As we continue our series on the alphabet soup that is eCommerce marketing acronyms, we find ourselves studying a peculiar specimen: the KPI—or Key Performance Indicator—a data point that is useful in determining exactly what is making your eCommerce website succeed. If you’re McDonald’s, your KPIs are probably how your hamburgers taste, the location of your stores, how fast your drive- is, but not necessarily the color of your cups (although who knows, color research is a thing).
Figuring out which KPIs to track for your business can appear to be very simple because there are lots of things you could track. The trick is, you want to find the unique KPIs to track which provide the greatest return on investment (ROI) to help your business grow and succeed. Honestly, these are all table stakes if you’re a marketer, we’re just trying to not jump into any acronyms too quickly for any newbies out there.
To help you figure out which data to ignore and which to start tracking as a KPI, we’ve isolated the most important metrics which are almost universally vital for successful eCommerce.
Where do you harvest KPI data?
So you know that Key Performance Indicators are important for your business, but how do you get them? A lot of the information is available through Google Analytics, but some information you’ll need to gather will come straight from your website. You should be collecting data on sales metrics, open rates for emails, the time of day a person viewed an ad, and so on. The KPIs an eCommerce site needs to focus on can vary hugely depending on the type of business you do, but if in general for an eCommerce business, there are six solid standbys that you absolutely must pay attention to.
The 6 Essential KPIs for an eCommerce Business
#1 Action Rate/Conversion Rate
In KPI parlance, the Action Rate is the number of visitors to a given page divided by the number of times those visitors performed the action you wanted them to do. For example, if a page gets 100 visitors and you want everyone who visits that page to give you their email, and 66 people end up doing that, your AR is 66/100, or 6.6/10.
Beyond Action Rate, it’s important to understand Conversion Rate (CR) as well; which is a smaller subset within Action Rate. CR is the number of potential customers who end up pulling the trigger and buying a product. Both of these numbers are critical for the overall health of your business because they can show where you are succeeding most and where you most need to make improvements.
If you’re landing hundreds of visitors to your email collection page but only getting a handful of addresses, you probably need to work on your copy and your value proposition. If your product page’s CR is in the single digits, you know that’s an area that needs improvement.
#2 Exit Pages
Exit pages are the other side of the Action Rate/Conversion Rate equation. Which pages do people typically abandon your site at? Which pages are the ones that lose the most people from your sales funnel? Tracking and recording your Exit Pages (sometimes called Bounce Pages) will provide a big red arrow pointing straight at the web pages and parts of your site that need the most improvement.
#3 Bounce Rate
How often does an ad bring somebody to on your website, only for them to immediately click away? This number is your Bounce Rate, and knowing this can identify which advertisements and which pages on your site need improvement. Your site is not a trampoline; bouncing isn’t what it’s built for.
For example, if you have a massive bounce rate on a PPC ad you’ve been running, it could be because the PPC copy and the landing page don’t match up. Somebody is clicking expecting one thing, and landing on your page and seeing another. Do some A/B testing on the ad copy and the page itself and track the Bounce Rate to see if your improvements are making a dent.
#4 Customer Retention Over Time (CROT)
The value a customer brings over the course of years is an important factor to consider, especially if you’re seeking out influencers or if your eCommerce business leans heavily on repeat purchases. Tracking CROT changes your focus from short to long term; and when this data starts trickling in, you can use it to make educated decisions about the future direction your business needs to travel in. Especially in the case where you sell a product that’s a once-in-a-long-while purchase, like TVs, tires, mattresses, Christmas trees, and the like, knowing that you have a customer’s loyalty (or not) can help you make educated selling decisions.
#5 Return on Ad Spending (ROAS)
The first part of this KPI equation is tracking how much you spend on which methods of advertising. If you’re not already doing that, you need to start. After which, you want to do your very best to determine how many of your customers arrived at your site via a given ad. Thankfully when you’re an eCommerce business, this is a pretty easy thing to do. Tracker pixels, Google Analytics, and myriad other tools exist to allow you to follow the path a person takes from the time they see an ad to when they make their purchase.
In the brick-and-mortar days, things like billboards, blimps, and TV ads were very difficult to track the ROAS on. In the words of an anonymous marketer quoted in David Ogilvy’s book Confessions of an Advertising Man: “I know I’m wasting half my advertising money, the trouble is, I don’t know which half.” But in the digital age, that problem is virtually non-existent, so long as you’re harvesting the available data and using it. Don’t make the mistake of treating an eCommerce business like it’s brick-and-mortar brethren. If you’ve got access to the data, take advantage of it.
#6 Time to Purchase
Finally, it’s important for a business relying on eCommerce sales to know how many times someone visits your page before making the purchase, or how long the gap is between first visit and final purchase. This data can help you figure out when to send out remarketing emails or employ other recapture tactics. If 80 percent of your sales come from customers who have visited the site, given an email, and then left, only to be enticed back by your snappy copy and creative emails, you know where to invest your time and energy when it comes to writing ad copy.