Ecommerce managers and performance marketers are much more fortunate than their bricks and mortar predecessors: we have a world of data at our fingertips. And while numbers alone can’t tell us anything, ecommerce KPIs (informed by metrics) are a key ingredient to both measure and improve your performance.
In this article, we’re sharing the whole recipe.
Metrics are a system of measurement that are (usually) expressed numerically.
With the right metrics (also called KPIs in this context) you can know:
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But more important than the metrics themselves is having an accompanying strategy. That will tell you what to track, and, most importantly, what they suggest about the performance of your site.
When you add strategy to your metrics, they become KPIs, or key performance indicators. They’re aptly named since they do just that: they define the metrics that are key to indicating your brand’s performance. That means KPIs are likely to include metrics, but that not all metrics are necessarily KPIs.
For example, if your focus for Q1 is on conversion rate optimization (CRO), session duration is an available metric that is unlikely to be a KPI. In this context, session duration has no direct connection to achieving your goal.
Just as not all metrics are KPIs, not all KPIs involve (quantitative) metrics or even numbers. Performance marketers may shutter at the thought that some things escape the measurability of actual numbers. But there are other, more qualitative methods of measuring performance too.
We’ve so far discussed “improving performance”, but in the context of ecommerce we can be much more precise. Improving the performance of an ecommerce website generally means achieving: an increase in sales, an increase in profit, or both.
This is a bit redundant, as this is the core purpose of KPIs, but if goals are important than so is measuring them and tracking them properly. Identifying a set of KPIs can tell you, quickly, how well your site is performing in terms of sales and profit– and more specific set sub-goals.
For example, as a marketing goal, you may want to increase visits from organic social because you have observed that these visits have a higher conversion rate, so doing so would be an efficient way to increase sales.
A perennial hot topic. Without benchmarking your ecommerce KPIs, you can only know how you’re performing according to your own (absolute) figures. That means you can determine if your website is profitable and if your marketing strategy is generally “working”.
But what if you want to know if your performance could be better, and by how much?
For a more precise understanding of your weak and strong points as well as your growth potential, you need to know the ecommerce metrics of your competitors.
If ecommerce metrics and KPIs beg the question, then ecommerce benchmarking provides the answer. Like, what is a “good” AOV?
What you really need to know is what’s the average AOV for ecommerce stores in my industry. Benchmarking means comparing your KPIs to others’ so that you can situate your own performance– above or below standard.
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Benchmarking KPIs can also help you to prioritize your action items. If your bounce rate is best-in-class, you may want to focus on more urgent areas for improvement. And, prioritization will ensure your resources are not wasted.
Regarding more informed decision-making, KPIs give your intuition a break and take the guesswork out of optimization.
For example, if you’re torn on call-to-action copy, comparing click-through rates (or CTRs) can tell you which is performs better.
Finally, how will you know how far you’ve come if you don’t know where you started from? And, which steps in between brought you forward and which missteps held you back?
A growth strategy by definition requires an accurate understanding of where you stand along the way. Ultimately, if you don’t understand the outcomes of your strategies, you can’t tailor them for bigger and better results. Consistently evaluating and responding to your KPIs enables you to stay on the right path for growth.
Many marketers find the funnel to be a helpful analogy for tracking the consumer journey, so we’ll use that model here.
If you haven’t employed a marketing funnel before, consider this your crash course: the shape charts the customer journey toward the intended goal (conversion).
An effective ecommerce marketing strategy loses fewer shoppers along the way– turning a higher proportion of prospective buyers into customers, then evangelists.
Sessions are a volume metric similar to visits, but distinct. It might be helpful to think of sessions as “stays”: they report the period of time when a user is on your site. In Google Analytics, sessions are closed after a period of inactivity of thirty minutes. That means that inside the thirty minute window, if the same user closes and opens your site several times, this is considered part of the same session. And, it means that if the user continues to be active on your site for a longer period of time, this is again counted as a single session.
This important distinction means that sessions are a bit more useful than visits as a traffic KPI because it is a more intuitive way to think about time on our site. If you have a friend over for tea but they exit our home to look at the garden, we wouldn’t count the next time they enter through the door as a separate stay. That’s how sessions work.
The following sources tend to make up the bulk of sessions for ecommerce sites, but this varies quite a bit based on industry.
There are a number of ways to look at sessions to your ecommerce site, but overall, they are a measure of success, or KPI, for your awareness and consideration strategies.
