Key performance indicators (KPIs) are like a GPS for your e-commerce business—they can tell you when your business is headed in the right direction, or when it’s taken a wrong turn. With these all-important metrics, you can hone and refine your e-commerce site to better capitalize on your successes while making improvements where needed, and these are the kinds of changes that can help your business generate more revenue.
There are dozens and dozens of metrics you can use to measure your site’s performance, and the best KPIs are typically simple, real-time and quantifiable measurements that can directly affect a company’s profitability. It’s integral for e-commerce retailers to partner with specialists who are seasoned and experienced at quantifying KPI data and showing businesses how they can take action to integrate that KPI information into an online strategy that reaps rewards. Here are some of the most essential KPIs that can make all the difference in your e-commerce retail business:
- Site Traffic: It’s vital to know how many people are coming to your site, but it’s also important to know where that traffic is coming from. Are people finding your e-commerce site via organic search, Instagram marketing, or a pay-per-click ad? What keywords are driving people to your website? With this KPI, you can focus your marketing efforts and see what campaigns are bringing in results.
- Conversion Rate: Of course, it’s one thing to get people to your website, but it’s something else entirely to get them to take action, whether that means placing an order or joining your email list. Conversion rate is calculated as a percentage, dividing the number of conversions by the number of site visitors during a set time period, then multiplying that number by 100. There are innumerable types of conversions, and you can measure different ones according to your business goals. Purchases are obviously the ultimate in conversion, but you could also see how many people click on a video, sign up for e-newsletters or visit a particular page on your site. You should be aiming for at least a 2.42% purchase conversion rate, which is the worldwide average.
- Shopping Cart Abandonment Rate: Let’s say that purchase conversion number isn’t what you want it to be. You’d want to take a look at this KPI, which can help pin down why site visitors are loading up their shopping carts but not pulling the trigger on ordering. Typically, 69 of every 100 carts are abandoned before purchasing. Perhaps the shipping fees are too high, or it takes too long to enter information to place an order. Pinpointing where these obstacles are in the ordering process can help you fix them, with the ultimate goal of improving that purchase conversion rate. It’s worth your time: Business Insider estimated that in 2014 alone abandoned carts represented $4 trillion in unsold merchandise, but with the right corrections 63% of those lost sales could have been recovered.
- Average Order Value (AOV): Purchases are also a great KPI source. The AOV is a simple calculation of your revenue divided by your number of orders. Obviously, the higher your AOV, the better it is for your revenue. Working with the right partner on your KPI can help you determine new ways to increase your AOV, such as offering free shipping with a minimum purchase amount or bundling products together.
- Customer Lifetime Value (CLV): Obviously, happy customers are more likely to be repeat customers, and that can be good for business. How good? That’s where this KPI comes into play. This figure calculates how much revenue can be generated from an average customer’s lifetime spending habits on your e-commerce platform. Long-term customer retention can be a cornerstone of a successful online retail business: Bain & Company found that customers who had spent around three years shopping at a particular site spent 67% more than customers who were new to a site. This KPI combines three metrics in its calculations: your brand’s AOV, the average number of purchases a customer makes per year, and the average time period for customer retention.
KPIs are a foundational tool for building a successful e-commerce platform, and Branded Online uses solution-driven data to help you grow the metrics that are the most important to your brand and the best fit with your business goals. Connect with us and learn more about how our expert team members can collaborate with you on creating a robust e-commerce strategy that will grow and energize your online retail operations to best meet your brand’s goals and objectives.