Everyone wants to know how their business is doing. It is a must in every industry. And if you have a website to operate, naturally, you want to know whether or not your website is effective.
But is there a way to understand that? Of course, there is!
Key Performance Indicators – or KPIs, for short – are on your side to have a good grasp of what is actually going on with your website.
As one can see immediately, it is of high importance to look into KPIs to make necessary adjustments to your site.
So let's just dive in.
There is, in fact, no to a very little difference between KPIs and metrics. Metrics can be defined as a method of quantitative measurement. According to Investopedia:
Executives use them (metrics) to analyze corporate finance and operational strategies. Analysts use them to form opinions and investment recommendations. Portfolio managers use metrics to guide their investing portfolios. Furthermore, project managers also find them essential in leading and managing strategic projects of all kinds.
Okay, but what are KPIs?
KPI is an umbrella term for the metrics that matter the most. However, it does not mean that one metric creates a KPI. On the contrary, you will need more than one metric to find the value of a KPI.
To put a finer point on it, you want to find the conversion rate for your website – one of the most important ecommerce KPIs – you will take two metrics to find that rate.
The number of goal completion divided by the total number of visitors gives you the conversion rate.
In other words, metrics enable us to find the value of a KPI.
Now, you might start wondering which KPIs are essential to growing your sales. No problem, here you can find the most important ecommerce KPIs that are important for your site to grow in sales.
Keep in mind that the list is not in a particular order and you can always add more KPIs according to your needs.
Shopping Cart Abandonment Rate is a key metric for e-commerce businesses as it provides insights into the checkout process's ease.
If a customer thinks it is too complicated to check out, then you'll have an abandoned shopping cart to deal with.
According to Statista,the average cart abandonment rate was 69.57% in 2022.
To find this metric and optimize it, you have to first divide the number of successful transactions by the number of people who added items to their shopping carts, then multiply the result by a hundred.
((Number of people who completed the purchase / Number of people who added items to cart) - 1) x 100
This is your shopping cart abandonment rate.
It might suprise you to find out that due to cart abandonment, Ecommerce sites lose $18 billion in sales.
Yes,that's a lot of revenue to lose!
To avoid this result, you can email them in different ways.
To improve this metric and your sales revenue significantly you can start optimizing the checkout process and implementing exit-intent popups to target the visitors who are about to abandon their carts.
We have already discussed how you can find this KPI earlier, but let's go over it one more time.
Monitoring this metric is crucial to understand your ecommerce success.
Basically, it measures the percentage of visitors who make a purchase on your site.
Here is the formula to this ecommerce metric:
(Number of transactions / Number of sessions) x 100
So, let's say you have 1000 monthly visitors to your site, and 50 of them make a purchase --> Your conversion rate is 5%.
Now, to increase your conversion rate, you can consider optimizing your site, adding more social proofs and customer reviews, simplifying the checkout process, and many other things.
By implementing these strategies, you can turn more visitors into customers and ultimately grow your business.
Many marketers pay to advertise our companies to attract more customers to your product. That is in the nature of any business.
However, have you ever wondered how much a customer costs you?
This KPI is useful for you to make changes in your marketing campaign to have minimal cost with maximum customer rate.
CAC’s formula is quite simple.
Total Cost of Marketing and Sales / Number of Customers Acquired
You divide your total marketing expenses by the new customers you get.
Thus the formulation will be as such; Costs you have spent on acquiring customers divided by the number of new customers.
For example, let’s say you spent $50 for 25 customers. This means $2 is how much a customer costs to you.
CLV is crucial to see how much a customer makes you profit.
If this number is low, you can take steps to increase your customer loyalty and launch campaigns to keep them coming back.l
So, assuming you run an ecommerce store that sells beauty products. To calculate the CLV of a customer, you can follow these steps:
Calculate the average value of each order that the customer has made with your store. Let's say the average order value is $50.
Calculate the number of times the customer has ordered from your store. Let's say the customer has made 5 purchases.
Calculate the average lifespan of your customers. Let's say the average customer lifespan is 2 years.
