How do you measure the success of a website? It’s an important question with a seemingly endless amount of answers, each one dependent on your business model, your industry, and the primary goals of your website. But for most websites (and eCommerce ones especially), the chief benchmark is conversion rate.
As the reigning eCommerce KPI (that’s a key performance indicator), the conversion rate’s popularity lies in its versatility. “Conversion” can mean anything—a visitor subscribing to a newsletter, filling out a contact form, making a purchase—it all depends on what action you’re persuading the user to take.
And while conversion rate is an excellent barometer for your website’s overall performance, it’s far from the only metric you should be diligently recording and analyzing. To dive deeper into your site’s customer experience, other KPIs are going to be more indicative of pain points and problem areas than conversion rate will.
WHAT ARE KPIS?
KPIs are measurable values that organizations use to determine how well they are performing against established business goals and objectives. KPIs provide a quantifiable way to discover how adept your business is at turning opportunities into successes. A KPI offers an objective perspective on how efficiently and effectively your business is meeting its goals.
KPIs are generally agreed upon prior to launching a project or initiative. If your eCommerce business is rolling out a new product or service, you might establish KPIs around its performance in the marketplace. However, KPIs can get infinitely more nuanced than that, incorporating all elements of your business. There are specific types of KPIs tied to these elements that inform the overall performance of your eCommerce business.
- Marketing KPIs help your organization determine how well your marketing and advertising efforts are performing. With well-defined KPIs, marketers can analyze which products are selling, why they are selling, what types of consumers are buying them, and more. Insights gleaned from these KPIs can help steer your marketing strategy—or inform how you develop products and services.
- Sales KPIs assess your conversions and revenue to determine how your company is performing in the marketplace. In addition to monitoring overall sales, businesses can refer to shopping cart abandonment rate, average profit margin, and more. These KPIs inform your overall business strategy, helping you to streamline production efforts, improve products, and build more efficient paths to purchase.
- Customer satisfaction KPIs tell you how adept your customer service team is at providing an excellent shopping experience for your buyers. Key metrics here include the buzzworthy customer satisfaction (CSAT) score and the net promoter score (NPS). These KPIs inform how your business treats its customers, and how effective you are at creating return customers and brand ambassadors.
- Order fulfillment KPIs gauge how efficient your business is at distributing your products to purchasers. They can be used to analyze your entire order management process to find any inefficiencies or opportunities for improvement to ensure you save time, money, and energy getting your products to satisfied customers in a timely manner.
WHAT IS THE DIFFERENCE BETWEEN METRICS AND KPIS?
While KPIs are quantifiable assessments of your company’s performance, they differ from traditional business metrics. Metrics are values that monitor the current state of your business and its efforts. They give you an accurate and up-to-date picture of how your business is operating at a specific moment in time. KPIs, on the other hand, are tied to specific business goals and if those goals have been achieved. KPIs are aspirational and serve as a compass to guide your business to future success. KPIs are the metrics that help you determine what good truly looks like for your business.
THE ECOMMERCE KPIS TO TRACK BESIDES CONVERSION
While conversion rate is a KPI that’s fundamental to the success of your eCommerce business, it doesn’t tell the full story. Think of conversion rate like the score at the end of a basketball game. It may be the most important statistic, but if you want to see where and how your team can really improve, you have to look at a slew of other stats: assists, turnovers, steals, rebounds, and more.
Where did your marketing efforts fail to attract new customers? Are there opportunities for your customer service team to provide a superior customer experience? Did inefficiencies in your order management process result in late deliveries or other issues? KPIs can help you assess the more nuanced aspects of your business that ultimately impact how you convert.
So what are those other eCommerce KPIs in the online retail game? As a leading eCommerce web design and development company, Codal has seen it all. We’ve put together a collection of all the essential eCommerce KPIs your business should be tracking.
AVERAGE ORDER VALUE (AOV)
Often abbreviated as AOV, the average order value can be calculated by dividing your total generated revenue by the total number of orders. It’s a simple equation that offers a wealth of information. Tracking AOV can reveal your customer’s average price range, and therefore clue you into which of your products may be overpriced or underpriced.
Many eCommerce companies leverage AOV to uncover potential areas to upsell or promote other products too—and if you have multiple eCommerce channels, AOV is an excellent indicator of which ones are the most profitable.
SHOPPING CART ABANDONMENT RATE
Differing from bounce rate or exit rate, shopping cart abandonment hones in on arguably the most crucial stage of the eCommerce purchase cycle: checkout. A common occurrence for all online stores (some studies found the average cart abandonment rate for eCommerce companies is nearly 70 percent), cart abandonment refers to a customer loading up their shopping cart, only to leave the website before completing the transaction.
Its importance is self-explanatory: your cart abandonment rate is quantifying that final obstacle in your marketing funnel. A high cart abandonment rate is a symptom of a poor checkout process, something that be easily remedied by an eCommerce web design company.
Churn happens when your customers stop purchasing your products. Churn rate indicates what percentage of your customers churned over the course of a specific time period. While customer acquisition represents an essential part of the success of your eCommerce business, retaining customers is just as vital. Looking at the churn rate can help you understand why customers may cease buying your products.
Churn rate is a lot easier to calculate in subscriber-based enterprises, like streaming platforms or meal kit providers. But its principle can successfully be applied to general eCommerce businesses as well.
CUSTOMER ACQUISITION COST (CAC)
Customer acquisition cost (CAC) is the sum total of all expenses to gain a new customer, including costs associated with the actual products or services purchased by said customer. If your CAC exceeds your AOV, your business is in trouble. It means you’re spending more to bring in new customers than those customers are purchasing. As a result, you’re not turning a profit.
