Skip to content
Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs? 1

Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs?

More and more businesses and brands are being drawn toward eCommerce. Now, it’s simply expected for a company to have a website and an online sales platform, and businesses without a website are seen as either old-fashioned or shady.

As crucial as having an online presence is nowadays, it can be challenging to manage an online business. Terms like key performance indicators, conversion rate, and cart abandonment are some of the many thrown around. However, there’s more to do once you’ve learned what these terms mean and how they’re essential.

It’s just as important to understand how to utilize these terms to your advantage. eCommerce key performance indicators mean little unless you can effectively measure and judge them. As such, you need to understand how to use them best before you can genuinely say you’re an eCommerce master.

Read more
Ecommerce KPIs Abstract Pattern with Performance Colors

Table of Contents

Related Consulting Services
Consultant

Yates Jarvis

Principal, Charleston

Make Sure They are Tied to Your Annual Financial Goals

Ecommerce key performance indicators should be directly tied to your financial goals. You should understand how your ecommerce KPIs affect these goals and even set goals for the KPIs themselves. Essentially, your ecommerce KPIs should be tied to the financial health of your business and be a good reflection of your finances and growth.

That’s because taking the time to do an audit every time you want to know the state of your business is time-consuming. They’re called key performance indicators for a reason – they’re supposed to let you know how your business is doing without looking at your finances.

So take your time to look at your ecommerce KPIs and decide if they accurately portray your business as a whole. If they don’t, they’re likely not tied to your finances at all and are therefore unimportant.

Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs? 2

The Most Crucial E-Commerce KPIs You Should Track

There are some general ecommerce KPIs all eCommerce businesses should track as standard procedure. However, all companies are different, so you’ll likely have other KPIs you and your business need to follow besides these. Examples of general ecommerce KPIs include:

  1. Customer Acquisition Cost
  2. Shopping Cart Abandonment Rate
  3. Organic Search Ranking
  4. Conversion Rate
  5. Engagement Rate
  6. Newsletter Subscribers

1: Customer Acquisition Cost

No matter what industry your E-commerce business is in, you need to measure this statistic continually. Essentially, you take all the marketing costs of acquiring customers and divide them by the number of customers you have. This gives you the cost per acquisition, including advertising, email campaigns, and everything else you’ve spent on reaching out to your customers.

Once you have this metric, you’ll have a pretty good idea of how much you’re spending on each customer. Then you can compare it to your revenue growth from each customer. Just take your total income and divide it by the number of customers.

If your customer acquisition cost is higher than your revenue per visit, you’re in trouble. In general, you want to keep your customer acquisition cost as low as possible. For example, the CAC (customer acquisition cost) is $7 for the travel industry and $395 for the tech industry. 

2: Shopping Cart Abandonment Rate

Pretty much all eCommerce websites sell something. If they didn’t, they wouldn’t be eCommerce! So they all have to deal with uncompleted transactions. The Shopping Cart abandonment rate is the number of customers who put items into a cart but never complete checkout. It’s also known as the checkout abandonment rate.

You want to keep this KPI as low as possible, with the general benchmark being around 69%. This is a high percentage, but you can lower it with varying business strategies, the primary use for this KPI. However, this percentage varies by industry, like many other benchmarks.

3: Organic Search Ranking

All websites vie with their competitors to be a higher-ranked result on Google search. Breaking into the top ten is a cause for celebration as higher rankings mean you’re more likely to be noticed by potential customers.

A high ranking means lots of organic traffic going through your site. Organic traffic means more customers, so aim as high as you can on Google Ads.

4: Conversion Rate

The conversion rate is the number of customers who purchase something on your website divided by the number of visitors. Conversion rates vary across industries, but there is one cardinal rule: the higher the price, the lower the conversion.

Aim for the highest conversion rate you can to convert website visitors into paying customers who bring in revenue.

5: Engagement Rate

Engagement. How do you measure engagement? How do you build brand loyalty? By interacting with your customers via social media. Your engagement rate can be seen in how many replies a post got, how many followers you have, or even just how many people saw the post. It’s essentially a number to judge how well you’re doing on social media.

