Ecommerce KPIs and Weight Loss
Let’s say you start a new diet and exercise program and you decide to track its success based solely on pounds lost. After 4 weeks of your new lifestyle, the scale hasn’t budged.
Does that mean your new healthy lifestyle was a dud?
If the only metric you used to gauge success was your body weight, then yes, you could think that. And that could even lead you to become excessively worried about your scale weight, weighing yourself every day, and even making major changes to your program — cutting calories further, adding more exercise, etc. — just to get the scale to budge.
But does your scale weight really give you the full picture of success?
Consider this…
Although you might want to hit a certain number on the scale, what is ultimately your long-term health goal? You might say…“Faster metabolism, improved body composition (more muscle, less fat), healthier joints, less back pain, less risk of chronic illness”.
So why not track your body weight together with a group of other key metrics related to your long-term goals — like pounds of lean muscle mass, strength, blood pressure, and resting heart rate?
Although your weight stayed the same after 4 weeks, maybe you gained two pounds of muscle and lost two pounds of fat. Maybe your strength and endurance went up at the gym, and your high blood pressure came down a couple of points.
Based on that “family” of metrics, is your diet/exercise program a failure? Absolutely not, because the combination of key metrics shows you’re moving closer to your long-term goal.
As we’ll see in this guide, the exact same thing happens with many ecommerce companies.
How Most Companies Use KPIs (and the Consequences)
Stop and think: As you read this section, take an honest look at your own company.
- Are you currently doing some of these same things?
From our experience working with ecommerce brands, we find that most are like the person who tracks their health only with a scale.
Most brands fall into KPI Tunnel Vision.
KPI tunnel vision is when brands focus too heavily on tracking and reactively improving individual KPIs. You’ve probably seen it happen.
A single metric goes down…let’s say conversion rate (CVR).
- Management wants to know why CVR is down and demands that marketing get it up soon.
- Marketing has meetings on CVR, why it’s down, and how to improve it.
- Then a bunch of money, time, and effort is thrown at initiatives to quickly improve CVR.
- The cycle repeats itself every time CVR is down.
The result?
- Because they want to avoid the consequences imposed by upper management when it’s down, everyone gets too focused on CVR. They end up watching it every day to try and see how it’s trending. And if it starts to trend in the wrong direction, they take immediate action.
- By focusing solely on CVR, everyone misses the big picture of profitability.
- Excessive worry and time spent tracking these metrics negatively affects emotions, reduces creativity, reduces job enjoyment, and all of that undermines the long-term profitability that comes from tunnel vision-free creative, strategic thinking.
*See the first part of our CMO’s Guide to Profitability – How to Avoid Limiting Ecommerce Metrics Like ROAS to see more of what happens when you focus on one single metric.
Key takeaway: Time spent worrying about tracking and “fixing” individual metrics is never time well spent. Not only does it lead you to miss the bigger picture, but the work environment it creates is not conducive to profitability.
A lot of this happens because ecommerce leaders view KPIs as goals.
KPIs Aren’t Goals
Many ecommerce companies set KPIs as their main targets the same way a person following a new diet sets a number of pounds lost as their ultimate goal.
Ask anyone who’s starting a new diet what their goal is and 93% will tell you their goal as a single metric — [pounds lost] / [time period].
Let’s say you’re a man who wants to lose 30 lbs in the next 6 months. That’s a little over 1lb/week. That trackable KPI has just become your main goal.
But think about this…would you be happy if you reached that goal regardless of how you lost it? Would you be happy if you lost 30 lbs of lean muscle mass?
Probably not. You want to lose fat right? Losing muscle leads to a slower metabolism, decreased strength for daily activities, more joint pain and if you only lose muscle, you haven’t lost any fat.
Pounds lost is an important metric, but it doesn’t tell the whole story. Therefore, it shouldn’t be the only goal.
The same is true with ecommerce KPIs.
Take conversion rate (CVR). Let’s say marketing’s goal this year is to improve overall conversion rate by 10%.
How do you know if that metric should be your main goal? Easy. Just ask yourself this…Would I be happy if we reached that KPI goal regardless of what happened to other metrics?