Depending on your industry and marketing mix, you may also want to track sessions from:
In all cases, increasing sessions by source means getting more clicks on your content– with an important caveat: not at any cost. You only want to have more sessions if they are meaningful, i.e. if they are likely to result in a sale. It can be tricky to define which sessions are “meaningful” but one way to measure is with on-site activity. In particular:
Bounce rate is a weighted metric that defines the percentage of visitors who exit your site after viewing only one page.
What’s the difference between a volume metric and a weighted metric? A volume metric is an absolute measure. In the context of ecommerce KPIs, volume metrics usually express either the total number of times some activity is performed (like sessions) or the total number of users who performed some action (like visitors). A ratio or weighted metric is a relative measure. In the context of ecommerce KPIs, a ratio metric involves dividing one (volume) metric by another to find the percentage of users who performed some action. Expressing metrics in ratios is helpful (and sometimes necessary) to contextualize volume metrics. For example: tracking “bounces” by volume would not be so helpful. For this metric to make sense, the context of what percentage of sessions “bounced” is required.
What’s the difference between a volume metric and a weighted metric?
A volume metric is an absolute measure. In the context of ecommerce KPIs, volume metrics usually express either the total number of times some activity is performed (like sessions) or the total number of users who performed some action (like visitors).
A ratio or weighted metric is a relative measure. In the context of ecommerce KPIs, a ratio metric involves dividing one (volume) metric by another to find the percentage of users who performed some action.
Expressing metrics in ratios is helpful (and sometimes necessary) to contextualize volume metrics. For example: tracking “bounces” by volume would not be so helpful. For this metric to make sense, the context of what percentage of sessions “bounced” is required.
Typically, a high ecommerce bounce rate could indicate that something isn’t quite right for your visitors.
It might be helpful to you to use bounce rate as a shorthand KPI for interest, or more accurately, lack thereof, in your site. Ask yourself how often have you landed on an ecommerce site you were interested in but failed to view more than a single page.
If your bounce rate is high, it’s worth investigating why. the longer people stay on your site, the more familiar they get with your brand and its offerings, and the more likely they are to convert.
If after auditing the basics, you are still scratching your head, it’s worth diving into possible reasons why by having a closer look at user behavior.
You may also consider pages per session a meaningful traffic KPI to gauge users’ interest. However, we won’t dive into that metric in detail here because optimizing your site to increase pages per session is not always a good thing: you don’t want to encourage users to browse multiple pages when fewer would be more efficient.
This highlights an important point about metrics and optimization: it’s important to look at the big picture and consider performance holistically or at least in the context of other KPIs. When we hyper focus on individual metrics, we may miss the forest for the trees.
For example, if you want to increase your ad performance by enhancing click-through rate, you may include a more flattering (even deceptive) image of your product. However, those clicks will only cost you when users bounce, not finding what they expected on your landing page.
Forget “cash”: in ecommerce, conversion rate is king.
Conversion rate is a weighted metric that shows the percentage of total visitors on your ecommerce store that are “converting”— making a purchase.
This metric bridges the gap between website traffic and sales. It shows how effective your website is at encouraging visitors to take action or literally the rate at which users convert. A higher conversion rate means you don’t need to get as much traffic to yield the same number of sales.
Conversely, a low conversion rate points to inefficiency in your sales funnel, suggesting sales opportunities (i.e. visits to your site) are not being converted to sales as often as they should. It is possible to have high conversions (or sales) and a low conversion rate.
For example, Black Friday may be the day with the highest sales for the year– driving conversions through the roof. But, if compared to the relatively high volume of visitors on that day only a small percentage of users made a purchase, that would result in a low conversion rate.
And, more visitors to your ecommerce website is likely to increase conversions, but unlikely to have an effect on the conversion rate.
Conversion rate is a shorthand for the effectiveness of your ecommerce website as a sales tool and points to the overall efficiency of your marketing funnel. A high conversion rate validates that you are reaching the right audience– because they’re purchasing your product. And, because it doesn’t depend on increasing your volume, improving your conversion rate is the best way to quickly increase your sales.
Since we can assume the user is interested in a product like yours and that they accept the price and basic listing information (shown on the ad or listing), we can narrow our focus a bit.
Also called conversion rate optimization, or CRO, here are a few quick tips to get you started on improving this ecommerce KPI. The coles notes is: eliminate obstacles to purchase.
