If you’ve used custom ecommerce development services in the past and now you are a proud owner of an ecommerce solution, you should know that you will spend much less on converting an existing user of a website into a buyer than on attracting a new one. That’s why the constant optimization of the sales funnel and the website itself is an integral part of the viability of your online business. However, how do you give the analysis of these aspects measurable value? Usually, professional marketers use special ecommerce KPIs for this as part of their online marketing service. We will talk about 15 metrics for ecommerce below.
When considering online business, key performance indicators (KPIs) are metrics for ecommerce that measure their success or the level of achieving certain goals. We can also define KPI as a measurable indicator of achieved results.
In practice, this term means the ratio between the result achieved and the resources expended, but in fact, other parameters can also be measured using ecommerce KPIs.
Thus, we can distinguish the following types of ecommerce metrics:
When compiling a list of metrics for ecommerce for your solution, you need to adhere to the following three rules:
Is a calculation of metrics for ecommerce a single, objective source of truth about your business performance? Is it worth using them at all? There are several reasons that demonstrate the importance of measuring these ecommerce KPIs at least once a month. Let’s figure them out.
Sales analysis is the main factor in understanding how your online business develops and what its performance is. At the same time, analytics without numbers is impossible. So, calculation of ecommerce KPIs provide these numbers, creating a general picture of what is happening with your business and whether it can be objectively considered a success.
So, based on these metrics to track, you can understand if your business moves in the right direction or if your business strategy should be changed (moreover, analysis using metrics for ecommerce will help you understand in which direction this business strategy has to be corrected).
By defining the most popular products in your online store through the metrics for ecommerce, you’ll be able to identify general and seasonal trends among buyers (also, you can use Big Data for this; you can read more about Big Data trends in ecommerce here). This will create an excellent foundation to better prepare for holiday sales and promotions related to the change of seasons.
Also, with help of ecommerce KPIs, you’ll be able to understand how best to segment the audience of your online business and how to meet the needs of each of these segments.
Above we found three main reasons why the analysis of ecommerce metrics for your ecommerce solution is so important. Now, we propose you find out what these ecommerce KPIs are and how to calculate them to achieve success in your business.
The conversion rate (CR) is one of the most important metrics for ecommerce. In a nutshell, this is the share of users who completed the target action: registered, subscribed to the newsletter, filled out a form, made a purchase, etc. from the total number of website visitors. Most often, a target action means a purchase, but for the objectivity of your analysis, you can choose other actions.
The formula for calculating the conversion rate looks like this:
CR % = number of visitors who completed the target action ÷ total number of visitors × 100
Let’s take a look at the example of calculating this metric to track. If we assume that 5,000 people visit a repair service website in a month, and 500 of them ordered this service, the calculations will be as follows:
500 ÷ 5000 × 100 = 10%
In this case, the CR is 10%. That is, 10% of the total number of visitors were interested in the service offer and used it. Note that you can calculate the conversion rate for all traffic or individual channels.
In internet marketing, this is one of the ecommerce metrics that determines how effective your website is and the traffic sources you use. So, when tracking click-through rates, you can only roughly estimate the interest of visitors. At the same time, by knowing the conversion rate, you can understand how many users react to your actions, and how much targeted traffic you attract from a particular source.
Average order value (AOV) is one of the most important metrics to track retail performance that is widely used in ecommerce. It means the average amount spent by each visitor.
The formula for calculating this metric looks like this:
AOV = amount of revenue received ÷ number of orders (purchases)
In fact, AOV is a conditional concept. Marketers say that all buyers can be divided into three segments: high, medium, and low AOV. In this case, the task of the online store owner is to identify which segment has the largest number of buyers. Based on this, the marketing strategy of a particular online store can be built.
AOV is also one of the most important ecommerce KPIs that define customer satisfaction with the services and products of a particular online store. In addition, it may indicate the degree of literacy of the company’s pricing policy, the purchasing behavior and loyalty of users, the effectiveness of the marketing policy, and even the psychological portrait of the average buyer.
Note that this is not an independent metric to track, since, for example, the marketing policy of a particular online store may develop in the right direction; however, the website itself may have flaws that repel customers (for example, with usability, design, ease of product search, response time to customer questions, etc.). Therefore, analytics involving this KPI should be comprehensive and imply the use of other ecommerce metrics.
The definition of customer lifetime value (CLV) KPI is simple: the value a customer will bring to your business over time.