Because a really easy way to increase conversions is to discount your product by 90% all the time. CVR would skyrocket, profits would tank. It’s an extreme example, but it shows how a single metric like CVR doesn’t tell the whole story of profitability.
Although it’s an important metric, since it’s not telling the whole story, it shouldn’t be your main target.
Key takeaways:
- Ecommerce KPI metrics are important, but a single metric doesn’t tell the whole story. Therefore, a single metric should never become a primary goal.
- Use KPIs as indicators and diagnostics. Keep goals as goals and KPIs as tools for reaching those goals.
So how should you use KPIs properly? We’ll share a specific example along with action items for you in the next section.
Example of How KPIs SHOULD Help Drive Profitability
Here’s a clear example of how you should use KPI ecommerce metrics to drive profits. Get out a piece of paper (or a napkin) and do the action items to help apply the principles learned to your company’s situation.
If you’ve been reading our ecommerce profit guides, you know that any initiative always starts with defining your overall strategy and the steps to reach it. *Check out our Strategy Creation Guide if you need help doing that.
So for this example, let’s say…
- Your big target is: Higher profits through an increase in lifetime value (LTV).
- You know a significant group of customers desire a chat-assisted purchase.
- So your strategic initiative to reach your target is: Increase the price + Use a portion of the profits as an investment to lower the wait time for a chat session = Higher LTV.
- You expect that a 20% increase in price, while leading to a higher Average Order Value (AOV) will cause CVR to drop 10%.
Action Item Now: Write down one of your company’s key profit-driving initiatives.
You’ve got your goal and the strategic initiatives for reaching it. Now you need KPIs to track it.
Choose Your KPIs
For our example (price increase + chat improvement), here are some KPIs that could help gauge success, as well as what you expect to see happen with each as you implement your plan:
- Avg Chat Time to Wait: We want to see this go down.
- Chat Satisfaction (Chat Sat): We expect this to go up.
- Conversion Rate (CVR): We expect this to go down, but only by 10%.
- Customer Satisfaction (CSat): We expect this to go up.
- Purchase Frequency (PF): We expect this to go up over 12 months.
- Review Sentiment: We expect this to go up.
- Ticket Sentiment: We expect this to go up.
- Net Promoter Score (NPS): We want to see this go up.
- Average Order Value (AOV): We expect this to go up.
- Customer Acquisition Cost (CAC): We expect this to go down as NPS goes up.
How do you know which KPIs to track? Each initiative will be different. Focus on those that are most closely related to your ultimate goals.
Think again about the weight loss example.
Which health metrics would you use to track the success of your new healthy lifestyle? If your ultimate goal is to lose fat weight and reduce the risk of disease, then you probably wouldn’t need to spend time tracking your vertical jump height. But your total weight, body fat %, and blood pressure are crucial metrics to track because they’re more directly related to body composition and health.
Action Item: Write down a list of 3-10 KPIs that are most directly related to the ultimate goals of the initiative you wrote in the previous step. Then write down what you expect to happen with each.
Set Triggers
Start by choosing a few of the most important KPIs and set some triggers.
What is a trigger? A predefined threshold or condition that when met, prompts an action. It’s a signal that something has changed enough to warrant attention.
Why KPI triggers are so important
- Triggers prevent reactive, panic responses to normal or minor fluctuations.
- Triggers also keep you and your team from unnecessarily expending effort constantly tracking KPIs. They let you set it and forget it. Triggers are like the alarm that goes off telling you it’s time to take the cake out of the oven. You can set the alarm for a specific time and then forget about it until it goes off, instead of constantly checking the oven every 2 minutes.
So for our example, you may choose to set triggers on specific KPIs such as:
- 10% CVR drop
- Drop in average order value
- Drop in purchase frequency
- Increase in average chat wait
Action Item: From your list of KPIs, select 1-3 that are most directly related to your ultimate goal. Define a trigger condition for each.
Important: To avoid a reactive panic response if one of those conditions is triggered, it’s important to clearly define beforehand what you will do. Determining what to do is easy when you create “metric families”.
Create Metric Families
A metric family is a group of related metrics intentionally bundled together to support a common actionable purpose. These “families” make it easier to understand the bigger picture and decide when and how action should be taken.
Here’s how that relates to our example.
