenue into ad spend and product development. Dividing revenue by the total number of orders will give you your Average Order Value. The higher your AOV, the more you’re getting out of money spent on customer acquisition (provided the latter sum is lower).
Customer Lifetime Value
Customer Lifetime Value (CLV) reflects profitability per customer. To work it out, take the (average order value x the number of repeated sales x average retention period)—the average cost of acquisition and customer retention rate. CLV is an excellent indicator of product-market fit, brand loyalty, and recurring revenue from repeat customers.
Its insights can be used to justify budget spending and determine customer loyalty programs. To quote Harvard Business Review, “Rather than thinking about how you can acquire a lot of customers and how cheaply you can do so, CLV helps you think about how to optimize your acquisition spending for maximum value rather than minimum cost.”
Customer Acquisition Cost
Customer acquisition cost (CAC) is the total cost of acquiring a new customer and includes advertising costs, staff salaries, etc., by the number of customers acquired. It’s a valuable benchmark to assess whether your spending is growing or bleeding your company dry. Growth is good, but growth at the cost of draining capital isn’t lucrative for businesses.
To work it out, you divide sales and marketing expenses by the number of new customers. Understanding CAC allows you to improve profits margins and calibrate investments to ensure you’re making the right decisions for your business growth. Early-stage investors use data from customer acquisition costs to analyze the scalability of businesses to assess whether they’re worth investing in.
Repeat Purchase Rate
Repeat Purchase Rate shows the percentage of your current customer base that has returned to buy from your eCommerce site. Influenced by your customer retention efforts, this eCommerce KPI is an important indicator of customer loyalty for marketers to evaluate. If your overall customer experience is pleasant, they’re more likely to become turning buyers.
To calculate Repeat Purchase Rate, simply divide the number of return customers by the total number of customers, and multiply by 100 to convert to a percentage. This can be calculated based on daily, weekly, or monthly timeframes. Average Repeat Purchase Rates fall between 20% to 40% for eCommerce businesses.
Shopping Cart Abandonment Rate
The average shopping cart abandonment rate is over 70%, meaning 7 out of 10 customers don’t make it through the checkout process. This key performance indicator is useful for an eCommerce store to measure the success or failure of its website’s functionality.
Dividing the total transactions completed by transactions initiated will give you a percentage rate of the site visitors who intended to make the purchase but didn’t complete the checkout process. A high abandonment rate may signal a broken sales funnel, poor user experience or site navigation, too high shipping costs, and a host of other technical problems impacting eCommerce success.
Return on Ad Spend
Return on Ad Spend (ROAS) is an eCommerce metric that measures the revenue generated per every dollar spent in an advertising campaign. Evaluating the effectiveness of individual campaigns can help you determine which types of ads perform the best, so you can scale them to maximize profit. The higher your ROAS, the better your online store’s performance.
ROAS is usually expressed as a ratio. For example, a ROAS of 10:3 would represent $10 in revenue for every $3 spent. According to HubSpot, depending on the platform and product or service, a good ROAS can be anywhere from $4-11 for every dollar spent on advertising. By optimizing landing pages and using conversion rate optimization services you can enhance ROAS.
Device Type Used
With Google Analytics, you can monitor cross-device tracking, allowing you to reach customers with precision and relevance. The majority of internet users switch between mobile, desktops, and tablets, so you need to get a full understanding of your users’ online habits to optimize across multiple touchpoints.
It’s necessary to define a common set of KPIs across all channels, as eCommerce KPIs vary significantly between channels, and a siloed approach won’t provide accurate insights. For example, someone might start searching for a product on their desktop, and then when they’re on their mobiles later that day, decide to make a purchase.
Traffic Source and Volume
Where traffic comes from and how it interacts with your eCommerce website is another one of those important key performance indicators to have on your marketing checklist. Traffic can come from organic, social, email, direct, paid search and referrals, and other sources, and the conversion rate of these different types of traffic will depend on your marketing strategy.
Google Analytics can provide you with a segmented overview of which channels bring in the most traffic. When you understand what users are doing on your website, you can decide which traffic to monitor and how to adapt your strategy and marketing budget appropriately to bring in more leads and convert them to paying customers.
Website Speed
A fast website provides a positive user experience. Online retailers with website pages that take three seconds or longer to load risk losing over 25% of potential customers. eCommerce businesses with slow websites frustrate users, and not only that, but Google considers a fast load speed as a positive ranking factor in search engine results.
79% of online shoppers won’t come back to a slow website. The size of individual videos and images, and the total number of them on any given page, can affect speed. Addressing both these factors will improve loading time, including leveraging page caching and speed plugins.
Bounce Rate
This is the percentage of visitors who leave a webpage without taking an action, such as filling out a form, making a purchase, or clicking on a link. Optimized eCommerce websites have an average bounce rate between 26%—40%. A bad bounce rate indicates a poor user experience. In marketing, we speak about making a website “sticky.”
This means when a new lead visits your site; you want to make them stay on, hence the adjective “sticky.” Improving offers, calls-to-action, and design all help nudge potential customers further down the marketing funnel. The longer they stay, the more likely they are to buy something. You can calculate Bounce Rate by dividing the total number of one-page visits by the total number of entries to a website.
Customer Reviews
eCommerce metrics like customer reviews are important for several reasons. Obviously, they offer constructive feedback for improvement, but they also help search engines like Google rank websites. This is particularly important for businesses that utilize local SEO, as high-quality, positive reviews from customers boost visibility and increase website traffic.
And, it’s equally essential, not to shy away from the odd negative review. A swift solution-orientated response, whether it’s a social media engagement or via another communication channel, can also demonstrate your credibility as an online retailer that’s comfortable engaging with customers’ feedback.
Average Ticket Resolution Time
This is the average time taken by your customer support team to resolve all opened tickets in a given time frame. Average Ticket Resolution Time reveals how efficiently your customer support team is, and often, the complexity of issues your customers experience. It’s useful to measure this metric on a per-agent basis to see where internal workflows and processes can be improved.
Remember, the average resolution time will vary depending on the complexity of the issue and the ratio of available agents. Effective tagging and categorization of tickets will reveal which tickets require additional support from finance or process reinterring to avoid them altogether: the lower your Average Ticket Resolution Time, the higher your customer satisfaction.
Email Click-Through Rate
Email click rate (CTR) is the measure of how many people clicked on hyperlinks, call-to-actions, or images within a particular email. If you take the number of clicks an email receives divided by the total number delivered, you’ll arrive at the click-through rate. Campaign Monitor found the average to be around 2.6%.
The success of Email CTR depends on subject lines, calls-to-action, and copy. Subtler elements like time of day, email length, link emphasis, and link positioning also affect this metric. Positive click-through rates indicate successful targeting and high engagement rates, and that offer opportunity to deepen and grow your customer relationships.
Conclusion
Monitoring eCommerce KPIs validates your marketing efforts and impacts how much revenue your company makes. Moreover, you have to evaluate the right eCommerce KPIs to ensure you meet your business goals. Newly acquired knowledge combined with incredible software can make monitoring and reporting a lot easier.
Alternatively, you can always hire the experts at Comrade Digital Marketing Agency to keep tabs on your KPIs. Whether you’re just starting out or an established business needing a professional marketing team to take your company to the next level, we can help you achieve your company KPIs. To learn more about how we set and achieve marketing KPIs that grow eCommerce businesses, click here.
- Website UI/UX, content and conversion review
- SEO: 20-point performance check
- Digital marketing strategy
