You’re passionate about what you’re selling. After all, you’ve spent countless hours crafting your online shop, propping up the virtual studs, and getting your brand out into the world. Building your inventory, setting up your site, and wearing every hat from CEO to merchandiser to customer support specialist hasn’t been a simple feat, but you’re along for the ride no matter where it takes you.
The thing is, though, you’re in this industry to give people whatever great goods you have to offer—but you’re also probably here to earn some money. While you’re having fun through all the ups and downs ecommerce can dish up, it’s important to remember to keep on track toward your growth goals.
No matter what stage you’re in, though, it can be tough to figure out exactly how to keep tabs on your growth and if you’re heading in the right direction. Instead of counting on your gut or that elusive feeling that everything might be heading in the right direction, it’s time to establish your store’s Key Performance Indicators, or KPIs.
Let’s explore KPIs, understand why they’re important, and which are a good fit for ecommerce stores like yours.
Why Key Performance Indicators Are Important in Ecommerce
What exactly is a Key Performance Indicator?
KPI.org puts it best: Key Performance Indicators (KPIs) are the critical (key) indicators of progress toward an intended result. KPIs provide a focus for strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most. As Peter Drucker famously said, “What gets measured gets done.”
(If you’re anything like me and wondered “Who is Peter Drucker and why are his words important?” I already looked into it. Drucker is referred to as “the man who invented management,” and he had a sincere desire to manage, measure, and get sh*t done. Just like KPIs.)
Establishing KPIs early on is, in short, key to avoiding total chaos down the line. They’re crucial to tracking your store’s growth (or catching a decline before it’s too late), and keeping an eye on metrics and milestones is the best way to create and finesse your strategies and tactics for the long haul.
Whether you’re on the cusp of opening up your digital doors or you’ve been selling online since dial-up, setting KPIs is an important step to any successful store. But what makes a good KPI?
Key Performance Indicators for any industry should:
Provide proof that you’re making progress toward your goals.
Measure what matters to help you make better decisions.
Be a constant that can be measured and compared against over time.
Track factors like efficiency, effectiveness, behaviors, performance, and economics.
In other words, if your KPIs aren’t measuring the factors that’ll help you hit your goals, you got the wrong KPIs, friend.
If you’re using a typical email marketing platform, you’re probably already being served data such as email opens, clicks, and unsubscribe rates. If your mission is to get really good at sending emails with high open rates, then these metrics will serve you well over time. But if you’re in ecommerce, I’m betting your goal is increasing customers, sales, and revenue—not hitting unsubscribe 0.
KPIs Every Online Store Should Track
Ecommerce is a competitive industry, and it’s only going to get tougher as more shoppers turn to the web to get what they want, when they want it. To make sure you’re playing the same game as your competitors, it’s important to focus on the same (or similar) KPIs.
While we listed the factors that make up a good KPI, we haven’t discussed what makes a good ecommerce KPI. In other words, what are the metrics that truly prove how an online store is performing?
Revenue Per Person
There are a lot of important factors that add up to signal a successful ecommerce store. The products sold, the advertising that goes into driving traffic, the usability of the website, the unseen logistics of getting goods into the hands of paying customers—there are lots of ecommerce cogs running in tandem that show a healthy online shop.
Above everything, though, online stores need one universal factor to succeed—revenue.
Revenue Per Person (or per visitor) is a critical KPI that indicates a few things.
How much is each site visit driving in revenue?
How well is your messaging aligned with shoppers?
One way to calculate RPP that takes conversion rate into consideration is like this:
RPP = Average Order Value x Conversion Rate
While this equation requires more figuring than simply dividing total revenue by total number of site visitors in a given span of time, it provides full context about what levers you need to pull to increase your RPP, e.g., should you focus on upping your AOV or your conversion rate right now?
Additionally, RPP is one of the best indicators of how well you’re targeting your messaging. If your conversion rate is low and causing your RPP to tank, you could have misalignment in messaging.
For example, imagine I’m a recent college grad being shown Facebook ads for trendy furniture fit for my new studio apartment. I click the ad, head to the website, and suddenly I see that these cute, hip chairs are actually $400 each—way out of my Ramen noodle budget.
If this high-end furniture store keeps sending college kids to its pricey website, odds are good that its conversion rate and, consequently, its RPP is going to be low. A more harmonious alignment between traffic and product would help improve their RPP and show a healthier KPI.
