Key Performance Indicators – or KPIs – are an important way to quantify the success of your eCommerce. Setting your KPIs allows you to track targets and set goals for individuals, teams and your business overall.
What are eCommerce KPIs and Metrics?
KPIs and metrics are essentially the same. Metrics are defined as a method of quantitative measurement. Metrics are used by company executives to analyze corporate finances and operational strategies. Metrics are analysed to inform decisions about investment recommendations. They are the numbers used to inform all levels of company management.
KPI is an umbrella term for the metrics that mean the most to a quantitative study. However, one metric does not qualify as a KPI. More than one metric is used to find the value of a KPI.
To find the conversion rate for a website two metrics are used to determine the rate:
|The number of goal completion
|/ by the total number of visitors
|= the conversion rate
Combined metrics are used to find the value of a KPI.
12 eCommerce KPIs to Grow Your Sales
As your online business grows, it is important to assess the site using actual data to determine what is effective and what opportunities are being missed. The following 12 eCommerce KPIs are suggestions for new online businesses seeking growth opportunities.
Shopping Cart Abandonment Rate
|/ Number of shopping carts
|= Shopping cart abandonment rate
Cart abandonment means a massive loss in potential profits. If your cart abandonment rate is high, it needs to be addressed fast. The KPI will tell you the rate, but not the reason for this rate. Further qualitative investigation will help you determine the cause or causes of your abandoned carts.
|Number of goal completion
|/ Total number of visitors
|= Conversion rate
It is an industry practice to optimize your site in order to get better conversion rates. If your conversion rates are low, you need to consider A/B testing your site or addressing concerns from site users, such as poor UX or security.
Cost of Customer Acquisition (CAC)
|/ New customers
|= Cost of Customer Acquisition
To determine the cost of customer acquisition is an important part of your marketing strategy. This rate can inform how to spend your marketing budget. It combines the cost of all the marketing types used, so for a further examination of costs, marketing needs to break down the costs of each strategy that you use.
Customer Lifetime Value (CLV)
|(Customer’s Annual Profit Contribution
|× Average Years as a Customer)
|– Initial CAC
|= Customer Lifetime Value
Your Customer Lifetime Value (CLV) indicates the profit that a customer gives your business. If this number is low, it indicates a need to increase customer loyalty. Using the formula above, which requires you to know your CLV, your com[pany can determine the customer value and target those who provide the hights value for your company.
Repeat Purchase Rate (RPR)
|Purchases from Repeat Customers
|/ Total Purchase
|= Repeat Purchase Rate
The Repeat Purchase Rate indicates how loyal customers are. A relatively high number indicates customers are loyal, which would also indicate that they are happy with the company’s products or services.
|(Number of customers at the end of the month
|– Number of customers at the beginning of the month)
|/ Number of customers at the beginning of the month
|= Churn Rate
The Churn rate is an important indicator of how often customers are leaving your business. For example, if you have 100 customers at the beginning of the month, and by end of the month this number drops down to 75, the first part of the equation is 100 – 75 = 25. 25/100 is your monthly churn rate.
If you are to multiply this rate by 12, it reveals your annual churn rate, which in this case is 75/100.
Average Order Value (AOV)
|/ Total orders
|= Average Order Value
The AOV is simply the average amount a customer spends at check out. You can find it by dividing total revenue by the total number of orders.
Pageviews per Session
|Total Number of Pageviews
|/ Total Number of Visitors
|= Pageviews per Session
The time customers spend on your website is called a session. In a typical session, you view several pages. However, if a person has to view too many pages in a session to take action, they will often abandon the sale.
If this KPI returns as a high value it means the process is likely complicated and deterring people from making purchases.
|Total number of bounces
|/ Total number of visits
|= Bounce rate
Some people do not view more than one page in one session. They bounce back. Keeping this rate low and not repelling a person who just visited your website is important. A low bounce rate of between 26 – 40 per cent is considered optimal.
Email Open Rate
|Total Number of Unique Opens
|/ Number of Successfully Sent Emails
|= Email open rate
This marketing KPI shows how many people have opened the emails a company has sent. There are many strategies to raise the email open rates such as avoiding spam filters and segmenting emails.
Email Click-Through Rate (CTR)
|Total Number of Individuals Click
|/ Total Number of Email Opens
|= Email click-through rate
Marketing emails contain a link or several links to landing pages that promote further action. How many clicks your site gets through emailing your customers is a key indicator of the success of your emailing campaign.
Email Conversion Rate
|(Number of conversions
|/ Successful email deliveries)
|= Email conversion rate
The Email Conversion Rate is similar to the conversion rate, with the only difference being the domain.
KPIs are used to quantify the success of your eCommerce website or marketing campaign. While there are more than 12 KPIs to track efficiency and success, these 12 KPIs are central at every stage of your eCommerce development. These KPIs become targets for your teams so they can better understand their goals and how to achieve them. These quantifiable targets help direct strategy, showing what elements are working to benefit your business growth.