What Are the Top 8 Most Strategic KPI for eCommerce?

This article was first posted on LinkedIn on October 4, 2019.

In order to be in control of your eCommerce, you need to know if you are making progress toward your goals, if there is an area of marketing activities or a website performance that should concern you, and how your campaigns are performing compared to the benchmarks. You need to have a clear view of what is working in your strategy and your processes, and what is not. To get that picture, you don’t need any possible metric generated by your eCommerce platform and Google Analytics. You need to focus only on a few key metrics, usually called eCommerce KPI (Key Performance Indicators).

There are no absolute rules on what are the key metrics that you should monitor as KPI. Only experience, and your current marketing strategy, can guide you in selecting your KPI.

There are no general rules on what are the metrics that deserve to be observed and monitored as KPI, only experience, and your strategy can define your KPI. Nevertheless, there is a set of KPI that are shared among almost all eCommerce managers.

Here is my list of the most popular KPI for eCommerce.

1. AR = Shopping Cart Abandonment Rate (Percentage)

This is a critical KPI that measures how effective is your website conversion process. It’s a measurement of the percentage of shopping carts that, after being created by visitors, are abandoned. According to several sources, the average value for AR is about 70%. But this number can larger or smaller based on your specific target market.

The most common reasons provided by users for the abandonment of the cart are:

  • 34% Just browsing
  • 23% Issues with the Shopping Cart
  • 18% Price Too High
  • 15% Purchase in a Regular Shop
  • 6% Issues with the Payment System
  • 4% Technical Issues
Shopping Cart Abandonment Rate
Shopping Cart Abandonment Rate

2. CR = Conversion Rate (Percentage)

The Conversion Rate measure how effective is our eStore in converting visitors to customers. How frequently a visitor generates a transaction by placing an order. According to reliable sources, the average Conversion Rate for an eCommerce is between 2.6% and 3%. Those values are indicatives, and each vertical market has a specific conversion rate range.

Conversion Rate
Conversion Rate

3. CAC = Customer Acquisition Cost

This KPI measures the average cost of acquiring a new customer. By definition, this is an estimated cost. If your marketing has been active on several channels for quite some time, the cost for the acquisition of a customer can only be estimated. Nevertheless, it is an important parameter to measure how effective is our marketing in getting more visitors to our website and how effective is our eStore in converting those visitors into customers.

Customer Acquisition Cost
Customer Acquisition Cost

4. AOV = Average Order Value

This KPI measures the average order value, or transaction amount, for an order. Not all eCommerce merchants have full control of the price of the single product sold. There are two ways to increase this KPI: one is to try to have customers to buy multiple items on each order, the second one is to try to move the customers to more expensive products (upsell).

Average Order Value
Average Order Value

5. CLV = Customer Lifetime Value

Customer Lifetime Value is usually abbreviated with the acronymous CLV, or CLTV, or LTV. It is the average net value (profit) extracted from a user during his relationship with our brand and eCommerce. To estimate the duration of a relationship can be challenging, depending on the type of market in which we operate. For some vertical market, a customer makes a purchase every 2 or 3 years, making this kind of measurement less meaningful.

CLV = Customer Lifetime Value
CLV = Customer Lifetime Value

6. GP = Gross Profit Margin (Percentage)

The Gross Profit Margin is the percentage of the revenues that is left after paying the Cost Of Goods Sold, Processing Costs, and Shipping Costs.

Gross Profit Margin
Gross Profit Margin

7. RPV = Revenue Per Visitor

The revenues generated by a single visit to our eStore.

Revenues Per Visitor
Revenues Per Visitor

8. RV = Returning Visitors (Percentage)

The percentage of returning visitors is an important parameter. It describes how effective we are at retaining visitors. Generally speaking, the higher, the better. But if the number of returning visitors goes over 60%, then we should become concerned about our ability to attract new customers and therefore to grow our business.

RV
Returning Visitors (Percent)

Marketing Specific KPI

The list above is focused on Sales Performance. The listed parameters are strategic also for the marketing department, but marketing people might want to monitor also the following KPI:

  • Site Traffic
  • Time on Site
  • Bounce rate
  • Pageview per Visit
  • Social Media Followers & Engagement
  • Average Position on SERP

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Franco Folini lives and works in the eCommerce territory, a wild area between the Kingdom of Technology and the Kingdom of Marketing. He speaks fluently the language of both realms. For many years, Franco has been helping people bridge the divide and successfully collaborate.

If you want to find out more about Franco, visit his LinkedIn profile or send him an email folini[at]gmail.com