14 ecommerce KPIs every online business needs to track
When you have an online business, you don't have the traditional key performance indicators (KPIs) that come with a physical location: customers walking through the door, a register till with money, shelves to restock. No, ecommerce KPIs are a different beast altogether.
Your ecommerce site may not have the visual cues that a brick-and-mortar retail location has, but it does have many KPIs that can help you stay on top of your online business. Let's look at what KPIs are, and then we'll dive into the most critical metrics for your ecommerce site.
What are key performance indicators?
In business, a key performance indicator (KPI) is a metric that tells you how well your company is achieving a specific objective. For example, most retailers have a few KPIs they track no matter what:
- Customer satisfaction
- Number of sales for the day, month, and year
- Amount of time it takes to move inventory
- Store traffic
While your ecommerce website can benefit from the above metrics, you might also have specific product goals you want to track. This is where you would set custom KPIs.
For example, let's say you just release a new shoe line. Your KPIs for this shoe would be things like number of shoe sales, customer returns for new shoes, customer satisfaction with new shoes, and repair requests for new shoes.
Such metrics are vital to understanding the item’s performance, and more broadly, your company’s overall health.
Why KPIs are important
KPIs are significant for several reasons. While KPIs are useful as an overall metric of success in a particular area, their usefulness goes well beyond this. Here’s why you want to track ecommerce KPIs:
- Build customer loyalty: When you have KPIs in place, you're naturally going to be more in tune with your business. As such, it’s easier to track customer satisfaction and build customer loyalty.
- Drive customer retention: With improved customer loyalty comes improved customer retention. KPIs let you track what matters most to your customers and ensure your business is on the right path.
- Boost your bottom line: Performance is in the KPI name for a reason. When you're tracking KPIs and making sure things stay in the green, you'll likely have a better overall bottom line.
- Track progress: When you don't have a physical store, it can be difficult to "see" your progress. KPIs allow you to keep your fingers on the pulse of your business, online or offline.
Tracking KPIs is a lot like knowing what symptoms to look out for with an illness. If you're tracking the right things and making sure nothing falls by the wayside, you're going to be healthier overall. That said, you still need to know which ecommerce KPIs to track.
14 ecommerce KPIs to track
Every online business is different, but there are still numerous ecommerce KPIs that you should track, no matter your niche. While some of these ecommerce metrics may not be as significant to your business as they are to another, they’ll still give you a better picture of your company.
A conversion rate is a percentage representing the rate at which people go from passive looker to active participant. For example, if you're on a landing page of your ecommerce site, the conversion rate would be the number of people who visited that page and went on to click or take the desired action. The desired action could be providing their email address to download an ebook, signing up for a newsletter, or entering their information to get a sales inquiry — you set the action.
Be sure to track the conversion rate for any marketing initiatives or social ads. Doing so will provide data you can use to compare against future efforts. If one campaign or ad has a better conversion rate than another, learn from that and recreate that success.
2. Customer acquisition cost
Your customer acquisition cost is the amount of money required to get someone through your sales funnel, qualified as a lead, and converted to an actual customer. This is a particularly important KPI for companies engaging in costly marketing campaigns, as you want to ensure you're spending as little as possible to acquire new customers.
To find your customer acquisition cost, select a period of time. Then, take the number of new customers acquired in that period and divide your marketing costs by the customer count.
Industries have varying customer acquisition costs, so don't get hung up on how much other companies are spending on customers unless they're in your immediate niche.
3. Social media engagement
Social media engagement is a measure of your brand's overall performance on social networks. This is crucial for gauging your general brand visibility on social channels, and optimizing your marketing strategies.
There are several social media metrics you can track to determine your overall social media engagement. No matter the platform you're using — Facebook, Twitter, Instagram, Reddit, or others — you want to look at how many people like, share, and comment on your posts.
Depending on the platform, you should also know how many people have seen the post. Compare this with the number of likes, comments, and shares to see which posts perform the best. Like conversion rates, learn from these posts and work toward replicating any successful activities.
4. Customer lifetime value
The customer lifetime value (LTV) is a measure of how much money your company can expect to make from an individual customer based on their total number of orders, purchasing frequency, and time with your company. This valuable KPI can be combined with your customer acquisition cost to see if you're spending more to acquire customers than they'll ever spend with your company.
To find your customer lifetime value, there are four pieces of information you need to figure out:
- Average purchase frequency rate: Total purchase in a time period ÷ unique customers in the same period
- Average order value (AOV): Total company revenue in a time period ÷ total purchases by a customer in the same period
- Average customer value: Customer purchase frequency rate x average purchase value
- Average customer lifetime: Go through existing data and make your best guess here
Once you have this information, you can find your customer lifetime value by using this formula:
Customer lifetime value = Customer value x Customer lifetime
The importance of your customer lifetime value can't be stated enough. It tells you the financial value of customers to your business, which is essential to understanding if you're spending too much on customer acquisition.
5. Bounce rate
Search engine optimization (SEO) is the practice of creating content and optimizing your website so that it performs well on Google. For example, if you want to show up for "best shoes," you would want to use SEO best practices to rank for "best shoes."
