One of the greatest advantages of running an eCommerce website is the easy access to data. It allows you to make fact-based decisions rather than relying on your gut feeling – provided you know what to look out for. It is easy to be overwhelmed by having all this information at your fingertips. To ensure that you measure the right eCommerce metrics, you must know which your key performance indicators are.
What is a key performance indicator?
A key performance indicator (KPI) is a metric that indicates how well your eCommerce website, or indeed any organization, is performing. Without tracking your eCommerce KPIs it will be difficult to determine if you are making progress over time.
The best KPIs for measuring the performance of an eCommerce business depends on which aspect of your eCommerce you want to track. Customer support and marketing will look at the different metrics to determine how they perform. Similarly, different businesses will rely on different KPIs.
KPIs provide you with objective information, but it is up to you to interpret the data and determine what actions can be taken to improve based on those insights.
How to track your eCommerce KPIs
Some eCommerce platforms track important data for you. However, it is always good to have a neutral source to compare that data to, to ensure its reliability. Google Analytics is an excellent option.
You should monitor your eCommerce KPIs on a regular basis. It is also important to consult them before making decisions about elements such as search engine or conversion rate optimization. Even the best KPIs for measuring the performance of an eCommerce business are useless if you don’t use them after all.
Website traffic is, quite simply put, the number of visitors your website gets. The more people that visit your eCommerce website, the more potential customers become aware of what you are offering.
New vs returning visitors
You should keep an eye on new and returning visitors. Depending on the product you sell, these figures can be more or less important. If you sell low-cost goods, people will often be ready to buy the first time they visit your online store. However, if you are selling expensive products your customers will often visit your website multiple times before committing.
It is also important to track where your traffic is coming from, regardless if you are running ads or not. If you post content on social media, you can get valuable data as to where your products attract the most attention. This, in turn, can give you a better idea of where future ads will have the most effect.
If you are running ads, tracking your referral traffic is essential. Google Analytics lets you track both where your visitors are coming from and their activities on your eCommerce website. This will give you a good idea of how well your ads perform. If the traffic from referrals is low, you should re-evaluate your current marketing and link building campaigns. However, if you are running the same ad on multiple websites and are seeing significantly better results from one? Then that is where your target audience is and where you should focus your attention.
Organic search rankings
If your eCommerce website is built with search engine optimization (SEO) in mind you are going to attract new visitors without needing to run ads. Even if you launched your website before acquainting yourself with SEO you have a lot to gain from redesigning with it in mind. The higher your eCommerce website appears in search rankings for relevant keywords, the more likely you are to attract visitors who are actively looking to become customers.
Time on site and pages per session
These are two different eCommerce KPIs, but they go hand in hand. Time on site is, as you have surely gathered, how long the average visitor spends on your eCommerce website. Pages per session tells you how many pages people visit, on average.
Both of these eCommerce metrics will tell you how engaging your content is. If the time on site is high, but pages per session is low, it suggests that visitors spend a lot of time on individual pages. If pages per session is high, people are exploring your website and its content. Ideally, both should be high as that means that you offer interesting content and have provided appropriate internal links to guide visitors to additional content that is likely to appeal to them.
The bounce rate is the percentage of visitors who left your eCommerce website after viewing only one page. A high bounce rate indicates that the visitor felt no need to explore your online store further. If combined with low time on your website it is likely that the content of the page is not what the visitor expected it to be.
The bounce rate is particularly important for landing pages. If you are running an ad and 90% of visitors instantly bounce from the linked landing page, it suggests that you need to review both your ad and your landing page. Consider the following:
- Does the ad give the impression that your offer is different from that of the landing page?
- Is the landing page appealing and easy to understand?
- Is the offer, when viewed in its entirety, not as good as the ad led people to believe?
- Are the keywords you are targeting not specific enough?
By tracking exit pages you can discover problem pages before they do serious damage to your business. If a large number of your visitors lose interest and leave your eCommerce website on a specific page you need to take a closer look. For example, if people leave your site after viewing your return policies, that is a red flag. By re-evaluating how you handle returns you may turn visitors into customers.
Your eCommerce conversion rate is the percentage of your website visitors that took a specific action. This can be signing up to receive your newsletter, downloading a file, or making a purchase. It is one of the best KPIs for measuring the performance of an eCommerce business and the clearest sign that you have successfully marketed your product.
The following formula will let you calculate your eCommerce conversion rate:
Keep in mind that the average conversion rate varies greatly between industries. If you want to improve your conversion rate, consider the following:
- Are your prices significantly higher than your competitors?