Average Order Value (AOV)
Average Order Value just played a pretty big role in determining Revenue Per Person, but it’s an important KPI to pay attention to all on its own. Keeping track of AOV helps online sellers understand how much their customers buy in a single visit as well as how much product is in a typical order.
Determine Average Order Value by dividing total revenue by total number of orders over a specific amount of time.
AOV = Total Revenue / Total Orders
If an online store is selling products priced between $10 and $25, a thriving AOV would be $25 or higher. If that store’s AOV is $11.50, though, that might be a reason for concern. From that number, they can see that customers are mostly ordering a single lower-priced item, which isn’t ideal. In a dream world, customers would be leaning on higher-priced items (and more of them).
A store’s AOV can help drive important decisions about marketing and optimization. For example, maybe the store in the tale above is spending too much money or time marketing its lowest-priced item and the strategy should be shifted to a more segmented one.
Ecommerce retailers should watch this KPI at least weekly, preferably daily, to establish a baseline AOV and catch any fluctuations. In Drip, retailers can also track the AOV for people who are first-time and repeat purchasers in order to develop strategies specific to levels of customer loyalty. By understanding what is driving dips and spikes in AOV, sellers will have a better idea about which strategies to employ or optimize.
Working toward steadily increasing AOV is one way to increase Revenue Per Person, so getting a baseline established early by tracking this KPI from the day the store opens could be a huge help.
Customer Lifetime Value
Customer Lifetime Value, or CLTV, helps ecommerce retailers understand how much the typical customer will spend during their relationship with the brand. Knowing how much a customer is “worth” informs things like how much to spend on acquiring that customer.
For instance, it would be important to know that the average CLTV for your store is $25 so that you wouldn’t spend beyond that in paid ads or other marketing strategies. When looking at CLTV for various segments of a customer base, it becomes even more clear which types of customers have higher CLTV (and could be worth that extra ad spend).
Calculate your Customer Lifetime Value by using this equation:
CLTV = Average Order Value x Purchase Frequency x Customer Lifespan
Your CLTV will also depend on what your product price point is as well as what industry you’re in. It’s important to hone your messaging and marketing to focus on those customers who will bring the most long-term value to your store, and CLTV is one KPI that will show you who that is.
Average Time to Purchase
This KPI is exactly what it sounds like. Average Time to Purchase is the average amount of time it takes someone to buy something from your store after they visit your site for the first time. As a store owner, understanding how many times someone has to visit your shop before heading through the checkout is critical information to building your best strategies.
Less than half—roughly 40%—of your customers will buy something during their first trip to your store. This means that the majority of your customers-to-be need some extra nudging back to your shop before they’re compelled to convert. Keeping an eye on this KPI will tell you just how many visits or touch points it takes to win over your shoppers.
Percentage of Overall Revenue Attributed to Email
At Drip, we’re big fans of rock-solid email marketing strategies. Weaving a personalized and timely email marketing plan into your overall ecommerce marketing could be the difference between thriving or diving.
If you aren’t sure whether email really has much of an impact, it’s time to start tracking this KPI. This metric is just as it sounds—it shows how much of your revenue can be directly linked back to your email efforts. This KPI exposes how much your shoppers engage with your email and what type of email content drives people back to your store.
This KPI may seem like the most esoteric of the bunch—after all, how do you track something as intangible as loyalty—but in ecommerce, there are numbers you can keep tabs on that indicate brand affinity.
A true indication of customer loyalty is the number of times a customer returns to buy from your store. Someone who never purchases isn’t demonstrating customer loyalty—they might be just getting familiar with your brand. In contrast, someone who has rung up purchases three or more times is well on their way to long-time loyalty.
Inside of Drip, easily see who’s made 0 purchases, 1 purchase, and 2+ purchases.
The tipping point between passive and loyal customer happens with the second purchase. While a first-time customer is fantastic, ecommerce retailers should always be optimizing to boost the number of repeat purchasers in their customer base. A loyal, repeat customer means long-term revenue for an online store, and that’s definitely a KPI to be happy about.
How to Measure Your Ecommerce KPIs
Knowing what to measure is a key starting point for ecommerce marketers, but KPIs don’t mean anything if you don’t have the tools you need to track and understand them over time.
