Performance should inform business decisions and KPIs should drive actions.
Key performance indicators (KPIs) are like milestones on the road to online retail success. Monitoring them will help ecommerce entrepreneurs identify progress toward sales, marketing, and customer service goals.
A performance indicator is simply a quantifiable measurement or data point used to gauge performance relative to some goal. As an example, it may be a goal for some online retailers to increase site traffic 50 % in the next year. Relative to this goal, a performance indicator might be the number of unique visitors the site receives daily or which traffic sources send visitors (pay-per-click advertising, search engine optimization, brand or display advertising, or a YouTube video).
For some goals there could be many performance indicators — often too many — so often people narrow it down to just two or three impactful data points known as key performance indicators. KPIs are those measurements that most accurately and succinctly show whether or not a business in progressing toward its goal.
Setting Goals and Identifiying KPIs
Selecting KPIs begins with clearly stating goals and understanding what areas of business impact those goals. Of course, KPIs can and should differ for each of an online retailer's goals, whether those are related to boosting sales, streamlining marketing, or improving customer service.
Here are a few examples of goals and associated KPIs:
- GOAL 1 — Boost sales 10% in the next quarter. KPIs include daily sales, conversion rate, site traffic.
- GOAL 2 — Increase conversion rate 2% in the next year. KPIs include conversion rate, shopping cart abandonment rate, associated shipping rate trends, competitive price trends.
- GOAL 3 — Grow site traffic 20 percent in the next year. KPIs include site traffic, traffic sources, promotional click-through rates, social shares, bounce rates.
- GOAL 4 — Reduce customer service calls by half in the next 6 months. KPIs include service call classification, identify of page visited immediately before the call, event that lead to the call.
It should be easy to see that there are many performance indicators, and the value of those indicators is directly tied to the goal progress measured. Monitoring which page someone visited before initiating a customer service call makes sense as a KPI for GOAL 4 since it could help identify areas of confusion that when corrected would reduce customer service calls, but that same performance indicator would be almost useless for GOAL 3.
With the idea that KPIs should differ based on the goal being measured, it's possible to consider a set of common performance indicators for ecommerce. Here are 32 common ecommerce key performance indicators. Just remember that the performance indicators listed below is in no way exhaustive.
32 Key Performance Indicators
Sales Key Performance Indicators:
- Hourly, daily, weekly, monthly, quarterly, and annual sales
- Average order size (sometimes called average market basket)
- Average margin
- Conversion rate
- Shopping cart abandonment rate
- New customer orders versus returning customer sales
- Cost of goods sold
- Total available market relative to a retailer's share of market
- Product affinity (which products are purchased together)
- Product relationship (which products are viewed consecutively)
- Inventory levels
- Competitive pricing
Marketing Key Performance Indicators:
- Site traffic
- Unique visitors versus returning visitors
- Time on site
- Page views per visit
- Traffic source
- Day part monitoring (when site visitors come)
- Newsletter subscribers
- Texting subscribers
- Chat sessions initiated
- Facebook, Twitter, or Pinterest followers or fans
- Pay-per-click traffic volume
- Blog traffic
- Number and quality of product reviews
- Brand or display advertising click-through rates
- Affiliate performance rates
Customer Service Key Performance Indicators:
- Customer service email count
- Customer service phone call count
- Customer service chat count
- Average resolution time
- Concern classification
Once you have set goals and selected KPIs, monitoring those indicators should become an everyday exercise. And most importantly: Performance should inform business decisions, and you should use KPIs to drive actions.
You mention " monitoring those indicators should become an everyday exercise."
Is there any online software to help quickly monitor these figures? A combo of google analytics, Sumall, Mailchimp, and social on a one page dashboard would be cool.
Wes – check out Cyfe for the dashboard.
You can also try out Qlikview, they have a full free version http://www.qlikview.com/us/explore/experience/free-download and if you combine it with a Salesforce.com developer version http://developer.force.com/ you would get a fantastic overview. Do Shopify consider collaborating with companies like these in the future??
Nice list of KPIs. I like the idea of defining a goal first then choosing the appropriate metrics that work toward hitting that goal.
Hi Wes, good question! You should check out Domo. They care about making it easy to see all the data you care about in one beautiful dashboard. They also have a solution for retailers: http://www.domo.com/solutions/retail
Hi Wes, you should take a look at Social Annex their analytics include demographics, Social ROI, audience likes and interest, and more that update daily; http://bit.ly/VccB1t. Their services also include tools that will help boost and track all of the KPI’s listed above.
Thanks for the post Mark!
Wes there is geckoboard :)
This blog is very informative..thanks for sharing your views
this is nice list of kpi to check the peormance of shopping sites.
KPIs are bread and butter of successful e-commerce consultancy for sure. This article explains really well how to go about choosing and setting up your own set of KPIs to track. I especially like the part about finding your own baseline.
Nice list of KPIs, and yes it is important to track them on a regular basis for sure.
One KPI that you didn’t mention that I use often (especially when doing paid traffic like Adwords) is profit per visitor.
Profit Per Visitor = Average Order Value * Average Margin * Conversion Rate
That KPI makes it really easy to project if buying traffic through Adwords or other sources would be profitable because you can directly compare it to cost-per-clicks.
Example:
You sell widgets with average order value of $200
Your average margin is 50%
Your conversion rate is 1%
$200 * 0.5 * 0.01 = $1.00 Profit Per Visitor
That means you could pay up to $1.00 per click in Adwords and expect to make a positive ROI
My post here goes into more detail about it:
http://ecommercedouble.com/simple-2-minute-test-to-determine-if-adwords-will-be-profitable-for-you/
Thanks for the idea. For making ecommerce successful, keeping this key performance indicators in mind is important.
Good list but you have forgotten one very important performance indicator – the refund rate. If you have many sales but your refund rate is high, then there is nothing good about those sales… only loses.
You can read more about this and how to lower your refund rate and increase your conversion rate in the 6th chapter of my ebook, available at http://www.abc-of-ecommerce.com
Key Performance Indicator’s are most important factor of online business and play most important role in decision making process for increasing market strategy and performance.
HI
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