Social media is a crucial part of any sort of eCommerce marketing, and the engagement rate measures how well you’re doing on social media. You can use all of these metrics to help understand how well you are marketing your brand and engaging with your audience.

Engagement rate benchmarks vary wildly by industry, from 0 to 10%, depending on the industry and platform. Remember, engagement rates affect lower-funnel metrics such as purchase rate and revenue per visitor.

6: Newsletter Subscribers

Every eCommerce business should have its newsletter available to subscribers at regular intervals. The number of subscribers that sign-up for this newsletter should be an essential KPI for your business.

Essentially, your subscribers are the number of people you have email addresses for and the number of people with whom you can use email marketing. The more this is, the bigger your audience. The number of your subscribers can also be seen as the number of loyal customers you have and give you a metric to measure customer lifetime.

Essentially, this metric gives you a good idea of your audience and loyal customers. You can use it to derive other valuable metrics, such as customer lifetime.

This KPI also feeds into several other metrics, like click-through rates and email open rates. The industry benchmark for click-through rates is about 2.3%, but it varies by industry.

Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs? 3

Other Metrics you can use for Ecommerce KPIs

There are a lot of measurable metrics in your website and eCommerce business, but not all of them will pertain to your business. What makes a metric a KPI is its usefulness to your business.

Several other ecommerce KPIs may or may not affect your business, such as bounce rate, online revenue, additional revenue, profit per customer, subscription rate, churn rate, cannibalization rate, product return rate, email bounce rate, and more. I’ll mention them and what industries should be measuring them at the end of this section.

You should choose which metrics you turn into ecommerce KPIs with care, so you don’t end up measuring useless metrics and crowding them together with useful KPIs, muddying your data.

For example, subscription and churn rates are helpful for eCommerce businesses that offer subscription services as their main product, such as coffee roasters or pet club websites. Depending on their industry, they’ll want to set a benchmark for the churn between 3% and 12%.

However, if you just offer a subscription service as a bonus to your main product, it’s better to look at profit per customer to see if you’re successfully upselling the subscription.

The cannibalization rate is another example. The cannibalization rate measures the number of new sales at the cost of old sales. If you constantly rotate or offer new products on your website, sales of existing products will drop. However, if you rarely introduce new products, or most of your sales are subscriptions with different products, this matters little.

The metrics you choose to turn into ecommerce KPIs depend on your industry, products, and business.

Make Sure You Have Hypotheses Written Down on How to Impact Your KPIs

Ecommerce KPIs have more uses than just tracking your business’s financial health. If you aren’t constantly testing your ecommerce KPIs, you aren’t getting the most out of them. One of the most valuable functions of KPIs is to show you customer reactions and which business strategies work vs. strategies that don’t.

KPIs are derived from real users buying your products, visiting your website, and abandoning their carts. So you should do your utmost to affect these ecommerce KPIs by using several different business strategies to maximize your website.

For example, if you’re putting a new email campaign in place to encourage customers to come back to your store and buy their carts, your hypothesis would be to lower your cart abandonment rate. If you don’t see this hypothesis reflected in the KPI, the email campaign did not help, and you need to change strategies, perhaps by offering a sale through an email where the customer would get a better price on the cart.

Essentially, your hypotheses should be tested with strategies to find the methods that work for you and your business.

Example

Let’s say you’re launching a new email marketing campaign. You hypothesize that this campaign will increase traffic to your website and increase the conversion rate. You launch the campaign, and traffic goes up. However, the conversion rate remains the same.

One of your hypotheses was false. This time, you launch the marketing campaign focusing on one item. You then bundle the item with another item frequently bought with it or discount the number of things they buy. Traffic isn’t as high as the general campaign, but the conversion rate goes up because more customers buy the item.

This causes the profit margin to rise. Coupled with the increased conversion rate, you would make a pretty penny. You can maximize your profits by tracking your hypotheses and mixing and matching business strategies.

Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs? 4

Business Strategies For You to Test

The holiday season is crunch time for eCommerce businesses. Most eCommerce conversions happen around Cyber Monday, when deals for shopping online all converge. So, how do you take advantage of these deals? There are several different strategies.