Sure, you can try and string together heaps of data with homegrown spreadsheets or Google Analytics, but then you’re left staring down numbers with little understanding. It’s only with accurate tracking and clear explanation can you gain real insight (and take real action) from the metrics you measure.
At Drip, we’ve set out to make tracking and understanding your ecommerce KPIs fast and simple. Our in-app metrics dashboards put critical information front and center, so you’ll always be able to see how your most impactful KPIs are stacking up.
The Account Dashboard Measures Customer Loyalty
One of your most important KPIs is customer loyalty. While we talked about how “loyalty” might seem like an impossibly intangible piece of data to grab, one measure of loyalty is tracking how many times a customer buys from you.
Drip’s Account Dashboard reveals the number of people who’ve come to your store and have not purchased, have made only one purchase, and have made two or more purchases. Not only does the Account Dashboard clearly show you how many people are in each cohort and how they’re migrating from one to the other, this dashboard also reveals a couple other KPIs you’ll want to watch:
- Average Order Value of each cohort
Watching what AOV looks like for your different customer cohorts is important in understanding who your most valuable customers are. Do your first-time or loyal customers spend more with you on each order? Where should you prioritize your marketing spend?
Average items per order by each cohort
Are your repeat customers piling up more goodies in their virtual carts than first-timers? This metric helps paint the full picture of repeat purchasers, and can help inform your ecommerce offers to help get more loyal customers in your store.
Average days to 2nd order (2+ order cohort only)
How long does it take someone to come back and make that second purchase? The Account Dashboard dishes this data to help sellers understand how fast people come back to buy again. This will also help sellers optimize their strategies to drive that number down over time.
Strategies driving first and repeat purchases
The Account Dashboard in Drip goes beyond showing these stats by also showing which strategies are driving the numbers. Which workflows, emails, or campaigns are getting folks to make their first or second purchase? How can you make those strategies even better or more comprehensive of the entire buyer journey?
Each of the components displayed on the Account Dashboard in Drip gives ecommerce retailers much-needed insight into how people are actually moving through the customer journey. With a full-color picture of which marketing strategies are driving people from passive shoppers to loyal customers, store owners don’t have to guess which tactics to optimize or create.
Drip’s Revenue Metrics Help with Attribution
As an ecommerce store owner, you invest a lot of resources into the tools that make your store tick. From your storefront to your payment processor to your shipping logistics and marketing tools (hi!), not only can your SaaS bills stack up fast, but you might find yourself short on time as well.
The Revenue Dashboard in Drip is designed to take the guessing out of how your hard work is paying off. At a glance, sellers can see how much revenue their store has raked in over the past 7 or 28 days—and how much of that revenue came right from workflows, campaigns, and broadcasts in Drip.
Real-time revenue attribution is critical in helping you decide where and how to spend your resources, and it’s also kinda neat to see your marketing creations turn into real money for you and your business.
Website Metrics Covers the Must-haves
Having access to your ecommerce marketing KPIs is important, but it’s good to keep an eye on your essential website metrics as well. Inside of Drip, users can quickly get an idea about their website performance with traffic and subscription analytics front and center.
In one dashboard, see data roll in like:
First-time visitors tracks the number of unique visitors to your website.
Top traffic sources show the highest performing referral page that has resulted in web subscriptions.
Highest performing pages lists the URLs with the highest amount of web subscriptions through a form.
Form opens: The number of times a form widget was opened either automatically or by a web visitor.
Form closes: The number of times an opened form widget was closed by a web visitor.
Web subscriptions: The number of times a web visitor subscribed to your email list by submitting a form. This number reflects both form widget and embedded form submissions.
Web conversions: Tracks the total number of identified web visitors who subscribed to your email through a form and who also eventually triggered a conversion.
Cohort subscription rate: Tracks the number of first-time visitors who eventually triggered a web subscription / first-time visitors.
Cohort conversion rate: The number of visitors who made their first visit during the time frame and later converted. This number is calculated by dividing the number of people who converted / the number of people.
Even if these metrics didn’t make your KPI list, they help to develop a truer picture of what’s happening with your online store. The more data you have—and the more context you have around it—the easier it is to discover which marketing efforts to ramp up, how to optimize your strategies, and where your growth and customer acquisition are coming from.
