Key Performance Indicators (KPIs) are key metrics that help your business understand where your successes are coming from. They also help you determine what changes you need to make to build your customer base and generate more revenue. Sounds simple, right? That is, until you realise there are literally hundreds of metrics you could analyse and hundreds of tools you can use to measure them.
Demographics, devices, browsers, keywords, goal values, conversion rates, bounce rates, exit rates, acquisition, behaviour, time… the list goes on! As does the list of tools available to help you analyse them. From Google Analytics to Salesforce to KISSmetrics and more in between, each one offers you something different.
But which of these metrics are most relevant for eCommerce brands? Today, we’re discussing which metrics eCommerce brands should be keeping a close eye on and why.
5 Basic KPIs Every eCommerce Brand Should Know Inside Out
Which internet-enabled device are your customers using to find and interact with your brand online? Device metrics are the key to understanding how consumers are consuming your content and making their online purchases.
Which of your online marketing channels is performing best? Marketing channel metrics are the key to understanding how each of your online marketing efforts are paying off in terms of creating the most conversions.
- New vs. returning visitor traffic (segmented by marketing channel)
How many visitors are coming to your site every day/week/month? New vs. returning visitor traffic metrics (when segmented by marketing channel) are the key to understanding which marketing channels work best to attract returning or new visitors.
- Exit pages
Is there are large bounce rate for certain pages on your website? Exit page metrics are the key to understanding which sections of your website are failing to meet your business objectives.
Do you know what keywords your customers are using to find your products? Keyword metrics are the key to understanding how to improve the SEO of your site and the content it features.
4 IMPORTANT KPIs eCommerce Brands Should Measure
Every brand selling online should be well and truly immersed and familiar with the basic KPI’s. However, taking this one step further, we’ve pulled together a few more important KPI’s that help identify conversion performance to know what works and where your customers are dropping off in the sales funnel. These metrics are:
Shopping cart abandonment rate (SCAR)
How many of your customers add items to their cart, but abandon it before making the final purchase? Calculating the SCAR is the key to understanding the shopping behaviour of your site visitors and customers. It’s also a good indicator of how intuitive and trustworthy your checkout process is. Google Analytics will calculate this rate automatically when you enable enhanced eCommerce, but to calculate it manually divide the total number of completed purchases by the number of shopping carts created. Subtract the result from one, then multiply by 100 for the abandonment rate. By calculating the percentage of interested potential customers who leave without buying anything compared to the total number of shopping carts created, you can:
- Highlight hiccups in the checkout process – As this metric is often an indicator of how successful your checkout process is, if your cart abandonment rate is high, it might be time to overhaul this area of your site. For example, you may need to offer more payment options or employ the services of a trusted payment service provider like PayPal or Stripe to encourage consumers to convert.
Average order value (AVO)
How much income does your site generate on each order? The AVO metric is the key to understanding and monitoring customer purchasing patterns. Increasing AOV is one of the most effective (and cheapest) ways to increase revenue and profit. To calculate the AVO divide the total revenue (usually monthly revenue) by the number of orders placed. By tracking the average amount customers spend when they make a purchase from your site, you can:
- Develop a strategy to increase it – If you want to increase the average amount your customer usually spends on your site, one of the best ways to do so is to encourage them to add more items to their order. You can do this by upselling, selling product bundles, or offering discounts on a minimum spend threshold.
Customer acquisition cost (CAC)
How much does it cost you to acquire a single customer? Calculating the CAC is the key to understanding how much you spend on things like marketing and sales expenses as well as salaries and overheads associated when it comes to attracting and converting a visitor to a customer. To calculate the CAC divide your total sales and marketing expenses (including salary and overhead costs) over a given period by the total number of new customers added during that same period. By assigning a monetary amount to each customer, you can:
- Use it to access the sustainability and scalability of your business – The cost of acquiring new customers on its own doesn’t provide enough information to make informed decisions. So, look at your CAC in relation to other metrics like your AVO. For example, if your CAC is €15 but your AVO is €12, you’ve got a severe problem. However, if your AVO is €50 then you’re in a much better position.
Customer lifetime value (CLV)
How much revenue will one customer generate during their lifetime? CLV is the key to understanding the value each customer can bring to your business. It can be calculated by subtracting your total expenses over your relationship with the customer from the total profits generated over the same period. By assigning a monetary amount to how much a customer is worth to your business over their lifetime, you can:
- Create a successful customer retention plan – To improve your CLV it’s important that you develop a strategy to retain customers beyond their initial purchase. Think building long-term relationships with targeted marketing campaigns and superior customer service or creating brand loyalty by maintaining a high-quality product. Or use upselling and cross-selling techniques and irresistible incentives and rewards to keep them coming back for more.
And finally, 3 HIGHLY Important KPIs eCommerce Brands Should Measure
If you sell your brand through a third-party retailer (e.g. Amazon, Tesco etc.), there are 3 incredibly important metrics you should be measuring. However, if you’re not using Buy Now technology, measuring how your brand is performing on these retailer sites is almost impossible. Yet, gaining these insights is completely invaluable to those who utilise Buy Now technology. The metrics are:
Which of your products are selling the best on third party retailer sites? What can you do to increase the numbers sold? Product performance metrics are the key to understanding how well your products are performing on third party retailer sites. You can use them to quickly identify what products are being purchased, where they are being purchased and if not being purchased on particular retailer sites, why not? The ability to measure the success of each product sold through third party retailers means you can:
- Take charge of your brand on retailer sites – With the likes of Amazon, selling thousands of branded products day in, day out, the last thing they have time to do is dig deep into and provide insights concerning product-specific conversions for all the brands they feature. Having easy access to these insights within the Buy Now portal empowers you to take charge of your brand on retailer sites and reduce your dependency on them to provide such data.
- Make better investments – Once you have this data you can see what channels/content types are influencing sales of your products on third-party retailer sites. Knowing this can help you invest money in content that’s working. For example, if you see your blog is driving big traffic and conversions to third party retailers, you can decide to invest more of your budget in blogging content rather than other marketing activities that are not generating as many conversions as your Facebook campaigns.
Non-branded product performance
What happens when a consumer clicks through to buy your product on a retailer site, but ultimately ends up choosing a competitor product? Are consumers consistently choosing a competitor brand over yours? Non-branded product performance metrics are the key to understanding how your brand compares to that of your competitors. By determining which brands pose the biggest threat to yours, you can:
- Perform informed competitor research – Which specific competitor brands are customers choosing over yours? Are there any lessons can you learn from the price/product description/advertising of that competitor brand to improve your own? If you find a competitor brand is continually chosen over yours, it’s time to start comparing how you describe, picture, advertise or even price your product.
Are consumers consistently purchasing another complimentary product/brand alongside yours when they shop on third party retail sites? Should you be considering establishing a complimentary partnership with another brand? Basket level performance metrics are the key to understanding the holistic composition of your customers online shopping carts. By identifying complimentary brands/products, you can:
- Strategize both online and offline – For example, if you can see that most consumers are also adding a particular brand to their baskets alongside yours, it may make sense for you to approach that brand and establish a complimentary partnership to help increase sales of both products.
For more information on how to analyse each of the metrics discussed or to discover how you can gain access to start optimising your eCommerce strategy, talk to a member of our team today.