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How important are Ecommerce KPIs?

What Are The Top E-Commerce KPIs?

Whether you are new to the E-Commerce industry or have years of experience, one thing is certain: Anyone running an E-Commerce business needs reporting. There are dozens of analytics reporting packages and E-commerce solutions available to use, and within those tools are dozens of metrics and reports. How does one sift through all of the options and create meaningful reports.

The answer is KPIs

Key Performance Indicators, or KPIs are quantifiable measures that reflect the critical success factors of an organization. They should clearly link to strategic objectives and therefore help monitor the execution of the business strategy. A KPI will differ from a report or analysis. These activities can be insightful and help drive specific tactics, but are not the critical measures of success against the overarching strategy or objectives.

Often times people struggle with the difference between a report and KPI. A decent test to determine if the metric can be a KPI is when looking at the data, ask yourself the question: “Is this good or is this bad?” For example, if you are looking at a top 20 list, you likely won’t be answer the good or bad question. In contrast if you compare you conversion rate to last month, you will very likely be able to answer that question.

With this in mind, the first step is to identify the success measure of your organization or the website you are managing. Fortunately in the E-commerce world, there are some standard metrics which nearly all businesses will need to monitor on a regular basis.

Developing a framework

It is often times easier to develop KPIs and a dashboard if you have some guidelines and a framework to build upon. One successful method is to frame your report against the marketing funnel (below).

Marketing Funnel
The Marketing Funnel

This method of framing will break down your reports into traffic, engagement, conversion, retention and advocacy. You may have a different way of looking at things or focus only on a couple of the elements in the funnel. Regardless of how you approach the reporting, it is helpful to have a framework in mind as you establish the KPIs.

Reach

Common metrics associated with reach are traffic metrics like visits or visitors. Additionally the top traffic drivers are often looked at as a percent of the whole, or trended over time. People running an E-commerce business need to understand how their marketing dollars are performing, and looking at traffic is the first step. Bounce rate is also sometimes looked at, as you will want to optimize the traffic going to your website.

Engage

Within the engage section, time on site and pages per visit are common metrics. An under-used but highly effective metric is product views per visit. This metric is well suited to the E-commerce environment as it is a quick snapshot into shopping behavior on a website.

Convert

The most critical metrics in E-commerce revolve around the sale, making the conversion reports the most important in the dashboard. Conversion rate (orders/visits), revenue, units/order and average order value (AOV) are commonly looked at. In addition, a funnel report that shows the success or drop off rate throughout the checkout process is a very useful tool in diagnosing problems on the website.

Retain

One of the most widely used metrics to report retention is the return visitor rate. A lesser known and harder to calculate metric is the returning purchaser rate. To calculate this metric, you take the total number of order from people who have previously ordered, and divide by the total number of orders in that given timeframe. This metric will give you a much better view of how effective your product lines and website drive repeat purchases.

Advocate

Every brand aspires to turn their loyal customers into brand advocates, driving new customers to their website. There are a variety of ways to report this activity depending on the functionality of your website. Social shares/visit are one way of looking at advocacy. Another is a ratings or review submission per purchase.

Putting it all together

Earlier I mentioned asking the question “Is this good or is this bad?” Answering this question involves a frame of reference, typically comparing to a previous timeframe, benchmark or goal to understand how the website is performing. Below are two sample dashboards used with real clients, to give you a visual idea of how KPIs can be reported.

sample-dashboard_v2
sample-dashboard2

Do you have other KPIs you’ve used?

About Nathan Matuska

Nathan Matuska is Director of Product Development at the Carlson Rezidor Hotel Group and founder of Analytics Nerd. He has nearly 15 years of experience in Ecommerce Strategies, Data Analysis, and Digital Marketing. He has extensive experience in web analytics, previously working as the Manager of Client services for a web analytics start-up and has worked with other tools such as SiteCatalyst, Google Analytics and Webtrends.

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