Ultimately, not every user will convert and it’s normal to browse, but you want to make sure that you’ve made the process as simple and as transparent as possible for those who are interested. Learn more about conversion rate optimization here.
If conversions are set to sale completions, then the number of conversions/transactions is the volume metric counterpart to conversion rate. Simply: the total number of conversions.
In the context of ecommerce KPIs, transactions (or conversions) are sales, so the case for tracking them is self-evident. But how is it different from tracking conversion rate?
Well, you can increase transactions by improving your conversion rate, but you can also increase the number of transactions by increasing volume. Or, widening the top of your marketing funnel.
Of course, there’s no silver bullet to increasing sales– this is likely to be the collective goal of your entire marketing strategy. So, we won’t dive into too much detail on how to achieve that here.
However, one of the lowest hanging fruits for increasing the volume of transactions is to increase the frequency of transactions from your existing customer base.
Ultimately, increasing the number of transactions from your existing customer base goes hand-in-hand with listening to your customer and investing in customer satisfaction. More on that in a moment.
AOV or average order value measures the average amount of money your customers spend per order. For example, if you made $100 from four sales in one day, then your AOV is $25.
Conversion rate, transactions, and average order value are the ecommerce KPI trifecta of boosting revenue. Like conversion rate, increasing average order value can increase your ecommerce profitability without having to increase volume.
And, the greater your AOV, the more you can spend to acquire a new customer.
Beyond increasing profitability, monitoring AOV can help you learn more about your customer by observing which trends, promotions, or seasonal changes influence buying habits. A more in depth understanding can help you offer a better shopping experience, and bring in more revenue.
Average session duration is the average amount of time that users spend on your website.
Essentially, session duration is bounce rate’s “good” twin. If bounce rate should be low, then session duration should be high. As such, decreasing bounce rate and increasing session duration have similar solutions.
Optimizing for this KPI assumes that more time on your site means more interest in your site, and that more interest in your site means a greater likelihood of purchase and, especially, repeat purchases.
But, as we covered earlier (regarding pages per session) this is not necessarily a one-to-one. So while it is certainly a relevant data point, this metric should be taken with a grain of salt.
Increasing session duration in a meaningful way comes down to making the experience of being on your website more pleasant for the prospective consumer and keeping maintaining their interest. That’s much easier said than done.
Beyond the basics (see: decreasing bounce rate) here are some ways to encourage session duration in a way that stands to improve customer satisfaction.
Customer ratings are a number score assigned by the (usually) verified purchasers only, stating their overall satisfaction with the product purchased– usually on a scale of one to five.
We tend to think of ratings as the quantification of customer satisfaction. Reviews are the qualitative measure of customer experience that typically accompany ratings, in text format.
While both ratings and reviews are usually intended to be specific to the product, anyone who’s read a few understands that it’s not uncommon for users to get creative; that the overall buying experience is likely to have a significant impact.
There are two main ways to optimize reviews: increasing your average review score and increasing the number of reviews.
We all know how to improve the first, and there’s no way around it: providing exceptional customer service and a quality product is the best way to avoid negative reviews and encourage a high review score from your customers.
However, perfectly satisfied customers are less likely to leave reviews, while dissatisfied customers are much more likely to do so. That unfortunate fact can negatively skew your products rating, which can have a powerful impact on conversion rate.
The same tips can reduce return rate. You never want to make a sale at the expense of customer satisfaction, this will only cost you more in the long run.
You might have noticed a lot of the common challenges and solutions individual KPIs face are similar, and that’s for good reason. Increasing engagement and revenue is about listening to your customer and improving their overall experience with your brand.
Finally, a performance indicator that needs no introduction. Of course, any business will have a close eye on revenue. But in the context of ecommerce KPIs, it might be helpful to think of revenue as a litmus test for your marketing funnel. Since both primary goals of ecommerce, increasing sales and increasing profit, culminate in an increase in revenue, it is both a goal and an ecommerce KPI. More on that:
If your revenue is suffering, your KPIs can reveal why. Finding the weak points in your metrics will reveal the holes in your marketing funnel. For instance:
Conversely, optimization at each step should be validated by an overall increase in revenue– suggesting that your strategy is “working”.
In sum, your ecommerce goals and overall strategy will determine which metrics are considered key performance indicators. And while the selection will vary depending on your specific strategy, the following seven are fundamental:
That means tracking and optimizing each of these is the recipe for an increase in the ultimate KPI of (increasing):
In addition, tracking ecommerce KPIs will allow you to:
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