A big part of SEO is the bounce rate, which is a measurement of how often people are landing on a page of your site and leaving without taking any action. A low bounce rate sends positive signals to Google that your site is giving people what they want when they arrive. In other words, it indicates that your site should probably be one of the top results for the term people are using to get there.
6. Time on page
Another important SEO metric to track is the time on page, which measures how long people spend on a particular page of your site. If people are hanging out on a page, this tells Google that your page is the right fit for the term people are searching.
Use Google Analytics to track your time on page and bounce rate to get a clear picture of how your pages are performing. If the bounce rate is high (think 80% and up), but the time on page is solid, you're at least attracting an engaged audience. Look at pages with a high time on page and low bounce rate to see where you can recreate that same success.
7. Shopping cart abandonment rate
A high shopping cart abandonment rate could point to a discrepancy between your product page and the checkout process.
It's not uncommon for people to leave stuff in their shopping cart at a store, and the same can happen in ecommerce. Your shopping cart abandonment rate will let you know how frequently this happens.
High shopping cart abandonment rates often indicate a hindrance between the product page and the checkout page. Perhaps it’s an issue with your checkout process, such as too many fields to fill out or a confusing layout. Or, maybe people are landing on the checkout page and realizing there are numerous fees or high shipping costs.
Use heat mapping tools to track where people are leaving on the checkout page to help identify the issue. Also, consider sending an email reminder or discount code to shoppers who were logged in with items in the cart.
Pay-per-click (PPC) is how much you spend whenever someone clicks one of your sponsored ads online. These are typically through Google but can be through other advertisers as well.
When using PPC tactics, you'll want to look at your cost-per-click (CPC), which is how much each click from a user costs you. If you're spending several dollars a click and noticing your conversion rate is still low, this is a sign your PPC isn't worth the money.
Ad spend can quickly get out of hand, so keep a close eye on your CPC and PPC to ensure your money is well-spent and rewarded with a stable conversion rate.
9. Net promoter score
The net promoter score (NPS) is a metric created by Satmetrix. This score is an overall measurement of how customers feel about your brand, and their experience with your brand.
The NPS factors in three types of customers: promoters, detractors, and passives. These three groups represent people who share and promote your brand, those who dislike your brand and speak out against it, and those who are neither enthused nor unhappy.
Boosting your NPS is a multi-pronged approach, requiring you to engage with people on social media, encourage positive sharing of your brand, mitigate damage in forums, and more.
10. Number of visitors per day and month
You should be tracking your number of visitors per day, week, year, and beyond. You can find your website traffic by looking at your site manager’s analytics tab, or through Google Analytics. Look at your page views as well as unique page views.
Pay attention to how many customers are "coming to your business" between these two figures. Doing so can give you an idea of overall interest in your company.
11. Traffic sources
When looking at the number of visitors to your site, be sure to track the traffic sources. You can do this through surveys or Google Analytics, which allows you to see if people are coming from referral sources (other pages on your site), organic (SEO efforts or organic search), or paid traffic (PPC).
This ecommerce KPI is especially useful when combined with your total number of visitors, as it tells you where the bulk of your efforts are paying off. For example, if you have a hefty ad spend and notice 90% of your traffic is organic, you can likely cut back on PPC spending.
12. Click-through rate
The click-through rate (CTR) is the percentage of people who click a link in an email or landing page after seeing it. The higher the CTR, the more people there are clicking a link after arriving on it. (That's a good thing.)
Your CTR can be useful for several reasons. First, it tells you if a marketing campaign is working. If you're spending a small fortune to create targeted emails and the CTR is 0%, that's money thrown in the trash.
Second, your CTR can be useful for optimizing existing efforts. Like the other ecommerce KPIs on this list, track where your CTR is higher, and learn from it. Then, A/B test and recreate that success.
Lastly, CTR can deliver added insight when paired with your traffic sources. For instance, if you notice your CTR is high on a landing page with a link to a sales page, you can then look at your traffic sources on that sales page and see what percentage of people are converting to a paid customer. This information, coupled with your CTR, can help with attribution and determining if your overall campaign is effective.
13. Email open rate
Some say email marketing is a dying art, but it's still an effective way to reach your dedicated email list. Perhaps one of the most crucial email marketing metrics is your open rate. Open rate is exactly as it sounds: the rate at which people open your emails upon receiving them.
A low open rate often points to issues with your subject line. If you notice your open rate is declining, try mixing up your subject lines. Personalization can also increase your email open rate.
14. Email unsubscribes
Track your email unsubscribes, which is the rate at which people are leaving your email list. If you notice an influx of people unsubscribing, people are likely losing interest in your brand or seeing little value in your emails. But don't panic.
This is an opportunity to do two things. First, reach out to your email list with a survey and ask for feedback to learn how you can improve your content. Next, use heat mapping to see where people are leaving or clicking in your email. You’ll get an idea of what's working and what's not, allowing you to lean more heavily into what's working.
Finding ecommerce success with KPIs
While no two online businesses are exactly alike, the ecommerce KPIs on this list are worth tracking. Build a checklist with the KPIs mentioned (or add some of your own), then implement them one-by-one to better monitor your brand’s performance. Your initial setup will take time, but you'll be rewarded with a clearer picture of your business, happier customers, and ecommerce success.