Ad Retargeting

Ad retargeting shows an ad on another website that targets a person who has just left your webpage in the middle of an order. It helps bring customers back in to complete their orders. Ad retargeting focuses on a narrower audience, helping you get the message across.

You can even offer special promotions and discounts for people to come and finish their orders, like a promo code or a special bundle. Whatever it takes to get them to come back and finish their orders.

Easy Checkout

Checkout should be seamless and accessible across all platforms you sell on. Social media apps like Instagram and Facebook now have storefronts where customers can immediately buy something that catches their eye.

More than that, your brand and product marketing should be identical across all storefronts to promote brand cohesion and make consumers feel more comfortable with your brand. This goes for your products at other online retailers as well as your storefronts.

Bundled Promotions

Upselling is one of the best ways to get more capital per customer. By bundling together certain items or showing a bar of Frequently Bought With These Items, you can sell more per customer.

It’s especially effective over the holiday season as the buyer can give away the bundled products or keep them for themselves, offering flexibility to the customer.

Fast and Free Shipping

Consumers typically fall into one of two categories: those who want it shipped fast and those who wish to have it shipped free. Shipping fees matter because shipping costs have been shown to be critical elements of a customer’s perception of the value of your product or service. Offering both types of shipping helps you attract both types of consumers, from those who waited until a week before Christmas to those who got all their shopping done in early November.

Not all of these strategies will work for all eCommerce businesses, so it’s up to you to see what works. For example, fast and free shipping might not work with eCommerce businesses that mainly rely on subscriptions. Use your ecommerce KPIs to test different hypotheses to find the business strategies that work for you.

Whatever your business is, KPIs track what is working and what is not.

Make Sure They Can Be Tracked Automatically

As helpful as ecommerce KPIs can be, you shouldn’t waste too much time on them. You have a business to run, after all! You should be focused on dealing with day-to-day affairs and implementing different strategies into your business.

Measuring and then organizing your ecommerce KPIs into helpful information is just a time sink. Your ecommerce KPIs should continuously be tracked and managed automatically so that you can get on with other work. There are lots of automatic KPI tracking software nowadays, such as Google Analytics, and using this software is essential to running a successful eCommerce business.

Once your ecommerce KPIs are automatically tracked and organized, they should be available to everyone who needs the information. Ecommerce KPIs should be easily accessed and available at your and your employee’s fingertips.

The Benefits of KPI Tracking Software

KPI tracking software is a necessity for eCommerce. The software should track and organize the data into coherent information that you can use. To put it another way, the software should both measure and process this data into KPIs.

Once the software has the number of visitors to your website and the number of people who bought products, it should automatically generate the conversion rate. It streamlines the process of creating KPIs to view them in real-time.

KPI tracking software saves you the time you would generally spend measuring and processing the data, saving human resources. And its accuracy allows you to view KPIs in real-time, a massive advantage for any business owner.

Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs? 5

Make Sure Everyone Has Access and Knows What to Do Next

Everyone involved in running your business needs access to your KPIs. And not just for transparency’s sake. Your employees and business partners should have clear instructions for specific KPI indicators.

Let’s say you tell your marketing director to launch an ad marketing campaign when your KPI for website traffic falls below a certain number. Then, when the director sees the KPI, they know to launch a new drive without you having to tell them. This can apply to all aspects of marketing and even beyond.

The “If X then Y” approach can help streamline your business and allow your employees to take action to rectify a problem without your permission. With clear directions, low KPIs can become a thing of the past.

Make Sure Your Employees Understand KPIs

Your employees should understand the definitions of KPIs and what they mean for the business.

They should be able to tell you that a high traffic number, but low conversion rate, means you need to beef up your website, or that high cart abandonment might mean you should run an email campaign for those who haven’t completed the purchase of their carts. Customer retention rate dips could indicate issues with pricing, promotions, or product mix. Marketing channel performance decreases could indicate an opportunity to test changes to marketing expense allocation, bolster positive customer reviews, or review basic data such as a channel’s click-through rate, which may have changed since last checked.

