Running an e-commerce business can be an interesting journey when you figure out the best key performance indicators to watch out for. Knowing what to look out for as you run a business gives you huge leverage as you can put things in perspective without so much stress.
With over 2 billion digital buyers expected by the end of 2020 (Stat from 99 Firms), it has become important to not only position yourself rightly for sales and profiting but to know what indicators to look out for to correctly measure your sales and business growth.
In this article, we will take a quick look at the best ways to clearly understand what the best Key Performance Indicators to look out for as you grow your e-commerce business.
What Are Key Performance Indicators in E-commerce and Why Are They Important
For every business or marketing campaign, there are several things to look out for as measurement metrics to find out if you are hitting your goals.
Key Performance Indicators are the most important indicators that most accurately show whether or not you are meeting your business goals or hitting your marketing targets.
These indicators could vary from goal to goal and from industry to industry as we will look at in a moment, but first, why are KPIs so important?
Really, Just like setting goals and objectives cut across as really important, Key Performance Indicators in e-commerce are important as there are also several Key Performance Indicators to not neglect, even in marketing!
Without Key Performance Indicators, you would find it difficult to accurately figure out if your sales or marketing campaign is tending towards its goal.
Key Performance Indicators give you more information about your business.
With the data it provides, you would be able to stop making decisions based on gut feelings or blinded hunches (however right they might have been over time).
1. Understand that Key Performance Indicators Differ Per Business
You will approach KPIs with better clarity when you understand that they differ from industry to industry and from company to company.
Look at it this way: the difference between your company and another company could be anything between business goals to company traditions. In the same way, since your goals and tradition differ, your KPIs are likely to differ as well.
For instance, a real estate company out of Michigan may decide to focus on lead generation statistics so they can figure out the effectiveness of their customer acquisition campaign while a B2B security company may choose to focus on their email click-through-rate to know how effective their email marketing campaign is.
The e-commerce industry is a different world altogether and you must focus on your business and the metrics associated with the e-commerce industry.
2. Decide Your Business Goals
Every business must have a set of goals whether they be customer acquisition goals or marketing goals.
What are your business goals?
The goal you focus on per time would help you to pick the best Key Performance Indicators to monitor to figure out where you are headed.
Let’s say your current marketing campaign is focused on growing your website traffic, then it implies that some of the best goals to watch out for are Time on Site, New Vs Old Visitors, Bounce Rate, Traffic Source, etc.
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Business goals are the bedrock of campaign successes in e-commerce and until you decide in clear terms what you want from your marketing campaign per time, you would continuously grapple with unnecessary metrics that would either end up wasting your time and resources or deceiving you into believing that you are hitting your goals.
Decide what your goals are for effective performance monitoring.
3. Consider the Growth Stage of Your Business
The growth stage of your business would help you in no small way to decide what best performance indicators to measure.
The measurement metrics for a startup would differ from that of a full-blown enterprise. Some new companies would focus on idea validation and gaining visibility in their industry while others would focus on metrics like Customer Lifetime Value since they are already an authority in their industry.
Figure out where your business is at the growth cycle and measure indicators accordingly.
Some Important E-commerce Key Performance Indicators to Monitor
Let us take a look at some of the important KPIs to watch out for in your e-commerce business.
Note: These indicators are listed in no particular order.
Cart Abandonment Rate: Numerous visitors initiate a buying process but do not complete the buying by abandoning their carts.
Several factors affect cart abandonment but watch out for this critical metric as it highly informs you about your site user experience or ease-of-use.
Product Affinity: Product Affinity describes what products your customers often buy together.
This is one important metric that would help you understand the products to promote together or what products to put together as a bundle during a promotion or campaign.
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Conversion Rate: Your Conversion Rate is the rate (also measure in percentage) at which the users of your e-commerce website are buying the products you sell. To calculate this, you should divide the total number of site visitors by the number of sales you rake in.
For instance, Number of Visitors= 750 divided by the number of customers who buy your products which we would experimentally take to be 47.
Product Relationship: This metric defines products that your visitors view alongside other products.
Like a visitor who views a brown shoe and a brown leather demonstrates that there is a product relationship between a brown shoe and a brown belt. This KPI helps you when you decide to “cross-sell”.
Customer Acquisition Rate: This defines how much your business spends on acquiring one customer.
Churn Rate: Your churn rate shows how quickly customers are abandoning your e-commerce website entirely or how they are failing to renew their subscriptions.
Deciding what best to measure in your e-commerce business is the best way to stay ahead and continue growth. If you do not measure the best metrics, you would be deceived that your growth is on the right track.
What metrics have you been monitoring in your business before now? How effective have they been?