A simple CLV model can be calculated using the formula:
CLV = average annual profit per customer × average customer retention
In particular, you can use CLV to see how much money you can spend to acquire a client without losing your business. The fact is that the cost of attracting a customer can exceed the income from the first purchase, so you should understand whether this customer will continue to pay in the long run. A customer lifetime value calculation can give you the answer to this question.
CLV also allows you to segment customers based on value. Thus, you will be able to understand which of your customers belong to the VIP segment, and who can regularly receive gifts and special offers to increase the chances of retaining them. At the same time, you will be able to plan upsells for lower-value customers to increase their CLV. By the way, such segmentation allows business owners to provide an individual approach for each individual customer.
Customer acquisition cost (CAC) shows how much money a company spends on attracting one customer. This metric helps evaluate the effectiveness of advertising channels and the profitability of the entire business.
Here’s how to quickly calculate CAC:
CAC = advertising costs ÷ number of attracted customers
Advertising costs include the cost of all marketing: for example, context, targeting, bloggers, and even outdoor billboards.
Note that sometimes advertising costs include indirect costs: salaries of marketers and content managers, website costs, and creatives made by freelancers. However, these costs are very ambiguous values, so it is better not to take them into account when calculating CAC, but subtract them from the difference between the profit from the customer and the cost of attracting him.
Comparison with another metric, CLV, will help you evaluate CAC.
In particular, using the ratio of CAC and CLV ecommerce metrics, you can understand whether you pay too much for attracting customers. In theory, CAC should not be higher than CLV, otherwise, the business will not pay off.
In practice, the ratio of CAC to CLV should be estimated based on the administrative costs and the specifics of your business (namely margins, number of repeat sales, and sales cycle). To ensure that your business is profitable, the more administrative expenses you have, the lower the CAC in relation to CLV should be.
Your visitors may leave the website by abandoning their carts at different stages of their customer journey. To understand how this affects your business, you need to calculate the corresponding ecommerce metrics. Its formula looks like this:
SCA = number of purchases made ÷ number of carts created x 100
Many online store owners consider the fight against abandoned carts to be their main task and devote an enormous amount of resources to this. Luckily, there are plenty of tactics and personalization strategies that can help you minimize cart abandonment and thus increase your profit (for example, through increasing user confidence by providing security certificates, allowing payment without mandatory registration, eliminating hidden costs such as shipping, displaying flickering notifications asking users to complete the purchase process, offering personalized coupons and discounts, etc.).
In particular, work in this direction should begin with tracking and analyzing the SCA KPI. Also, you may find it helpful to divide your total score into cart abandonment and checkout abandonment to refine your sales strategy.
As for the optimal values of this KPI, they largely depend on the type of device from which the customer visited your website. If we average acceptable values, then they are in the range of 70-85%: while the average value of this metric is 69.99 percent, it’s higher for mobile solutions and can reach up to 86 percent. Barilliance argues that the problem with this lies in the size of the screen that the potential buyer interacts with: the smaller it is, the less likely it is that a purchase will be made. For business owners, this means that even a seemingly high SCA is not an indication that something is wrong with their websites or with their marketing strategies. It’s worth suspecting the presence of problems only if the fluctuations occur in the range of 95-100%.
When CLV is one of the important ecommerce metrics for highlighting the most promising segment of your customers in order to focus on increasing their loyalty, then the repeat customer rate (RCR) is a measure of how good a customer experience consumers get while interacting with your website. In fact, this is the answer to the question: is your product or service of sufficient quality to pay for again and again?
The RCR is calculated quite simply: for this, you need to find out the number of buyers who made a repeat purchase. This can be done with the following formula:
RCR = number of loyal customers ÷ total number of customers x 100
As for the optimal value of this key metric for ecommerce, it ranges from 20-30%. If your score is above this range, you should start expanding your customer base, if below it, you have to try retargeting to bring back one-time customers. The second option is rational, at least for the reason that attracting new clients is always more expensive than bringing back old ones.
The bounce rate (BR) is a metric that reflects the number of website visitors who leave it after opening a page without taking any targeted action. The indicator is calculated as a percentage of the total number of visitors. The optimal bounce rate for an ecommerce website ranges from 20-45%, but the left limit can be lower.
How does it work in practice? Let’s look at an example: in a month, 300 users visited the website, 150 of which performed targeted actions: moved to another page, filled out a form, placed an order, etc. The remaining 150 users immediately closed the website. As a result, the bounce rate is 50%.
It’s also important to be able to distinguish between exit rate and bounce rate ecommerce metrics. The exit rate is the percentage of views of a particular web page, the last one in a session. In turn, the bounce rate is the number of sessions where users only viewed a particular web page divided by the total number of sessions that started with that page.
