The Basics Every Online Merchant Needs To Understand In Order To Measure Their Performance

Key Performance Indicators (KPI’s) are the metrics by which an eCommerce store is measured for success or failure. Example KPI’s may include the Number of Unique Visitors, Referral Sources, Gross Margin, or even Average Order Value. By targeting, studying, and analyzing the KPI’s important to your business, you will be able to notice possible trends, spot potential problems, or uncover hidden opportunities that otherwise would have gone unnoticed. You’ll be able to understand where you stand, what got you there, and what you’ll need to move forward in a successful manner.

In sum the KPI’s themselves are not important. Rather what the KPI’s allude to and where they force managers to investigate further is where their value is derived. KPI study raises questions for managers that they may not have otherwise had the foresight or knowledge to ask beforehand.

For example, you may find that site traffic is down. Rather than assuming first it’s because of the slow market, a poor review you received, or people loosing interest in your product, look at other KPI’s that perhaps can help guide your investigation. If your discussing traffic to your site, what questions around low site traffic are important to ask?

The answer is that there are at least three parts to be concerned with:

1.) Who is traveling to your site (Demographics)?

2.) How are they traveling to your site (Which platform/browser/source did they use)?

3.) Where are they coming from (Referrals: Direct, Search, Paid, etc.)?

Maybe you find that there is a big problem on your mobile site and many users browse your website on a mobile device. If Referrals was one of your tracked KPI’s, you would have seen that problems persisted on the mobile site based on its usage data. If you watched this KPI close enough, you might even notice the problem had occurred within the first day which means there wouldn’t have been as big of a problem to solve. Clearly choosing the right set of KPI’s to study, and the frequency of that study, is important.

Every business will track and measure their own set of unique and specific KPI’s. That said, it should be apparent that figuring out which KPI’s are important to your business is worth figuring out. Once you have the KPI’s you know you’ll be checking daily, weekly, and monthly remember the manager must remain diligent when checking and studying the data. There’s no point in tracking something that is not watched or studied. Furthermore, the temptation to be lazy will be highest once the data has not thrown you anything interesting in a while. Just because something has not happened does not mean it never will. Remain on guard at all times. If you become lazy, whether it be a problem or an opportunity, something will inevitably slip through the cracks.

Warning

In the example about traffic above, most managers will certainly be tracking their Traffic, which made that an easy example to give. But there will come a time where a problem has arisen and you will not know exactly the questions to ask to find an answer or solution. Remember that any questions you have about anything to do with a website has an application where data can be gathered and analyzed. Analytics can come in many forms, whether you receive it from Google Analytics, Facebook Insights, Moz, or even still-developing tools such as Klout. When collecting data and studying KPI’s, it is all a matter of the managers preference how they receive the desired information.

Dig deep into the areas surrounding your existing problems. Hope to find other problems and don’t become discouraged when you do. Finally, and most importantly, don’t ever accept the first answer or solution that presents itself… there may still yet remain a better one. “Question Everything” is the staple motto every manager and marketer should live by when dealing with eCommerce. The reason simply being that there is so much potential information and data that can be gathered. eCommerce and marketing statistics are so detailed and intricate that it’s quite simple to be led astray because something starts to make sense… 1+1=2 right? But so does .5 + 1.5, 1.01 + .99, 0+2, .5 + .5 + .5 + .5, and so on. The idea being that unless you look into and study your KPI’s, which there will be a lot of, you will never truly understand what is happening or why it’s happening. Be diligent and be mindful. The rest will fall into place… and if it doesn’t you’ll at least be better prepared to catch what fails.

Typical eCommerce KPI’s Worth Watching

Now we made it very clear that no two businesses will be concerned with exactly the same set of KPI’s. However, as is for anything else, there are the basics which for the most part are universal to most businesses. The reason we try to make it clear that no two KPI sets are the same is to not dissuade the reader from investigating their business further. Don’t simply use the KPI’s listed below and believe you’re doing a proper job. There are certainly going to be unique and potentially obscure KPI’s that you’ll be interested in specifically dependent upon your industry and service/product offerings. Often times, some of these KPI’s are more important than the basics ones are. But all of them are worth studying, and it is this point that we hope to drive home. That said, let’s discuss what some of these basic KPI’s are and the reason they should be monitored.

Unique Visitors:

If you are unable to attract new users to your website, you’re likely going to have a hard time selling anything. Only so much business can be had from a limited amount of traffic. eCommerce is often times, more than anything else, a numbers game… keep them in your favor. Try to attract as many Unique Visitors as possible. The more you attract, the greater the possibility of a conversion and/or a return visit.

Total Visits:

It’s worthwhile to watch and ensure that your total number of visits is not declining overall. This combines both returning and new visitors and gives the total number of visitors that landed on your website. Remember, the quantity of traffic is not necessarily as important as the quality of that traffic. You can have a million visitors to your website, but if none of them are interested in what you offer, what value do they provide? I’d rather have 50 visitors who are engaged with my website rather than 1,000 who are not. Again, it is a numbers game but the types of visitors you receive must be quality.