This helps them understand the business and customers on a deeper level, investing them in the industry and their work. You shouldn’t just tell them to keep specific numbers up; they need to be told why they need to do specific tasks in order to get them to invest their time creatively in a manner that matches your business strategies.

Make Sure You Check Them at Least Daily and Test “Why”

KPIs are a good overview of the health of your finances, and you need to understand their patterns. You should check your KPIs daily. Only when you know how KPIs work and their patterns can you begin testing your hypotheses.

Ecommerce KPIs have their patterns and predictable ups and downs, just like sales. For example, no one is surprised when website traffic sharply drops at night when most consumers are asleep. However, your ecommerce KPIs can be a little more unpredictable.

Perhaps your KPIs are a little more unusual. Your sales go down every Wednesday, website traffic spikes in the evenings at a particular time, or most of your customers from Finland shop at two a.m. Only once you understand and predict your own KPI schedule can you test your business strategies effectively.

The Benefits of Real-Time KPIs

Assuming your KPI tracking software is set up, you’d check it several times per day. Real-time KPIs help you assess the flow of your business and check your hypotheses as soon as promotions and strategies are set into motion.

It helps you set daily goals, keeps your employees motivated, and helps monitor staff performance. If the ecommerce KPIs aren’t swinging the way you thought, be patient, wait to see if they change, and stay calm if they don’t.

Know The Right and Wrong Ways to Best Utilize Helpful eCommerce KPIs? 6

Make Sure You Limit Your Ecommerce KPIs to Only the Most Important

It can be easy to drown in your ecommerce KPIs. Most articles seem to state that you need to track 60 or more KPIs for your eCommerce business. But that isn’t true. Your KPIs should follow specific requirements for you to track and use them, and if a KPI doesn’t fall into these requirements, you’ll just be monitoring them for no reason.

  1. KPIs should be directly tied to the financial health of your business
  2. KPIs should track unique measurements
  3. KPIs should change over time

The KPIs you choose to follow should fulfill all these requirements. Moreover, specific ecommerce KPIs are useless without others. For example, website traffic isn’t enough. To get the conversion rate, you need to divide website traffic by the number of actual purchases, a far more helpful KPI for your business.

Moreover, each KPI should measure something different. Many KPIs essentially measure the same thing, so unless you have some specific hypothesis you’d like to test on a particular KPI, they’re virtually useless.

Website traffic is a solid overview of how popular your website is. The number of people clicking on website links is another way of measuring your traffic flow. However, if you have an ad campaign that features many sponsored articles, you should check this KPI to see if that strategy was effective.

Metrics Vs. KPIs: The Differences

What makes a metric a KPI? Essentially, KPIs are metrics that matter. Moreover, this is dependent on the industry and business growth, meaning no two companies have the same KPIs.

Ecommerce KPIs should be tied to your finances, measure different things, and change over time. Typically, you follow the guidelines above. So how do you choose which ones are which?

KPIs that aren’t tied to your finances have no critical bearing on your business. Different metrics that display the same information shouldn’t be KPIs, and KPIs that remain stable over a long period are useless to track.

Ultimately, the choice of metrics to track as ecommerce KPIs is up to you, but you shouldn’t crowd your data with too many unless you want to overwhelm yourself with too much data.

Make Sure You Switch Out Irrelevant KPIs

As your eCommerce business grows and changes, you want different ecommerce KPIs that indicate sustainable growth. However, as your business gets more prominent, some numbers level out and remain the same. That’s when you switch them out with better indicators.

For example, when you first launch your website, you’re focused on increasing traffic and growing your email lists. However, when you’ve built your base, you’ll want to focus on other ecommerce KPIs that indicate your revenue better, such as checkout abandonment and conversion rates.

Essentially, your business will grow and make some KPIs obsolete, so don’t be afraid of replacing them with better ones once you feel they no longer work for you.

How to Tell When KPIs Need to Be Switched

It can seem like all of your KPIs are essential, and you can be hesitant to switch them out. As your business scales, your KPIs should change as well. But how do you know when to switch them out?

