While we all realize the importance of a well-performing e-commerce website and budget-friendly advertising in a successful business endeavor, do we know how to get there? There are numerous factors that are involved in the development of a successful business. Given how technologically dynamic we have become, a company’s success hinges on its ability to grow its online presence. Businesses ought to monitor a wide variety of metrics, known as KPIs or key performance indicators, to ensure that their eCommerce solutions are always providing their customers with a positive experience.
Here are 15 key performance indicators that will help you realize if or not your e-commerce website is progressing in the right direction.
What is meant by “key performance indicators” for online stores?
Key performance indicators (KPIs) for eCommerce KPI dashboard serve as landmarks in revealing how far down the road of success an online store is. Each company’s key performance indicators (KPIs) for electronic commerce will be tailored to its own unique set of objectives. Upon determining these key performance indicators, an e-commerce website must undergo consistent monitoring. Bounce rate, time on site, cost of client acquisition, shopping cart abandonment rate, and conversion rate are all examples of key performance indicators in the realm.
Why do key performance indicators matter so much?
Although it may be tempting to rely on tried-and-true methods, it is critical to remember that each eCommerce’s success mantra is unique. This is essentially why you should start looking for common solutions that are tailored to your specific demands. Moreover, you should focus on intermingling several KPIs rather than focusing on a single KPI because this might affect the overall performance of your e-commerce website.
A list of the 15 most important KPIs for online stores
There are numerous resources at the disposal of users if they wish to monitor their businesses by analyzing the key performance indicators. To help you set out on your journey toward an efficient e-commerce website, here is a list of 15 key performance indicators.
1. Rate of change
It is natural that you would like your visitor to become a paying customer. But do you know what needs to be done in order to surpass the typical worldwide conversion rate of between 1% and 3%? Well, progressing with a strategy and properly directing them can be a game changer. Even if you’re unable to achieve the highest mark, an improvement from your previous performance can benefit you greatly.
It is possible to boost the conversion rate through intuitive calls to action, A/B testing for changes, and streamlining the purchasing process. But it is also important to keep in mind the fact that building brand loyalty among clients should always be the top priority.
Here are three things to keep in mind:
- Establish and work toward clear objectives.
- Never settle for just one approach.
- Try to identify what works best for your company by trying different things.
2. Churn Rate
People may end up forming a negative impression of your business if they encounter any unpleasant reviews online. On the other hand, they might remember your company fondly and seek your services again and again if you are able to bring outstanding services to their table.
In order to be able to please your customers to the core, building trust with your clientele can prove to be of great help because it is only by understanding their demands that you can conform to their expectations. This could enable you to convert browsers into buyers and further into repeat customers. So, to prevent customers from encountering an unpleasant experience, you must adopt a multi-channel customer care system.
Churn rate refers to the percentage of subscribers who cancel their service after a certain period. The greater the satisfaction of customers, the lower the churn rate. For a SaaS business, the ideal churn rate is 3–8% per month.
3. Bounce rate
Bounce rate is a key performance indicator that measures the proportion of people who visit a website and then leave right away (as measured by Google Analytics). It helps businesses analyze if their e-commerce website is appealing enough and if their services are sought after by consumers. Consequently, an increasing number of “bounces” indicates that visitors are leaving a particular site because they do not find its products or services worthwhile.
4. Amount of Repeat Business
A company’s success depends on repeat business, because one can’t just rely on new customers every single time. The only way to ensure that your customers return to you is to provide high-quality goods or services. This key performance indicator enables businesses to measure the frequency with which previous consumers repurchase similar goods from a store.
Several customer-focused actions, such as informing buyers of product updates and encouraging them to return, have been shown to enhance the return rate, apart from providing some kind of discount, of course. Even a return of 20% is satisfactory, but anything above 35% is considered desirable.
So, it’s high time you recognize the value of repeat consumers and provide them with attractive offers to continue making purchases on your e-commerce website.
5. Net Promoter Score
Consumers will speak highly of your business and promote it for absolutely no cost if you provide them with high-quality services or products. It is also likely that your satisfied clientele will recommend you to their friends. However, if customers are unsatisfied with your services or products, you may draw criticism from them in the public domain, thereby affecting your reputation. An effective marketing strategy relies heavily on word-of-mouth from satisfied consumers.
The performance indicator known as “net promoter score” measures how likely consumers are to suggest your business to others. But there’s one thing that you definitely need to keep in mind, which is that no matter how appreciated your services are, there is always room for improvement. Your net promoter score (NPS) will also depend on how well you handle these types of complaints.
6. Average profit margin
In order to succeed, online stores must categorize their inventory based on which goods bring in high and low profits. But it is only possible to derive such conclusions when you are constantly tracing the performance of your goods and services. The measurement of average profit margin paints a clear picture of the business’s overall profitability and can help a business owner allocate resources more effectively.
7. Shopping Cart Abandonment Rate
While your e-commerce website may witness numerous visitors, you must realize that the typical desertion rate is 69.99%. Customers who shop online and want to pick up many goods at once can use the virtual cart offered by most retailers. The selected items are then transferred to digital shopping carts, into which they can add products at any point in time and go on to complete their purchase by placing their orders by directly entering the payment gateway.