- Is your website running smoothly without errors?
- Can you make your eCommerce website more user-friendly?
- Are your visitors buying your products in your brick-and-mortar store after looking at them online?
Even small improvements in eCommerce conversion rate can lead to big results, especially if your website sees a lot of traffic.
Average order value
The average order value (AOV) is the eCommerce metric which tells you how much money customers spend on your website per order on average. You calculate your AOV within a given time frame, such as a month, or quarter, or year as follows:
Your AOV might vary greatly depending on the time of year. Some products are more affected by seasonal trends than others.
One of the easiest ways to increase your revenue is by improving your AOV. This can be done by upselling to existing customers, offering bundles, or free shipping for orders that reach a minimum value. You can also offer personalized product recommendations, both when users review their shopping cart and via email offers.
Customer lifetime value
The customer lifetime value (CLV) is the average net profit a customer is predicted to contribute to your business during their relationship with your brand. You calculate your CLV as follows:
Customer retention is something all businesses should strive for. It is easier to convince an existing customer to buy from you again than acquiring a new one. Additionally, returning customers are likely to spend more than new customers.
The best way to encourage your customers to return to your eCommerce website is to provide a great service. You can provide further incitement by offering loyalty perks and exclusive offers for repeat customers. You can also increase your CLV by offering discounts if related products are bought in a bundle.
Customer acquisition cost
Your customer acquisition cost (CAC) is the amount of money you spend to acquire a new customer. You calculate your CAC as follows:
So, what if you spend $1500 on sales and marketing, and that results in 30 new customers that month? Then you paid $50 to acquire each of those customers. Whether or not this is a lot depends entirely on your customer lifetime value.
This is one of the best KPIs for measuring the performance of an eCommerce business when paired with your CLV. It is easy to get excited and run multiple ads but forget about the cost they incur. It is essential that your CAC is always lower than your CLV to ensure that you are making a profit.
Shopping cart abandonment rate
Even an abandoned shopping cart tells a partially positive story – your visitor was interested in your product. Now you have to investigate why that interest was not enough for the visitor to become a customer.
On average, eCommerce websites see a shopping cart abandonment rate of nearly 70% according to the Baymard Institute. You can calculate your shopping cart abandonment rate with the following equation:
There are many reasons why customers bail out at the very last step. It may be due to shipping costs, payment methods offered, or a complicated checkout process. Take the time to ensure that the checkout process is short, smooth, and, most importantly, works.
Slow-loading websites test the patience of your visitors. If they have to wait for several seconds on multiple occasions during the checkout process you are going to see an increase in abandoned carts. It is also important to ensure that the mobile version of your eCommerce website loads quickly and is easy to use.
If you are running a subscription-based eCommerce business, it is vital to keep track of your churn rate. Your churn rate is how quickly customers cancel or fail to renew their subscription with your business. The nature of your business will determine if you should calculate your churn rate by the month, quarter, or year. You can calculate it as follows:
You want your churn rate to be low. This not only indicates that your customers are happy with the service you are offering, but also that your business is likely to be sustainable. Do not be afraid to reach out to customers who cancel for feedback on how to improve.
Finally, there are some eCommerce KPIs that you should keep an eye on as they can help you maintain high customer satisfaction.
How many active support tickets do you have? How long do customers have to wait before they get help? If a customer has to wait months before the issue with their product is amended, it won’t matter if you provided a new product free of charge. Odds are they will look elsewhere in the future.
Customer reviews and ratings provide helpful information not just to other potential customers, but to you too. A satisfied customer talking about the excellent quality of the product often means more to your visitors than your assurances of great workmanship. After all, these happy customers have little to gain by singing your praises. If a product consistently gets poor ratings, however, there is room for improvement. You might want to redesign the item, change manufacturer, or even drop the product entirely.
If a customer leaves a bad review it is, of course, important that you reach out as soon as possible. Hear them out and see if there is anything you can do to improve their experience with your brand. Most people are willing to update their review once their problem has been addressed.
Additionally, displaying customer reviews is good for your SEO efforts. Good reviews signal that you are a reliable vendor and also improves your search rankings. The best ad for your eCommerce website is, after all, satisfied customers.
There are a lot of KPIs for eCommerce websites. Though you might not consider some of these metrics to be KPIs for your eCommerce business today, it can prove worthwhile to track them anyway. By keeping an eye on them you improve the odds for noticing significant changes early on.
If you need help or advice with your eCommerce website, contact us! Forbytes have skilled experts ready to lend a hand.