KPIs to Focus on for Your Ecommerce Website
We’ve spent time talking about must-watch KPIs that are inherently ecommerce-specific. But beyond tracking customer loyalty or Average Order Value, there are certain metrics you should also be watching when it comes to your website.
After all, before you can nurture anyone toward customership, you need traffic to your site. Then, when traffic starts rolling in, you need people to give you some bit of information so you can start nurturing them. Much like the marketing experience, you should always be optimizing the website experience so that browsing and buying is as seamless as possible.
Imagine your online store in brick-and-mortar context. If the corner shop has great marketing to lure you into the store but the aisles are in disarray and everything is out of stock, you’re probably going to bounce outta there in no time.
Creating a fluid and frictionless user experience is just as important as the plan you hatch for post-conversion nurturing, so let’s explore some of the KPIs you should be tracking for your ecommerce site.
Ecommerce brands can’t sell anything if no one is going to their website. Each new site visitor is another opportunity to gain a loyal customer, so the more the merrier when it comes to traffic. As mentioned before, Drip’s own Traffic Analytics dashboard can help you understand how much traffic your site is getting as well as where it’s coming from.
If your visitor count is low, it’s time to sit down and analyze the tactics you use to drive traffic to your site. If you’re foregoing content creation and relying on paid advertising, it could be that your audiences need to be adjusted for a better-fitting customer base. If you are creating content—blog posts, video series, a killer GIF game on Twitter—it might be that what you’re creating isn’t resonating with people or with Google’s search algorithm.
Planning and executing a Search Engine Optimization (SEO) strategy will help boost where your store ranks in search engine results pages, and it will help establish your brand as an authority in your niche. With the right content featuring the right keywords, more people are bound to find your website, start browsing, and boost your sales.
Social Media and Referral Traffic
Speaking of website traffic, it’s important to know where all the people popping by your site are coming from—whether that’s social media, email engagement, paid ads, organic traffic, or beyond. Tracking where visitors (hopefully, your soon-to-be customers) are coming from helps you know a few things when forming your marketing campaigns:
Which marketing channels you should prioritize
Where you should be spending your resources
What your customer base’s journey looks like from start to finish
Gaining a grasp on where your customers are when they find out about your ecommerce brand is crucial to spending your time and budget wisely. Without clear understanding and too much trusting your gut, you could risk putting money into ads or content where your customers aren’t even looking.
Your site’s conversion rate is an important factor to dig into as it could tell you a lot about your website. As mentioned, inside of Drip, Subscription Analytics shows how many identified site visitors subscribed to your email and triggered a conversion.
However, a “good” conversion rate should be put in context of what you’re selling. If your store is stocked with high-priced luxury refrigerators, for example, you might have a lower conversion rate when compared with a store selling low-priced commodities like phone cases or fidget spinners.
No matter your niche, tracking conversion rates early on will help establish a baseline that you can use to set goals, e.g., 10% increase over the next 12 months. If your conversion rates plateau or take a dive, it’s time to investigate what’s causing the friction between site visitor and call to action.
Conversion Rate Optimization (CRO) is the process of making it easier for your site visitors to do what you want them to do, whether that’s signing up for your newsletter, subscribing to a service, or buying some of your products. If your website is clunky and confusing, if your buttons don’t work, or if your links are broken, odds are good you won’t rack up a fat conversion rate any time soon.
If your conversion rate is suffering, it could be time to test variables along the customer journey. Sometimes a headline isn’t enticing enough, or maybe the CTA button doesn’t stand out enough for visitors to notice. Button color, headline copy, or your offer are just a few of the factors you should test to try and boost your conversion rate.
Heads up! Test only one factor at a time, though, so that you know which change to your site caused an impact to your conversion rate (and you aren’t left guessing which changes helped or hurt).
Start Tracking Ecommerce KPIs Today for Growth Tomorrow
You’ve already hit one mega goal out of the park—start your very own ecommerce company! You’re taking an idea and turning it into a reality. Establishing and tracking your KPIs, though, is the next step that takes your ecommerce brand to an ecommerce success.
Key Performance Indicators show you how your store is growing, how your customers are engaging with your brand, and where you can optimize your marketing campaigns. Collecting crucial KPI data and having the context to know what to do with them makes all the difference between taking a dive or thriving.
At Drip, we want your online store to be as big of a success as your can dream. Giving you the data dashboards and the tools to react are just some of the ways we’re helping you revolutionize ecommerce.