This KPI is used to help eCommerce businesses understand how to adjust and refine their marketing efforts to be more efficient. Some businesses may find it effective to operate with a higher CAC in the short term—think limited time offers, special introductory pricing, or other deals. While this results in slimmer margins on products sold, it can lead to higher customer lifetime value (more on that below) in the long run.
CUSTOMER LIFETIME VALUE (CLV)
Acting as an estimate of the total amount of money each customer will spend at your online store, customer lifetime value, or CLV, helps set a ceiling for how much you can afford to spend on acquiring new customers. As a general rule, your average customer lifetime value should always be higher than your average cost of customer acquisition.
Unlike the other metrics we’ve mentioned, CLV is a bit trickier to calculate. The basic formula is to multiply the average order value (AOV), purchase frequency, and time period, but even those variables can be difficult to pin down. The time period (“How long will my customer shop at my online store?”) can be easier to discern for some eCommerce sites than others. Some eCommerce companies, like BigCommerce, report that on average this number is three years.
This one is fairly straightforward. It’s the total number of people visiting your eCommerce site. But while this KPI may seem obvious, it’s essential to the overall success of your business. Simply put, the more visitors you can drive to your eCommerce site, the more likely you are to convert those visitors into paying customers.
Boosting website traffic should always be top of mind for eCommerce businesses. Monitor your traffic using Google Analytics and look for key sources of traffic. How are people arriving at your eCommerce store? Are they coming straight from Google? Are they being linked from social media posts? Having an idea of who is coming to your site from where can be invaluable when crafting and refining your marketing strategy, and looking for ways to enhance your brand awareness.
Bounce rate refers to the number of visitors that leave your eCommerce site after viewing just one page. A high bounce rate means your eCommerce isn’t offering much to entice visitors to stick around. CXL puts the average bounce rate around 45 percent for eCommerce websites.
If your site has a high bounce rate, perhaps it’s time to consider optimizing your product pages, streamlining paths to purchase, and improving your content. Consider how a UX audit may help establish an improved relationship with your customers.
REVENUE PER VISITOR (RPV)
This provides you with an average of how much a customer on your eCommerce site spends in a single visit. It’s calculated by dividing revenue from a certain period of time by the number of visitors to your eCommerce site during that same period.
When used in conjunction with CAC, RPV can help you determine how successful your efforts at garnering new customers are. A positive RPV shows that the right customers are accessing your site and connecting with products that are relevant to them. A negative RPV can indicate that your customer acquisition efforts are not netting the right visitors for your products, or that there is an issue with the paths to purchase on your site.
CUSTOMER SATISFACTION (CSAT) AND NET PROMOTER SCORES (NPS)
Both customer satisfaction (CSAT) and net promoter score (NPS) KPIs have seen rapid adoption by eCommerce businesses seeking to quantify their customer experience. CSAT scores are typically calculated by collecting customer feedback and responses to basic questions like, “How happy are you with your shopping experience?” NPS measures both the number of satisfied customers—and their average degree of satisfaction—by simply asking customers how likely they are to recommend your site to a friend or colleague on a scale of 0-10.
While both methods gauge how satisfied customers are with your site, NPS tends to be the more widely accepted of the two. It’s standardized, so numerous industry benchmarks are available. This makes it easy to chart a course for success and outline approaches to boost your score over time.
CUSTOMER RETENTION RATE (CRR)
Did your customer enjoy their shopping experience? How likely are they to return? That’s what customer retention rate represents, making it an extremely useful metric for monitoring the overall performance of your eCommerce site, and even quantifying customer loyalty.
Measured over a certain time period, CRR also serves as a benchmark for how many active returning customers your site is attracting. Easy to calculate, the customer retention rate is simply the percentage of customers kept relative to the amount you had at the start of that time period.
HOW TO DETERMINE WHAT KPIS TO TRACK?
ECommerce KPIs serve as guideposts to help steer your online store to success. Branching out beyond simply setting goals tied to conversions will help you gain a more nuanced understanding of how to boost your business. But how do you know what KPIs will be most relevant to your business in the long run?
It’s important to understand a few factors when selecting KPIs for your business. First, consider what industry you operate in. Then, determine what stage of your business lifecycle you’re in. Are you a high-growth startup, or a well-established mainstay? Lastly, review both your long- and short-term business goals. Where do you want your business to be next month? Next year? In the next five years?
Say you are a subscription-based food delivery service. KPIs like churn rate and net promoter score (NPS) are likely going to be more relevant to you than shopping cart abandonment or average order value (AOV). If you’re a relatively young eCommerce site that’s entering an established market, you may gauge success based on website traffic or customer acquisition cost (CAC). If you’re seeking to become the top brand in your industry in the next 2 years (how ambitious of you), perhaps KPIs like revenue per visitor (RPV) and customer lifetime value (CLV).
Take a long, hard look at your business and determine what success really looks like. Then, create actionable, relevant KPIs and use them to inform important decisions.
Like the old adage says, “If you can’t measure it, you can’t improve it.” If you can’t monitor quantifiable performance metrics, how do you know where the pain points in your customer experience are located? How do you know where your online store’s strategy succeeded so that you can replicate it in other channels?
That’s why key performance indicators are so important. And while conversion rate may be king, the lesser KPIs cannot be ignored. Together, the collecting, monitoring, and testing of this invaluable data helps to inform not just the customer experience of your website, but your business’ larger digital strategy.
Great customer experience design is data-driven. Want to learn more about using KPIs to improve your eCommerce store? Consult with the experts. Talk to Codal today.