Do you know that you can lose thousands of dollars if you focus your energy on the wrong KPI? KPIs are something which can gauge the performance of your website and help you to learn which of the key performance indicators are working or not working in your favor.
As a marketer in a digital marketing agency I know what it feels like to focus my energy analyzing the right KPIs for our business. Most of the website owners feel that they are on the right track while they miss the most important factor: e-commerce KPIs.
While there are dozens of areas which needs focus, the best place to start is to micro-manage small things to drive the business.
Focus on anything which haven’t changed
We operate on planning monthly, for instance we assign date and compare the work from our previous work.
The real magic of KPI is constantly looking for ways to improve and get better at something. Anything which is not working needs to be changed and for everything else it is good to keep everything constant.
Here are some KPIs which are working good for us, and might work for you too:
1) Conversion Rate
According to the study done by BigCommerce the average conversion rate is around 1 to 2% out of 100 visitors. This is quite alarming, and it is true because not many founders focus on conversion rate optimization.
The formula for calculating conversion rate is simple
Conversion rate = total sales / total number of visitors
For instance, if there are 1,000 visitors on your website, then your conversion rate will be 1%.
2) Gross margin
The second KPI is Gross Margin.
It is calculated as:
Gross Margin = Total Sales – total cost of goods sold.
Gross margin is the total profit benefited from each product that you sold.
The question arises, what is a healthy gross margin?
According to a study it was conclude that an average gross margin on $1 million sales is 40%, while on $100,000 it is 30%.
You can calculate gross margin from here.
3) Session Duration
If you have an engaging content on the website, your session duration will increase automatically. There are tools to improve your content marketing, you can use these tools to engage more users and keep them on the website until they buy something.
The average time of website is 3 minutes 24 seconds. If the user is spending less than this time, it means you need to work hard on the design on the website. You can even hire a digital marketing agency to take care of the content.
If you don’t have engaging check out pages or blogs with some valuable info why will the users stay on the website on the first place?
4) The traffic sources
This is one of the most ignored KPI that digital agencies and e-commerce website owners fail to realize. It is vital to know what the sources from are where the users are coming to your website and invest more time on those sources.
Not every social media medium is right for you, but you will learn this by trying out every social media platform. Try and work on every medium and see where your users are?
Whether it is direct traffic, email traffic, blog traffic, or the traffic which is coming from your Facebook ads. Once you know what to focus on it will help you to drive more traffic with the right keywords on your website.
5) Shopping Cart Abandonment
According to the study by Baymard it was concluded that around 69 out of 100 people abandon an order from the shopping cart page.
You can check the cart abandonment rate with Google Analytics, which is if you’ve enabled the smart enhanced e-commerce. Just go to Conversions >> e-commerce >> Shopping Behavior and you’ll see a visual funnel of shopping who abandoned your shopping cart before buying anything.
If you want few reasons which can force customers to abandon the cart are:
- The unexpected checkout costs.
- Not fulfilling the promises you’ve made.
- No security badges on the website.
- Endless registration forms.
6) Customer Lifetime Value (CLV)
The projected revenue that the customer spends in his whole life is the customer lifetime value.
If you calculate the total costs and compare it with your marketing and acquisition costs, this is what you will get.
You can easily get the CLV by Google Analytics. You can find the report by navigating to Audience and then to lifetime value.
7) Average Order Value
The average order can be calculated by total number of store sales and dividing it by total number of transactions. It is always good to work to increase the average order value because this will add more revenue in your overall conversion rate strategy.
8) Product Views per Session
What are the most viewed products per session?
If you don’t know what are the products with the most views, how can you offer more products from that category? Too many product views per session can also create some confusion to you. You need to track the customer and see what are they doing after viewing the product?
Are they having problem while placing the order? Or they are finding the price too high. You can capture all of this by knowing how many views you had on the product page and why are customers driving away from the page.
To bottom it up
There are tons of other KPIs which you can work on, but for now these are the most common and the most important e-commerce KPIs which are helping brands in creating big impact.
If your business is not growing it is time to re-consider your KPIs and know which of the KPIs are working for your brand and not. And if you’re using some KPIs which are working for you, feel free to list them out in the comments section below.