Running an ecommerce business requires a lot of effort and dedication. However, in order to ensure your ecommerce store can achieve success, you have to measure its overall performance and identify the key factors that influence success. These key factors are called key performance indicators or KPIs. In other words, KPIs are metrics that are the most important to your ecommerce business.
They allow you to effectively measure which aspects of your business are driving success and whether or not there’s room for improvement, so that you can generate even more revenue. For ecommerce websites, driving sales and generating profits are the main factors that determine a successful business. That’s why you must focus on monitoring KPIs that will indicate whether or not your strategies are working in helping you achieve success. Here are a few KPIs to monitor on your ecommerce site.
Converting leads into customers in one of the main goals of every ecommerce website. Your marketing efforts, promotions and custom offers have a purpose of generating leads and taking those leads to your website where they’ll purchase your products, thus becoming your customers. Measuring the conversion rates indicates how effective your marketing strategies and campaigns are. For example, if you manage to turn 10 leads into customers out of 1000, then your conversion rate is only 1%.
This may seem like a very poor conversion rate, but the fact is that an average conversion rate for most ecommerce stores is 1% to 2%. If your conversion rates are falling behind, it means you must rethink your approach, as well as improve your marketing efforts to convince more leads to convert into customers. Moreover, you can also track minor conversions that have the potential to lead to sales, such as email subscriptions, downloads, and others.
Web traffic is also an important KPI to measure on your ecommerce site. This metric indicates the number of visitors you get on your website. The more visitors you have, the better the chances of driving more sales. However, there are a few factors you must consider when monitoring website traffic. That being said, it can oftentimes become difficult to watch everything. In that case, you can use a reliable KPI dashboard to keep track of anything of relevance to your business.
For instance, average time spent on your pages and pages viewed per visit shows how engaging your content is. Also, the number of unique and returning visitors shows who’s here for the first time, and who’s returning to your website and why. In addition, you must monitor a bounce rate, which shows how many visitors are leaving the moment they land on you pages and why. The bounce rate below 40% is actually considered good.
Customer acquisition and lifetime value
Another important KPI for ecommerce business is the customer acquisition costs (CAC). This metric points out how much it costs your business to acquire a new customer. You can combine the cost of sales and marketing efforts for a month, and then divide that number by the number of customers you’ve gained during that month. This will indicate the capital required for your ecommerce business to get a new customer. Moreover, you need to monitor yet another important KPI, and that’s customer’s lifetime value (CLV).
This metric helps you understand just how much profit you gain from a single customer during their lifetime. In other words, the gross profit, or the revenue your business gains during a lifetime of a single customer. The main reason you must monitor these two KPIs is that it shows you how much it costs you to gain new customers, and how much you gain from these customers in return. If the costs of acquiring new customers exceed their lifetime value, then perhaps you need to work on your customer retention strategy.
Cart abandonment rate
Cart abandonment KPI is very important for ecommerce websites. The main reason to track this metric is that it shows you how many visitors have abandoned their shopping carts before they’ve completed the purchase. An average rate of cart abandonment is 69.23% for ecommerce stores. This KPI indicates that there’s probably an issue with your checkout process that drives people away.
For example, additional shipping costs, lack of security during checkout, lack of multiple payment options and so on. These are all issues you can address to simplify the checkout process and make it more convenient for your customers. It’s also important to attend to this matter before it gets out of hand.
Monitoring the right KPIs for your ecommerce business is essential in understanding what factors drive your business success. It’s also important for realizing if the strategies you’ve implemented are actually driving results or not. When monitoring essential KPIs, you’re able to improve your tactics and ensure business success for your ecommerce store.