Analyzing statistical data when you’re not an expert is difficult, but if we are talking about an online store or an eCommerce shop, the challenge gets even more complicated because first, we must know what data we are interested in analyzing. It’s not as simple as downloading a spreadsheet and you’re done – no, you have to see what KPIs or performance indicators we’re interested in looking at; then know how to interpret that data. But don’t panic! Throughout this post, we’ll help you understand what a KPI is and hopefully, give you a better understanding of what the basic KPIs are for an eCommerce shop or online store.
What are KPIs or performance indicators?
We all understand what a “Performance Indicator” is. It’s a fact or figure that tells us the benefit or advantage we get from a particular action. So far so good. For example, a performance indicator for physical activity at the gym would be the maximum number of beats per minute our hearts can pump. So, we have some data that gives us some information that tells us what to do depending on that data: working out harder or taking a break to prevent a heart attack. In the business sense, it’s the same. A KPI will give us data and depending on what it tells us, is how we’ll act and what kind of strategy to prepare.
To better define what it is, a performance indicator is a tool that precisely determines the relevant health of a business or an eCommerce shop in our specific case.
Characteristics of all good KPIs
The performance indicators of a business should be:
- Measurable: can you even imagine “unmeasurable” metrics?
- Quantifiable: something that can be measured or quantified. If we were talking about money, we would quantify it depending on the currency: EUR, USD, etc.
- Specific: only measure one specific thing. Let’s not overdo it.
- Measurable in time: we should be able to choose if we measure it by the day, week, month, or year.
- Relevancy: depending on the business type.
The first thing we should do as an online business owner is to figure out what KPIs interest us. Start with a consultant or auditor for the eCommerce shop. However, if we do not have the resources for an audit, there are a few performance indicators that about 90% of businesses find it useful to measure. Pay attention!
Basic KPIs to bear in mind if you have an eCommerce
Let’s finally get the checklist we’re really looking for. What do I have to keep an eye on to see if my online store is doing well?
ROI: Return on investment
Return on investment is in the name, but to get things straight, this KPI will tell us the economic value generated as a result of any marketing activity. In other words, this indicator will measure the results of our investment. Basically, whether we have made a profit or not depending on what we’ve spent. This KPI is quite interesting if we invest in Google Ads and/or Social Ads campaigns since we will be able to figure out if it’s worth it to continue spending money on them, increase/decrease our investment, or get rid of it altogether.
Average Order Value (AOV)
Easy. It’s the result of dividing sales by the number of transactions; thus, obtaining an average value of each sale either globally or through different and specific channels. If we segment it by channels, we’ll get information on whether your customers are spending more (on average) on certain channels and try to understand your target audience better.
Customer Lifetime Value (CLV)
This KPI gives us the “engagement” and this is the capacity that a brand or product has to create in order to establish a solid relationship with its consumers or users. This metric gives us an idea of the total number of purchases that a potential customer would make over a period of time if they remained loyal to the brand or product, but remember that this KPI is relative! A customer who buys a little over many years is more interesting for us than someone who only buys once and spends more money. What we try to achieve with this indicator is to organize a future projection based on the behavior patterns of our own customers.
Cost per Acquisition (CPA) or Cost per Share
We sell, yes, but that process requires a series of actions that cost us an investment of money, time, and resources. In other words, we don’t get our sales for free. With the CPA (Cost per Acquisition) we know how much it costs us to get a new customer and how much those strategies that we make to get new contacts (what in marketing we know as leads) based on a buyer’s persona.
We will see the real impact of our paid advertising campaigns, which are almost always necessary and beneficial if we do them well. If we don’t know how to do a good PPC campaign (because let’s be honest, it’s something complicated), we can resort to free tools or apps that help us with these investments in getting paid traffic.
Sales Conversion Rate
This is the star figure, the one that shows us at the end of the day the profitability of our eCommerce shop, and our goal, of course, is to make this number as high as possible. It is obtained by dividing the number of sales by the number of visits to a channel. However, don’t worry because normally this rate does not exceed 2% in most businesses, so if you get a number lower than 3 or 4% … You’re doing fine!
Shopping Cart Abandonment Rate
Data from various studies indicate that the abandonment rate of shopping carts/baskets is 79%, a very high figure. Why? It could be due to the shipping costs or the lack of information about a product — this is why we must always try our best to understand our goal as much as possible with a good customer journey and a good buyer in mind, as mentioned previously. How many people put something in the shopping cart but then leave it there and exit out? This is an important piece of data, especially to know the reasons and make the necessary improvements in our eCommerce shop so that this percentage can be reduced as much as possible.
Now that you know the most important KPIs to measure the performance of your business, you may want to know more about how to increase the conversion rate of your eCommerce shop. Okay, maybe your brain is fried after all those numbers and indicators, but at least knowledge doesn’t take up space!