Most of the time, the KPIs you use when starting your business will level out over time, meaning you no longer need to follow them so closely because they remain stable. KPIs should significantly impact your financial situation, measure unique metrics, and change over time. However, an easy way to tell is to go back to the requirements and hypotheses and recheck them.

Don’t React Quickly to KPIs.

People who sell when stock is low are fools in the stock market. They react too quickly to the falling prices, then regret their actions later. However, they still sell their stock because they’re afraid of losing all of their investments.

And like the stock market, running a business is risky. When you see your KPIs drop, you get scared. You want to throw everything at the wall to see what sticks and bring them back up. Don’t be like the fools in the stock market who sell low stocks. Stay calm, and proceed about business to see if they come back up. Sometimes, the answer is to scale back on business to allay actual costs.

Not everything about KPIs is within your control. If you sell organic candles and there’s a nationwide story about how organic candles are harmful, your KPIs are going to drop no matter what. It’s just a matter of successfully navigating the crisis so your business will see the other side.

How to Deal With Low KPIs: Come Up With a Plan

If your traffic is low, it doesn’t mean you should just throw money at traffic generation and hope it comes back up. It means you should look at the data and try to find the cause of your low traffic.

It can take several meetings with your partners and employees, but once you’ve determined the reason for your low KPI, you can come up with an effective plan to solve it. Understanding the problem behind the KPIs is essential to fixing them.

With an effective plan in place, you’ll easily raise the ecommerce KPIs to your benchmarks.

Don’t Rely Too Heavily On Benchmarks.

We all hear about how you should shoot for different goals and hit higher and higher benchmarks with your ecommerce KPIs. However, KPIs are not the focus of your business. It’s growing the business.

If your organic search rankings are low, it doesn’t mean you should spam a bunch of keywords to get your ranking higher. This lowers the quality of your website and makes it look suspicious to customers who do click on your link. It ultimately hurts your business because customers are less likely to buy from you, even though your search ranking is higher.

This can apply to several aspects of marketing. Ultimately, you want to advertise your website and business while retaining high quality and trust with the consumer. If you can’t hold onto that, all the benchmarks in the world won’t add up to sales.

So focus on achieving your benchmarks, but don’t sacrifice your business for them.

How to Find Benchmarks that Work For You

Benchmarks differ by business and industry, so you should start your research with both the general industry benchmarks and what benchmarks are reasonable for the size of your business.

Once you have the industry average profit margin, you can look at your own KPIs for your business and fine-tune them from there. Then, it might be wise to put your benchmark a little higher to reflect your business better. For example, the 2022 conversion rate benchmark for retail websites is around 3%. However, if your website regularly performs over that benchmark, it’s time to raise your benchmarks.

Your benchmarks should scale and grow with your business. Over time, you should aim for higher and higher standards until you’ve found the perfect measures for your business.

Ecommerce KPIs are Critical To Your Success Online

eCommerce key performance indicators can be an intricate and complicated performance methodology to agree on, track accurately, review, and act on. Navigating this operations tool means understanding what the KPIs mean and how to use them.

Google Analytics cannot be underutilized as it is a free, great-first-step KPI tracker for website basics. Over time your ecommerce KPIs should change, and your tech may need to as well in order to better track and report on your KPIs. A seamless checkout process helps customer satisfaction. A good checkout process also decreases the cost per acquisition.

You should maintain high-quality customer experiences over a long period of time as great customer experiences also lead to high customer retention (customer experience is a broad category that also includes user experience). eCommerce Metrics could include the data for the percentage of customers, online advertising campaigns, traffic source, customer loyalty, customer retention, marketing efforts, marketing strategies, etc.

Ecommerce KPIs only have value when you know how to use them. Knowing which ecommerce KPIs should be used in which situation and testing your hypotheses is vital for any eCommerce business. Learn everything you can to understand how to use ecommerce KPIs effectively and get the help you need by working with a consulting company such as 2 Visions. Reach out today; we’d be happy to help!

Insights

american marketing association logo
Strategic Management Society Member
Insights Association Member