All in all, these key metrics for ecommerce help analyze the work of the website, as well as the behavior and activity of visitors. A too-high BR results in problems such as:
Finally, you should remember that the number of bounces of a web resource affects its ranking in search engines. Search engines take these key metrics for ecommerce into account when calculating the rating: if the bounce rate is low, then the website is interesting for visitors, and it can be placed in the top positions in the search results.
The BR calculation is especially important for multi-page websites. And conversely, if a visit to your web resource does not involve transitions or mandatory actions, then the bounce rate is not critical.
Net promoter score (NPS) is one of the key metrics for ecommerce that show how much users love or hate your online store. The NPS calculation is based on user responses on a scale with points to the question, “Are you ready to recommend the company to friends?”
To calculate NPS, you do not need to do a huge amount of work, and this is a colossal benefit. Here’s how it goes:
Here’s how to decipher the NPS scale:
Finally, to calculate the NPS key metric for ecommerce, you will need to subtract the percentage of detractors from the percentage of promoters. The result of the calculations will vary from -100, when everyone hates your business, to 100, when everyone loves it.
So if your NPS is:
Don’t forget to re-survey. The optimal time interval for each business is different. In particular, for an online store, this can be effective after each purchase. Thus, if the indicator stands still from one survey to another, it’s time to do something to boost it.
Click-through rate or CTR is another essential KPI from our list of key KPIs for ecommerce sites. It’s often calculated automatically by popular ecommerce CMSes, but you should also be able to calculate this metric manually.
Using the CTR key metric for ecommerce, you can determine the effectiveness of an advertising campaign, in particular, the relevance of contextual ads and banners to the needs of the target audience. CTR can be applied to absolutely any tool for attracting traffic, whether it’s a link with UTM tags, a snippet in the search results, or an image-text ad. A prerequisite for calculating this KPI is to know the number of impressions and clicks.
For instance, to calculate the click-through rate, use the following formula:
CTR = number of clicks ÷ number of views ÷ impressions x 100
This indicator is applicable to the evaluation of the effectiveness of the entire campaign and a single advertising tool. Accordingly, the higher the click-through rate of a banner or ad, the more effectively relevant traffic is generated to the landing page.
For example, on the Google search engine, ecommerce projects typically receive a CTR of 1.66% for search ads and 0.45% for display ads. For email, the average CTR is about 2%.
The next important KPI for your online store is store sessions by traffic source, which determines the number of visitors to your online store that come from a specific traffic source.
Typically, the most profitable traffic sources include:
Thanks to these KPIs you can objectively evaluate the effectiveness of each of the marketing channels and improve work with those that have insufficiently high performance indicators.
This KPI is often automatically calculated by the popular ecommerce CMSes, but you should understand its importance and how it works on your own.
In essence, these KPIs for ecommerce sites display the number of visitors to your online store using a particular type of device. Typically, these devices are segmented into three groups: mobile, desktop, and tablet.
In particular, if the vast majority of your customers use mobile devices to interact with your ecommerce solution, you will have to pay attention to improving the user experience for this particular group of users, because, in the long run, this can increase conversions and boost your income level.
This is another popular metric that shows the main geographic locations of your customers. This is important for the formation and optimization of marketing strategies for local advertising. In practice, manually calculating these KPIs for ecommerce sites is a time-consuming process. Therefore, if your website engine allows you to do this automatically, please do not neglect this data.
Defining top products in terms of sales plays a huge role in the formation of a successful business strategy. Such products should be in stock in high quantities, and the cost of them may even be higher than that of your competitors.
Thus, if you have this value at hand, you will be able to plan the optimal threshold for your inventory and thus provide a top-quality service for your customers.
This KPI determines the balance of your goods in stock at the end of the month. Typically, online business owners use this data to offer discounts and promotions to their customers, as well as to calculate the actual cost of goods in stock.
Average inventory sold per Day ends up on our list of metrics for ecommerce. Thanks to its calculation, you can understand how many goods you sell on average per day. By the way, the most advanced CMSes offer more detailed analytics, also providing data on the types of goods sold.
We hope that now you will be able to select the optimal set of metrics for ecommerce for your business solution to monitor its performance. Indeed, knowing the meaning of key KPIs, you can understand whether your online business is succeeding or if there is still work to be done to achieve it. If you’re interested in creating your own online store from scratch and ready to attract the best specialists for this, feel free to contact us. You can also get acquainted with our portfolio with case studies in the ecommerce sector to get a more comprehensive vision of our expertise.
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