“Measuring innovation is a great way to steer businesses toward success. However, choosing the right KPIs is important as businesses can only improve what they can measure.” - Gartner
So you’ve built an eCommerce site, and you’re organizationally focused on digital business. But how do you know what’s working? How do you determine when and what to optimize? Understanding the components working for (or against) you in your digital transformation journey help you quantify, communicate, and plan for the future.
“A relevant KPI set is key to navigate against goals, allocate and manage the budget and investments, measure the performance of activities, and manage tactical execution,” states Forrester.
So, what are the relevant key performance indicators (KPIs) you need to track to understand your business and increase your revenue?
Critical eCommerce KPIs for Tracking Business Goals
eCommerce Revenue KPIs
Revenue growth rate, typically measured month over month, gives you a view of the revenue (money coming in) to your eCommerce business. Monthly revenue growth is calculated by: current month’s revenue - previous month’s revenue / previous months revenue x 100.
Example: $15,000 - $12,000 / $12,000 x 100 = 25%.
Revenue Tracking KPIs
- Day over day, month over month, year over year
- Revenue by channel (e.g. email, social media, channel/partners, digital advertising, etc.)
- Margin: tracking revenue against cost (can also be segmented by channel)
- eCommerce Revenue as a percentage of overall revenue
With your website as your digital storefront, capturing and understanding what’s going on there helps you identify areas for growth and optimization. In order to understand your website performance, look at the following website KPIs:
- Conversion rate (number of purchases/actions made per site visit)
- Engagement rate (previously called bounce rate)
- Pages viewed
- Onsite searches (number of searches, phrases searched, search result accuracy)
- Average order value
- Abandoned cart (number of abandoned carts, percent of visits who abandon carts)
User behavior is a complex web of customer browsing, shopping and buying behaviors.
There are three key buckets of user behavior: acquisition, engagement, and retention.
Your user KPIs look at a segmented audience’s behavior in order to better plan for the future.
You can begin by looking at three audiences: people who are prospective customers, existing customers, and at-risk customers. Within those groups, consider segments like: high-value prospects and customers, high-potential prospects and customers, low-value prospects and customers, so you can gauge your sales and marketing behavior appropriately. For example: you’ll want to understand and focus your efforts on high potential customers - and where there are opportunities to grow this business (as opposed to acquiring low-value prospects).
- Acquisition: acquisition rate, cost of customer acquisition (by segment), customer acquisition campaign performance
- Engagement: engagement rate, cost of customer engagement, customer
For any B2B company, bringing in new partners and customers is the end goal for nearly any strategy. Monitoring this KPI entails separating details like how many new accounts have been created on your website. Monitoring customer acquisition cost (CAC) is critical too, calculated by combining sales and marketing expenses and then dividing by the number of new customers for any period of time.
Acquiring customers is key. Keeping them is a challenge. But measuring their true level of satisfaction is an art. By far, this eCommerce KPI is one of the most common and the most critical, leading B2B companies to study their customers in-depth. They may be resellers, partners, or end-use consumers, but the key is in understanding what customers think about the website experience, products, prices, performance, and their experience overall.
Consistent referrals indicate that B2B customers are happy enough with your services to recommend you to industry peers and others. Surveys are also a great way to measure customer satisfaction, but often an incentive is required for people to give up their time–whether they receive a discount code for a future purchase or a freebie. Taking that a step further, focus groups are also extremely effective for evaluating products, usability of the website, and exploring what customers really want. This can roll out into a bigger Voice of the Customer program to capture, measure, and optimize customer experience.
“It shouldn’t come as a surprise that companies more focused on achieving better customer outcomes are those experiencing the most success,” states research from Forrester.
Return on Investment (ROI)
ROI reflects the true impact of dollars and effort invested into the business. ROI allows businesses to analyze the success of strategies and campaigns, as well as comparing them to past time periods and performance. A business wants this measurement to reach the highest level possible, along with quantifiers such as customer lifetime value (CLV). Calculating the total revenue generated during the course of a customer’s relationship, the CLV is reached through multiplying their average sales x average number of times they shopped.
Metrics can be counted on for accuracy, eliminating subjectivity and bias in offering a true picture of success, steady and encouraging growth, or outright failure. KPIs for eCommerce should also function as measurement tools that are aligned with company objectives, realistic, and easy to understand.
Start defining and driving your KPIs. We’re here to help. Schedule a call to get started.