Using this information, you can calculate the CLV of the customer:
CLV = (average order value) x (number of purchases) x (average customer lifespan)
CLV = $50 x 5 x 2
CLV = $500
This means that the customer is expected to spend a total of $500 on your store over the course of their relationship with your business.
By knowing this, you can adjust your marketing efforts and customer service to maximize the value of each customer over time.
Repeat purchase rate is a powerful metric that tells you how many of your customers are loyal to your brand.
A high RPR means that you have a base of loyal customers who return to your store to make additional purchases.
Number of Repeat Purchases / Total Number of Customers
To calculate it, divide the number of customers who have made more than one purchase by the total number of customers.
For example, if 500 customers made a purchase and 100 of them returned to make another purchase, your RPR would be 20%.
Improving customer loyalty programs, personalized communication, and post-purchase follow-up are some effective ways to boost RPR.
Customers leave & customers come. This is the rule of the business.
Still, do you want to know at which percentage your customers are leaving? This can be found via churn rate.
So, the first thing in order is to take the number of customers at the end of the month and subtract it from the number of customers at the beginning of the month.
Then, divide the remaining number by the number of customers at the beginning of the month. Finally, multiply it by one hundred.
This is your monthly churn rate!
Number of Lost Customers / Total Number of Customers
So to say, you have 100 customers at the beginning of the month, at the end of the month this number drops down to 75. So, 100 – 75 is 25. 25/100 is your monthly churn rate.
If you are to multiply this rate by 12 to find the annual churn rate, you will have the rate of 75/100.
As its very name signifies, AOV is about how much an average customer spends when they check out.
It represents the average amount of money each customer spends per transaction on your website.
Average Order Value (AOV) = Total Revenue / Number of Orders
A higher AOV means more revenue, and it's easier to increase AOV than to acquire new customers. Let's say the average customer spends $50 per purchase on your shop.
If you increase the AOV to $60 by using upsells and cross-sells, you can make a 20% increase in revenue without acquiring new customers.
The time customers spend on your website is called a session.
In a typical session, you view several pages. But, if a person is to view so many pages in a session to take the desired action. It might not actually bebe actually good for your business.
Total Number of Pageviews / Total Number of Sessions
You don’t want to feel like you're inlike in a maze when you want to just buy an item.
Thus, if this KPI returns in a high value it means that you have to make this process less complicated.
The formula for this KPI is very simple. Total Number of Pageviews divided by Total Number of Visitors.
There are some people who do not view more than one page in one session. They bounce back.
A high bounce rate indicates that visitors are not engaging with your content, and are leaving your site after viewing just one page.
To calculate the bounce rate, you can divide the total number of bounces by the total number of visits.
Total Number of Bounces / Total Number of Sessions
A high bounce rate can be improved by improving the website's navigation, reducing page loading time, and optimizing the website for better user experience.
For instance, if you have 5000 total visits and 1000 bounces, the bounce rate would be 20%.
Email open rate is a metric that tells you how many people have opened the emails you’ve sent.
It’s an important metric because it measures the effectiveness of your subject line and preview text. Let’s say you’ve sent a promotional email to your customers.
You want to know how many people actually opened it.
(Total Emails Opened / Total Emails Delivered) x 100
To calculate email open rate, you simply divide the number of opens by the number of emails delivered, and then multiply by 100 to get a percentage.
However, if you use automation and email software, you will automatically receive an email open rate report.
If your email open rate is low, you may want to test different subject lines and preview text to increase engagement.
There are many strategies to raise the email open rates such as avoiding spam filters.
The emails you have sent are not empty, of course, they contain a link or several links. With that being said, how many clicks your site gets through emailing your customers is a key indicator of comprehending your emailing campaign.
(Total Clicks on Links / Total Emails Delivered) x 100
So, by dividing the Total Number of Individuals Clicks by the Total Number of Email Opens you will see your campaign’s success.
The next step to grasp the success of your campaign is looking into Email Conversion Rate. It is approximately the same thing with the conversion rate – the only difference is the domain.