Shopping cart abandonment rate is a KPI for online stores, indicating the percentage of visitors who enter but do not make a purchase. So, how can you reduce this?
Online data shows that email remarketing, guest checkout, and no hidden fees are three approaches to cutting down on cart abandonment.
8. Customer lifetime value
Customer lifetime value (LTV), one of the key performance indicators for online businesses, guides their approach to customer retention. When compared with how one can retain one’s customers, it becomes explicit that attracting new customers can cost you more than you could have imagined.
Nevertheless, you can still win the trust of more customers by serving your existing ones. Maintaining relationships with current clients is crucial to any company’s financial health because the review of your services will impact your growth in the future.
The lifetime value of a customer and enables businesses to calculate the lifetime value of a client and thus get insight into how much money a customer is likely to spend with the company. The formula for arriving at your customer lifetime value is as follows:
Average gross margin x (Transaction1, Transaction2, Transaction3,… TransactionN)
9. Cost per acquisition
One of the key financial metrics for e-commerce enterprises is the cost per acquisition (CPA), or the amount of money spent to bring in one new consumer. This key performance indicator (KPI) displays the typical expense incurred to acquire a single paying client across all channels. It is important to remember that your current worth in the eyes of your customers determines your worth as perceived by your prospective clients.
10. Average order value
As an eCommerce development key performance indicator, “Cost Per Acquisition” may help you calculate how much it will set you back to acquire one new client. You can track performance metrics such as the number of purchases made by your ideal consumers or the amount they spend on your website. The AOV (average order value) measures this very thing.
One of the most important KPIs in the eCommerce KPI dashboard is AOV because it provides insight into customers’ purchasing habits, product pricing, and online advertising spending that can be used to inform data-driven business decisions. Instead of losing money on garnering new clients, businesses should adopt innovative business strategies that can help them improve the average order value.
Here are a few ways in which businesses can do this:
- Increasing the price of the goods
- Incentivizing customers to spend more
- Enhancing their checkout experience
11. Rate for adding to cart
Instead of trying to attract visitors to your e-commerce website, try to shift your attention to the appropriate kind of people and persuade them to add products to the cart. This key performance indicator (KPI) helps businesses measure the number of times visitors add items to their virtual shopping carts. Discovering the added-to-cart rate can benefit you in many ways, a few of which are mentioned below:
- If people are really interested in buying your products or services.
- If the product price quoted by you is reasonable.
- If your products suffice to meet the demands of your customers.
12. Return or refund rate
When customers are not satisfied with your services or products, it is natural that they will ask for refunds, and returns are standard practice. However, if customers continue to send back your products and constantly demand refunds, this can hinder the smooth functioning of your business. As a key performance indicator (KPI) in e-commerce KPI dashboard, the return or refund rate measures the percentage of orders that are cancelled or returned by customers. If you observe that the number of returns is higher than average, you must try to fix the flaws in your offerings. Use this formula to figure out the percentage of returns and refunds:
Return on Investment (RR) = [(Current Value – Original Value) / Original Value] x 100
13. Revenue per visitor
Revenue per visitor is a KPI that helps businesses arrive at the average amount of money made from each visitor to their eCommerce website. It offers an instant glimpse of the performance of an eCommerce website, which in turn helps fix any problems. You can calculate your business’ revenue per visitor using the following formula:
Total revenue divided by total number of visitors over a given time period equals revenue per visitor.
14. Customer satisfaction score
When attempting to learn about the health of your eCommerce company, you must first determine how satisfied your customers are, because your business can only grow if your customers are satisfied with your services. If you can guarantee 100% consumer happiness, you can rest assured that your ecommerce website is going to rule the respective niche.
So, the question that is most likely to crop up in this regard is: “How can customer satisfaction be measured?” To calculate customer satisfaction, add up all of the scores and divide by the total number of respondents.
15. Return on investment (ROI)
When you invest your hard-earned money and your precious time into creating something, it is implied that you will wish for it to succeed. But how do you measure success with respect to your investments? A good measure to use in eCommerce development is return on investment (ROI). This metric is monitored in the following ways:
(Net Profit – Cost of Investment) / 100 = Return on Investment Ratio
What this implies is that a higher return on investment translates to greater profitability because what you gain is much higher than what you have invested.
Frequently asked questions
What are the three categories into which key performance indicators are classified?
Quantitative indicators can track performance metrics for an online store. Qualitative indicators provide a broad picture of the health of an eCommerce website. Leading indicators help predict the results of a process.
How do you define quality key performance indicators?
The best key performance indicators (KPIs) for online retailers are those that are open, applicable, comparable, inexpensive, simple to understand, verifiable, and responsive.
Will B2B and B2C eCommerce use the same key performance indicators (KPIs)?
Since the marketing approaches of business-to-business and business-to-customer ecommerce websites can vary, the performance indicators will also differ between the two. While key performance indicators (KPIs) for business-to-business (B2B) online stores include the number of visitors, time spent on the site, percentage of visitors who make a purchase, percentage of sales made online versus in stores, cost per customer acquisition, and number of abandoned carts, KPIs in business-to-consumer businesses are visitors, clicks, page views, and new customer acquisition cost.