Best KPIs eCommerce Sites Should Measure
Every business founder, owner, and working professional can agree that measuring your company’s KPIs is essential to ensuring you are on the right track to performance growth. But you might be asking what a KPI is; KPIs are Key Performance Indicators that place your business in a realm of success that you can view, measure, and understand. Basically, having set KPIs that you monitor and revisit periodically is one solid way for businesses to see how they have either grown or regressed, and to track whether they’re meeting their goals.
KPIs can be used to measure the performance of a company, but they can also measure employee achievement, or the success of certain programs or projects. Your business’s intended KPIs are important to establish right away and regularly revisit to ensure you are constantly moving in a forward trajectory.
As Pearl Zhu, the author of CIO Master: Unleash the Digital Potential of It, famously wrote:
“Selecting the right measure and measuring things right are both art and science. And KPIs influence management behavior as well as business culture…The use of KPIs is meant to improve and transform the organizational performance.”
We asked business founders, owners, and CEOs what they believe are the best KPIs to have a company measure. Their answers will place you well on your way to establishing your own key performance indicators to measure progress and success. After all, the greatest way to understand where your business stands is to create solid metrics by which to measure your achievement.
These tips and tricks and recommendations from those conquering the business world will direct you to your next steps.
The founder and content chair for Fwd50 who is also the author of Lean Analytics: Use Data to Build a Better Startup Faster offers the professional advice of viewing your metrics as ratios in order to assess them in concrete rather than abstract terms.
“A good metric is a ratio or a rate. Accountants and financial analysts have several ratios they look at to understand, at a glance, the fundamental health of a company. You need some, too.
There are several reasons ratios tend to be the best metrics:
• Ratios are easier to act on. Think about driving a car. Distance traveled is informational. But speed—distance per hour—is something you can act on, because it tells you about your current state, and whether you need to go faster or slower to get to your destination on time.
• Ratios are inherently comparative. If you compare a daily metric to the same metric over a month, you’ll see whether you’re looking at a sudden spike or a long-term trend. In a car, speed is one metric, but speed right now over average speed this hour shows you a lot about whether you’re accelerating or slowing down.
• Ratios are also good for comparing factors that are somehow opposed, or for which there’s an inherent tension. In a car, this might be distance covered divided by traffic tickets. The faster you drive, the more distance you cover—but the more tickets you get. This ratio might suggest whether or not you should be breaking the speed limit,” says Alistair Croll, Founder and Content Chair of Fwd50.
“Your business should be measuring your eCommerce site’s conversion rates, meaning what percentage of your site’s visitors make purchases. Conversion rates are important to measure because they provide insight into your revenue through how often potential customers become actual customers. Not only do they provide you with concrete statistics but they also allow you to better understand your users based on their actions,” says Evan Zhao, Co-Founder and CEO of Revela.
“Your gross margin shows your profit after the amount you initially spent on your inventory is deducted from the total amount made–in more formal terms, your inventory cost is deducted from the cost of goods sold (COGS). I’m sure I don’t need to explain to any business owner the essentiality of tracking your profit; it helps you understand where your company rests on the financial spectrum. If your revenue is not increasing, this signals that you need to make some changes,” says Jeremy Gardner, CEO of MadeMan.
“The best KPI for eCommerce sites is measuring the CTR. Click-Through Rates help show the overall trends of what type of content your audiences are interested in and what is engaging them. It also makes it easier to manage your future campaigns and where your money should be placed/how it should be spent,” says Daniel Seehoff, CEO of Sophistiplate.
“Don’t forget to measure your abandoned cart rates as an essential KPI. This details how many of your customers shop around the site and do not simply or save items for future but actually add them to their cart–but then don’t follow through with their purchase. You can monitor the amount of abandoned carts your eCommerce site is dealing with and strategize methods to increase your conversion rate,” says Ayal Ebert, Co-Founder of Particle.
“I recommend eCommerce sites measure their customer engagement statistics in their KPIs. If you’re only going to choose a few key performance indicators to keep an eye on, make sure you don’t neglect the ways your customers operate on your site. There’s no one metric that tells you everything you need to know about your users; just watch for measurable factors like customers’ time spent shopping, your site’s most popular pages or products, and how many users become revisiting customers,” says Jared Hines, Head of Operations of Acre Gold.
“KPIs should be quantifiable and possible to track, meaning you don’t want to place all of your efforts into tracking some obscure measure of progress or an aspect of your business that doesn’t directly correlate to growth. Instead, you should be measuring key performance indicators that actually tell you something valuable. Generally, KPIs that directly relate to revenue are trackable and provide effective insight. For example, tracking the average amount that each customer spends on your products offers numbers you can survey and understand. I would consider this statistic more valuable than, say, the amount of time customers spend on your site, which still offers useful information but doesn’t relate any info about conversions,” says Jay Levitt, Founder and CEO of Lofta.
“Your bounce rate refers to the number of customers who visit your eCommerce site but do not interact with it before quickly leaving the page. Asking probing questions can help you get to the root of the reason why site visitors were not enticed to stay. It could be a slow loading site, unappealing design or unloading graphics, too much text and not enough images, or a confusing layout configuration. If bouncing customers are a frequent occurrence, you know there is a deeper issue in your infrastructure that needs to be addressed,” says Matthew Mundt, Founder and CEO of Hug Sleep.
“Social media is one of the best ways to reach an audience today, especially if your target demographic is between the 18-50 age range, who make up more than 90% of social platform users. You know to focus more effort into your social media marketing if your engagement rate–meaning users liking, following, commenting, and generally interacting with your page–is low,” says Ryan Lee, Co-Founder & CEO of Rooted.
“You want to be tracking deep diving metrics that provide profitable insight into how your company is operating and thriving–or not. Be wary of vanity metrics, what are known as indicators that seem to be revealing but in actuality do not offer any information in regards to accomplishment. Measuring your return on investment, or ROI, is one such metric that offers concrete information about your business’s methodology. ROI is simple to account for by dividing the return on your investment by the amount you invested to achieve these results. A sign of a growing company is a regularly increasing ROI,” says Jim Beard, COO of BoxGenie.
“Generating leads costs money, obviously. Understanding how much it costs you to get a lead is an important metric to closely watch when you have an eCommerce site. To calculate your cost per lead for a certain period of time, figure out how much your total costs for advertising, social media management, content, etc. and divide that by how many leads you generated in that time period. This will give you a good idea of whether or not your company is spending more to find customers than how much customers are typically spending,” says Rachel Roff, Founder and CEO of Urban Skin Rx.
There you have it, the top tips and advice on the best KPIs to measure if you have an eCommerce site. By incorporating these highly important and efficient metrics, you will have a well-rounded visual of your business’s progress and success so you can continually keep growing your company. Don’t forget to establish your KPIs initially and then regularly revisit them to view your progress.