In ecommerce, the ability to analyze and act on key performance indicators (KPIs) is critical to success when selling products and services online. If you can’t measure something, you can’t improve it, but it’s important to focus on a handful of specific measurements which will most indicate the health of your business.
What’s a KPI?
Key performance indicators are metrics used to track site visits, leads, sales, etc. A KPI’s accuracy depends on the quality of the data you gather to calculate it.
Most ecommerce platforms have KPIs built into their dashboards. Google also has several free tools you can use to track your site’s performance, or you can invest in more complex analytics systems that track conversions and customer lifetime value.
What ecommerce KPIs should you be tracking?
There are dozens of KPIs you can track, so consider which areas below are important to your company’s success, and which metrics are most relevant to you.
Customer metrics
- Conversion rate: “Conversion” describes when a prospect becomes a paying customer. Your conversion rate is your number of conversions divided by your total number of visitors.
- Customer acquisition cost (CAC): It’s great when prospects convert to paying customers, but how much did it cost to get them there? The customer acquisition cost is important for calculating profitability.
- Average order value: How much do customers spend buying your products or services? How does that number compare to the customer acquisition cost?
- Customer lifetime value (CLV): How much can you expect to make from a customer from the first transaction to the last? CLV is an important way to see how well you’re retaining customers.
- Repeat customer rate: Are your customers coming back for more? How often? How much are they spending on their second or third order?
- Cart abandonment rate: How often do prospects or customers load up the shopping cart and walk away without completing the purchase?
- Rate of return: High return rates can indicate poor-quality products, bad service, slow delivery, etc. This KPI tells you what your rate of return is.
Get helpful tips for how to improve your customer lifetime value.
Profit metrics
- Gross profit: Your revenue before subtracting your manufacturing and production expenses.
- Net profit: Gross profit minus expense—i.e., this is how much you made on the sale.
- Average profit per customer: The amount of revenue that a customer generates over a time period of your choice divided by the number of customers you have during that period.
General marketing metrics
- Impressions: How often your ecommerce site is shown to prospects. This metric is important for assessing web traffic.
- Reach: The “reach” KPI tells you where your visitors are geographically and how they’re finding your site on the internet.
- Social media engagement: How many of your customers are coming to your site from social media, and how many are engaging with your posts there.
- Net promoter score (NPS): A number between -100 and 100 that expresses the likelihood of a customer recommending your business. Your goal should be an NPS above 50, but anything over 20 is good.
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Website metrics
- Site traffic (visitors/sessions): How many prospective customers visit your website daily?
- Traffic source (organic, paid, email, social, etc.): Where do your visitors come from? Analytics will tell you if you’re getting organic traffic, paid traffic, or just visits from the social media platforms you’re currently advertising on.
- Session duration: Visitors need time to read about your offering, place an order, and process a payment. Is their session duration long enough for them to do that? Also known as “time on site.”
- Bounce rate: A “bounce” is when a visitor spends ten seconds or less on your page and doesn’t click on anything. A high bounce rate could indicate that your website is not engaging or loading fast enough.
Email metrics
- Open rate: Emails are only useful if your prospect or customer opens them. Use an email marketing program that tracks this for you.
- Click-through rate: Tracks whether recipients are clicking on any links in your emails. You could classify that as another step in the sales funnel.
- Unsubscribe rate: Too many unsubscribes could result from oversaturating your email list. It could also be due to buying a suboptimal email list from a third-party provider.
Product metrics
- Top products (units sold): How many products did you sell, and which products are your top sellers?
- Cost of goods sold (COGS): Includes the materials and labor used to produce your online products but doesn’t include administrative costs.
- Average inventory sold per day: COGS sold divided by your average inventory.
How to use metrics to forecast sales
The results of the KPIs most relevant to your business can help you identify variables in your business model. For example, with no changes, your sales from Q2 last year would be the same as Q2 this year, so analyzing your KPIs can help you find what’s changed (or what’s going to change) and therefore help you lower costs and increase revenue.
Aligning your KPIs with your ecommerce business strategy
The KPIs above provide a fairly comprehensive picture of what your ecommerce business is doing. However, you should focus on a few KPIs that most align with where you’re focusing your business strategy. Evaluating these most relevant KPIs every quarter will give you insights on what you need to adjust throughout the year.
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