Tuesday 2nd May 2017
How to Choose the Right KPIs for Your eCommerce Store
A key aspect of formulating a strong eCommerce strategy is knowing how to measure it. When it comes to eCommerce, picking the right KPIs is vital.
The vast amount of data that comes with digital selling can be incredibly useful, so long as you use it correctly.
There are so many different metrics you could use to measure the success of your eCommerce store - how do you know which ones to pick? How do you ensure that your chosen KPIs give you an accurate representation of your business’ situation?
While not all KPIs will give you an accurate picture of how your store is performing, the following metrics are a must for any eCommerce business. They form the key indicators of success and can help you to assess your marketing, sales and growth strategies, as well as flagging up any issues.
Of course, you’ll want to be measuring your store’s sales metrics. You can collect order information on a daily, weekly and monthly basis, allowing you to monitor the health of your sales volumes. Measuring sales metrics accurately is vital for identifying drops in demand, as well as forecasting and planning for your store.
Sales are usually the lifeblood of any business and your eCommerce store is no different.
A key metric that can provide you with a wealth of useful information is your conversion rate. This describes the percentage of your site’s visitors who convert into paying customers (or otherwise achieve your intended aim for them).
Determining an acceptable conversion rate for your store can be tough, as every site and industry is different, but monitoring changes over time and measuring the impact of site changes on your conversion rate can be very useful.
A poor conversion rate could mean bad quality traffic or bad site optimisation. Conversely, a high conversion rate means you’ll have to spend less attracting traffic for each purchase.
Customer Lifetime Value
Another vital KPI, but one that’s often overlooked, is customer lifetime value (or CLV for short). This calculates the average total value of a customer to your business.
CLV focuses on overall worth, rather than the value of an individual transaction, so is a fantastic indicator of customer loyalty. It can also be great for determining the efficiency of your sales and resource allocation. After all, if you’re achieving greater value from each customer, you’ll spend less on average acquiring them.
Cost Per Acquisition
In order for your eCommerce business to be viable long term, you’ll need a realistic cost per acquisition. This determines the marketing spend required to attract a new customer on average.
If your cost per acquisition increases substantially, you’ll make little or no profit from each customer, so keeping track of this metric is essential. Including Cost-per-Acquisition as one of your core KPIs will allow you to show that your business model is viable, and that you are able to maintain your margins.
With reviews and opinions so easily accessible online, monitoring your product reviews and ratings should be among your eCommerce store’s core metrics.
Bad reviews can have a significant impact on sales and brand image, so being aware of them when they occur allows you to act quickly. Poor scores could be a result of a bad customer experience and signal that you may be losing customers.
At the same time, plenty of positive reviews can boost both customer trust and search rankings, so keeping track of reviews and employing an active strategy for gaining positive ratings can really pay off for your eCommerce business.
Average Order Value
A great way of building a sustainable and profitable eCommerce business is by increasing your average order value, making it an important KPI to track.
Having a higher average order value can help improve your cost per acquisition and signal a willingness of customers to spend more on your products. You’ll be able to increase your profit margins and allocate more resources to marketing and acquiring customers, as well as to building up your brand.
Other KPIs to Note…
While you should definitely be including all of the KPIs mentioned above, there are plenty of other indicators that can be useful for building up a picture of how your eCommerce store is operating.
The ones you choose will largely depend on your store’s aims and objectives, but all can add significant value to your planning, reporting and evaluation.
The volume of visitors to your site in a given period of time. This can be great for monitoring general traction and interest for your site at specific times.
Where traffic is arriving at your site from. This metric is useful for monitoring traffic quality and the effectiveness of your marketing campaigns.
The number of visitors signing up for your newsletter. These customers become available for email marketing, so increasing signups can be useful for your marketing objectives.
Engagement metrics for social media platforms including follows, post engagement and clicks thorough to your site. Great for building brand traction and a community around your products.
Metrics taken from your email marketing strategy such as open rates, bounce rates, click rates and more. Valuable insights for your email campaigns.
Repeat Purchase Rate
The number of customers purchasing more than once from your site. This is a useful indicator of customer loyalty and your level of service and is closely linked with customer lifetime value.
The percentage of customers who add items to their cart but then leave your site. This could indicate optimisation issues, problems with your shipping costs or other sources of friction in the checkout process.
Order Gap Analysis
The gap between purchases made by a customer. This indicates how long customers wait between purchases, and therefore indicates how soon they may be susceptible to marketing again.
Search Ranking Metrics
Your average ranking for chosen search terms can be a very useful indicator of your visibility, and could be monitored to increase organic traffic to your eCommerce site.
Paid Advertising Metrics
Metrics from your paid ad campaigns such as AdWords cost per click. Important for optimising and managing your paid campaigns and assessing their effectiveness.
Selecting the right KPIs for your store is largely about considering your store’s unique situation and strategy, then formulating a plan that allows you to effectively monitor that strategy.
You’ll want to keep track of key metrics like conversion rate and customer lifetime value, but also customise your mix of KPIs for the needs of your eCommerce business.
Interested in finding out more about how Statement can help you better measure your eCommerce success? Or, how we take a data-driven approach to our projects? Just get in touch and we’d be happy to discuss your next project with you.