Let’s say CVR drops 11% and your 10% CVR drop condition is triggered. Is it time to panic? Not yet.
You need to understand the big picture. Has this drop even affected profitability? Which other metrics should you look at?
- Maybe you look at AOV and it’s up 12%.
- And then you look at NPS and it’s way up.
The CVR-AOV-NPS metric family puts the CVR change into perspective so there’s no need to sound the panic bells.
Or maybe you compare the CVR drop to PF which has increased 30%. In addition to understanding that your profits have actually increased, it also helps you get a better understanding of customer behavior. Perhaps the folks who needed to see this as a premium service-backed product finally got what they wanted and now they’re loading up because trust went up!
How do you decide which metrics and how many belong in a family? There’s no right or wrong answer. It all depends on your business goals.
Think again about the diet.
If you haven’t lost weight and you need to evaluate if you’re still on track to improve your overall body composition, which other health KPIs would you compare your body weight with?
- Vertical jump?
- 400m run time?
- Amount of lean body mass?
Obviously, the third one (lean body mass) because it helps interpret the results of the primary KPI and the effect it’s had on your main goal.
Action Item: For each of the key metrics you added triggers to in the previous step, select a few KPIs you should compare each against. Remember they should be KPIs that help interpret the main KPI and provide a clear view of the bigger picture.
Once you’ve created these KPI families, you can take the next powerful step.
Create Metric Trigger Families
Setting a single metric trigger is good. Creating groups of triggers with metric families is better.
Continuing with our example…
Instead of a trigger set on a CVR drop of 10%, create a family trigger that can catch problems before they completely blow up.
For example, you could set a trigger that activates when:
- CVR drops = 5%+
- AND AOV drops more than 1%
- AND PF drops more than 0%
- AND AVG Chat Wait increases more than 0%
A 5% CVR drop by itself may not be a big deal. But accompanied by other negative KPI movements, it could be. So by adding extra conditions, you can create an early warning trigger system. It acts as an ecommerce smoke alarm to alert you even if there’s not a full-blown fire yet.
Creating metric trigger families makes it easier for you to set it and forget it because you know you’ll catch problems with time to evaluate and correct them.
Action Item: Create groups of triggers for each of the metric families you created in the last step.
What It All Comes Down To…Stop Watching Lone KPIs
We don’t mean you should completely ignore KPIs. Just set the triggers and then ignore them until they hit the triggers.
Having the freedom to temporarily forget about KPIs is a profit-driving activity in its own form. Don’t underestimate the time you’ll save from not thinking about, monitoring, conversing, meeting, and strategizing about KPIs when you really don’t need to.
Imagine what it would do for productivity and profits if you could invest that time into initiatives that drive innovation and add genuine value.
But it’s not just about the time. It’s also about the worry.
Watching KPIs without triggers leads to constantly checking the numbers day and night. And when you’re not looking at the numbers, you’re worrying about the numbers. When they start to go the wrong way, you get your team to “fix” it with no real strategy in mind. Once one KIP is fixed, another KPI goes out of whack and now your team needs to “fix” that one. Your team ends up feeling like failures because they can’t make all the numbers go up enough every single day.
This leads to a culture of stress and reaction and anxiety.
Anxiety stifles creativity and big-picture thinking by constantly activating the task-oriented part of your brain while switching off the part associated with creativity, dreaming, and innovation.
And a lack of creativity and big-picture thinking undermines the very foundations of long-term profitability.
Key takeaway: Set the triggers. Forget about the KPIs.
Use KPIs the Right Way & Boost Profitability
KPI e-commerce metrics are powerful tools when used correctly. To leverage their valuable insights the right way, don’t forget the following key takeaways:
- A single metric never tells the whole story.
- Use KPIs as indicators and diagnostics, not as goals.
- Create KPI families with groups of related metrics that support a common purpose.
- Create triggers and groups of triggers so you know when to act.
- Forget about KPIs until they hit triggers.
Questions to answer this coming week:
- Have you recently had a meeting about a single KPI?
- Have you currently set single KPIs as goals for your team?
- How do members of your team answer when you ask “Are you worried about KPIs on a daily basis?”
- What steps will I take to implement the principles in this article?