Page Views:

Typically the sign of a healthy and engaging website is where total Page Views far exceed the number of total visits. It means people are actually traveling around your website. This is important to understand. You can have a healthy number of visitors, but you may realize that none of the visitors travel past the initial landing page. This can mean any number of things for the individual landing pages and is worth looking into.

New Customers:

The name of the game is to acquire New Customers. Sure total traffic and new vs. returning visitors are important KPI metrics to watch. But nothing is as important as a paying customer. Watching how your percentages for new customers change from month to month is critical. Also comparing these numbers against Returning Customers begins to teach you where all of your sales traffic is coming from. Are new customers more important than returning? Which group generates the most revenue?

Total orders per day, week, month:

Through studying the total orders you receive throughout a certain time period, you may begin to notice trends that you can capitalize on. Watch for anything with a repeating or cyclical nature. You can cash in on opportunities or safe guard against potential dangers. Obviously seasonality is important, but understanding the sales nature of your business is well worth the study.

Time on site per visit:

The time a user spends on site is literally the Standard that measures the overall quality of a website. Are users engaged enough to browse around, look through other products, or read site content? If you notice you have a very brief average time on site per visit, you can likely assume viewers are not engaged with site content. That or they find and purchase exactly what they want fast enough. But often enough that will not be the case.

Page views per visit:

The number of pages viewed per user per visit is another sign of how engaging and user friendly a site may be. How deep do your users get into your website? Time on site is in part related to the total number of pages a user visits. Obviously the more pages they views, chances are their time on site will increase as well. However that said, they are not 100% interrelated and can stand independent from one another.

Checkout abandonment:

Sales lost in one of the last possible moments in a sales cycle are important to note. What caused the user not to complete the sale? How many users does this happen to? What can be done to correct it? You should always look into the possibilities of why sales are not completed, especially when they were so close.

Cart abandonment:

If you Cart Abandonment rates are high, this typically means there is something scarring people off that they don’t first notice. Or worse yet… they don’t know or can’t figure out very easily how to check out and complete their transaction. People don’t just load up carts for the fun of it, though they may do it to find the total cost of what they were looking at.

Return rate:

A website with a high return rate signifies that the products/services you offer, and how those products/services are displayed, are appreciated by users. You want users to return to your website. It’s hard enough to get new users to visit, so once you do it’s best if you are able to keep their attention.

Gross margin:

Understanding the Gross Margin for your products determines whether or not what you are selling is profitable. It is the difference between revenue and cost of an item. Obviously you won’t stay in business very long if you are unable to sell anything at a profit.

Pay-per-click cost per acquisition:

What does it cost you to convert a user using Pay-per-Click advertising? The lower the number, the better as you will be acquiring a customer at a lower overall cost. This is one of countless many KPI’s that should be studied for paid advertising.

Pay-per-click total conversions:

How well are your Paid Advertisements performing? Do your total conversions generate enough revenue to cover the costs of using Pay-per-click advertising?

Average order value:

What is the average worth of an online order to your business? If the average is high, fewer orders may be required to keep the course you’re going. If you have a low order value, many sales are required to achieve profitability. Knowing where your business sits on this spectrum is important for strategically planning your course of action.

Facebook “talking about this” and new Likes:

Engaging with your followers on Facebook is important for keeping your brand top of mind and striking conversations with customers. Your engagement metrics are important.

Twitter retweets and new followers:

Similar to Facebook in that you are easily able to engage with users, but much less in a face-to-face way. Twitter is great for sharing your content, and hearing the “buzz” about your business.

Email open, click, and conversion rates:

If you’re running an email campaign, you have to study how they perform. Knowing how many of the recipients opened the email, actually clicked on links, and then converted on site is important for planning for future campaigns.

Referral sources: percent from search, direct, email, pay-per-click, other:

When marketing, its important to understand the referral sources for where your traffic arrives from. These numbers will be unique and specific to individual businesses, but as an average the numbers below are pretty close to what most websites witness.

  • Organic Search (Worth 70-80% of traffic)
  • Direct Traffic (Worth 1-10% of traffic)
  • Social Media (Worth 1-10% of traffic)
  • Referral Traffic (Worth 1-5% of traffic)
  • Paid Search (Worth 1-5% of traffic)

What you’ll quickly notice, and the same is likely occurring on your site, is that organic search and direct traffic make up the majority of sources where traffic originates from. If you have heavy advertisement spending, your paid search numbers will be higher. If you have a strong social media presence, your social media referral numbers will be higher. The point being, once you know where the majority of your traffic comes from, you will then know where marketing budgets will be best spent. Furthermore, if you want to increase the performance of something that has not been doing so well, you’ll know where to spend your time and focus.

By now it should be very apparent that choosing the right set of KPI’s for your business is important. But more important is the continual study, examination, and questioning of every piece of data you come across. Be thorough, be diligent, and be mindful. Leave nothing to chance and first and foremost…. Question Everything. Once you practice this for a while, its benefit quickly becomes apparent as you will learn a tremendous amount about your business and why its operating in the manner it is.