5 Critical KPIs That Affect Your Ecommerce Businesses

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5 Critical KPIs That Affect Your Ecommerce Businesses

Regardless of your business size,  staying on top of your customer analytics is a must. Being able to establish important key performance indicators (KPI) and annotate them in some fashion, such as growth driven design, is a valuable way to not only fully understand your sales funnel and customers, but a great way to tweak the machine and squeeze extra dollars.

Use google analytics to acknowledge important KPI's

Being able to monitor revenue and costs from and against your e-commerce store seems like a no-brainer, but there are quite a lot of aspects to each of these funding streams.

A great example of a valuable KPI metric for a tomato farmer who sells at local markets would be ‘market visibility’, or otherwise how many people are going to show up at this specific market.

The same goes for e-commerce sales, although slightly modified, as you probably don’t have to worry about tomato-eating-insects and all of the lady bugs you need to purchase to mitigate such a heinous act.

Mom's tomatoes

Digressing to the point, there are 5 key KPIs that all e-commerce store owners should evaluate regularly:

  • Unique visitors
  • Average order amount
  • Average cost per order
  • Total orders per interval (day, week, month)
  • Cart and Checkout abandonment

These five KPI examples, when analyzed properly, can leverage a whole chain of marketing events that could exponentially increase your yearly income. Lets inspect each KPI a bit further.

Unique Visitors

Your store’s unique visitors are going to set a baseline for some future conversions we will do, but basically “unique visitors” is equal to how many individual sessions visited your website during a particular amount of time. Notice the word was ‘sessions’ and not people.

Session vs Person

Google analytics tracks your store metrics based on a cookie that gets set on the page load via a snippet of java-script. This cookie is unique to that computer and unique to that users ‘session’ or the amount of time they have their browser window open.

A new session would be rendered if a person opened an ‘incognito tab/window’ or if a person landed on your website via a separate browser or mobile device.

There are some measures taken by Google to mitigate as much duplicity as possible, like time-frames and IP tracking, and for the most part it is fairly accurate. However, you should know that 1500 unique visitors in a 1 month span doesn’t necessarily mean 1500 individual unique people viewed your website, but it is probably somewhere close.

Average Order Amount

This KPI is going to refer to how much money was spent, over a defined period of time, on every order divided by the total number of orders. This is a straight forward metric and can be calculated easily by gathering total sales and dividing it by the total number of orders that occurred.

Order total screen from big commerce

Average Cost per Order

This metric is often overlooked, but is really important when evaluating marketing strategies. As with each order you receive, it does cost some amount to make that order actually occur.

A one month time frame could be a valid cycle to calculate against, but basically how much did it cost you to execute those 100 orders last January? Things like business operating costs, shipping costs, cost of goods, and employee wages would all factor into how much those orders cost you for that selected period of time.

Total Orders per Interval

How many orders you sold over that given time interval. This would need to factor in returns as well, which is another KPI by the way.

Cart and Checkout Abandonment

Knowing how many carts or checkouts you are losing (a customer closing their browser or quitting your site before they complete their order) can provide valuable information and let you adapt and adjust your funnel to attempt increasing your conversion rate.

We wont be using this KPI in our equation (an example further down) but this is a very valuable metric. Carts being abandoned is something that bigcommerce store owners can easily measure AND do something about.

If you are losing carts or checkouts, reminding your customers of their order is a great way to pick up the lost trail. Offering incentives is less abrasive and will make users more likely to want to come back.

Doing Something Useful With KPIs

There are many different actions that can be sought after with proper knowledge of your order history and customer data. However, I would like to point out an invaluable marketing strategy that can be enacted upon by most e-commerce store owners that have 6 months or more of valid data.

Here is the equation:

Visitor value = (Average order amount – Average order cost) * (Total orders per interval) / (Unique Visitors)

What we have done here is calculated the Average order value and multiplied it by our conversion rate. These are two new terms but Average order value is just your net on your orders, and your conversion rate is the percentage value of visitors to orders made.

This equation will tell you your Visitor value, or how much you can expect each person to spend when they come to your site.

Now with real data!

After 3 months of data, we gathered that we have: ($300 order average$50 order average cost) * (25 orders taken / 1000 visitors on the site)

This means that we have $250 average order (rather high) * 2.5% conversion ratio (rather low for properly designed e-commerce stores) which equates to a Visitor Value of $6.25!!!

Hey we want more leads now!

If you have a visitor value of $6.25 that is probably a really good thing and means that you could spend 3 to 4 dollars for a ‘click’ on your website and still break even. Technically, you could spend $6.25 but a lot of the time PPC traffic is not really good quality and could dilute your results. Note: No dilution was factored into this equation.

Furthering Your Business

Now that you have started with KPIs, take a look at some others that can assist you in your e-commerce climb. It’s important to note that getting site traffic is not that difficult and you can certainly pay for it.

Having a properly designed website to increase your conversion rate is the #1 way to make your media spend more valuable. It also makes your competitors look inferior.

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