(Total Conversions / Total Emails Delivered) x 100
The calculation method is quite simple too, divide the number of conversions by the number of successful email deliveries, then multiply that number by one hundred. Voila! You will get the email conversion rate.
In addition to the 12 KPIs mentioned above, there are many other metrics that you need to track in order to optimize your ecommerce business.
These additional metrics can provide valuable insights into customer behavior, marketing effectiveness, and other key areas.
By monitoring these metrics in addition to the main KPIs, you can identify areas for improvement and make data-driven decisions to help your business succeed.
Cost performance index (CPI): This metric measures the ratio of the actual cost of an advertising campaign to the expected cost, indicating how efficiently your business is using its budget.
Return on investment (ROI): Calculates the financial return on an investment relative to its cost, allowing businesses to assess the effectiveness of their marketing and advertising campaigns.
First response time: Measures the time it takes for a business to respond to customer inquiries, which can impact customer satisfaction and retention rates.
Net promoter score (NPS): Measures the likelihood of customers to recommend a business to others, which can help identify areas for improvement and track customer loyalty over time.
Customer satisfaction (CSAT) score: Measures customer satisfaction with a business's products or services, providing insights into customer needs and preferences.
Affiliate performance rates: Measures the effectiveness of affiliate marketing campaigns, helping businesses to optimize their partnerships and track revenue generated through affiliates.
Email click-through rate (CTR): Measures the percentage of email recipients who clicked on a link within an email, providing insights into the effectiveness of email marketing campaigns.
Subscriber growth rate: Measures the rate at which a business is gaining new email subscribers, helping to track the effectiveness of marketing efforts and identify areas for improvement.
New visitors versus returning visitors: Measures the ratio of new visitors to returning visitors on a website, helping businesses to assess the effectiveness of their marketing and advertising campaigns and track customer loyalty.
Revenue per visitor (RPV): Calculates the average amount of revenue generated per website visitor, allowing businesses to track the effectiveness of their website and identify areas for improvement.
Inventory levels: Measures the quantity of products or goods available for sale, helping businesses to manage their inventory levels and ensure they have the right products in stock at the right time.
Product affinity: Measures the likelihood of customers to purchase complementary products, allowing businesses to make data-driven decisions about product recommendations and cross-selling opportunities.
Average order size: Calculates the average amount spent per order, helping businesses to track sales and identify areas for improvement in marketing and sales strategies.
All in all, KPIs are of high significance for you to comprehend how successful your website or marketing campaigns are. Of course, there are more than 12 KPIs to track your website’s efficiency, however, these 12 KPIs are the ones that are important in every stage of your website’s development.
Thus, it is no surprise if one says you have to keep KPIs in the desired value.
For your website to have desired rates, you have to come up with different strategies. For example, you can check out Popupsmart’s popups. They are one of the easiest ways to keep your KPIs at the optimum value. Moreover, you can easily import a popup when there is a need.
One of the best strategies to get your emails opened in the first place is to use humorous subject lines.
KPIs can help ecommerce businesses identify areas of improvement, optimize their website for conversions, improve customer acquisition and retention, and increase the lifetime value of customers. By measuring and analyzing KPIs regularly, businesses can identify trends and take action to optimize their performance.
Some common ecommerce KPIs include conversion rate, average order value, customer lifetime value, repeat purchase rate, cost of customer acquisition, bounce rate, email open rate, and revenue per visitor. These metrics provide valuable insights into different aspects of ecommerce performance.
Ecommerce businesses should track KPIs regularly, depending on the metric and the specific needs of the business. Some KPIs, like conversion rate and revenue per visitor, may require daily tracking, while others, like customer lifetime value, may be tracked on a monthly or quarterly basis.
Yes, some KPIs, like bounce rate and time on site, are considered important factors for search engine optimization and can impact the visibility of a website in search results. Additionally, by optimizing for KPIs like customer satisfaction and net promoter score, businesses can improve the customer experience and potentially earn more positive reviews and social shares, which can also benefit SEO and rich results.
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