You have launched ecommerce business and created a webstore. This is how your work starts. But how to understand that everything is working properly and your online shop is successful? Figures are the answer. In today’s article, we will tell you about key performance indicators you should pay attention to.
What is Key Performance Indicator
Key performance indicator is a system of measurement to gauge the performance of your business. There are dozens of KPIs. So many that merchants get lost in them and decide to give up on their business measurement. The solution is to choose several indicators suitable for your business and monitor them closely. As an entrepreneur, you have a certain business strategy and goals. They can be based on your personal beliefs and preferences. The chosen KPIs should depend on the type of your business, its stage, and goals.
Key Performance Indicators for Sales
These indicators are important to understand how your business is growing and what can be done to increase sales and profit.
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- Sales. The number of sales by a certain period helps to understand an online shop performance. Annual sales deal with business strategy; quarterly sales show the seasonality; monthly sales track marketing efforts. Hourly sales help to identify the “gold” hour.
- Average order size. If you want to know how much your customers spend on a single order this metric is for you.
- Number of transactions. This indicator should be used with the previous one to receive complete information.
- Profit margin. It is probably the most important indicator. Sales themselves are not enough. You should understand what part of your sales is your profit so you will know how much money you can invest in further development.
- Market size. Compare your market size with the total market and you will see where to grow.
- Products affinity. Helps to increase the average order size by suggesting cross-sell products.
- Shopping cart abandonment rate. Knowing how many customers you lose will help you to understand why it happens and what can be done to prevent it.
Key Performance Indicators for Marketing
These indicators help to assess the effectiveness of your marketing efforts:
- Site traffic. We can add “no comments” to this point because everything is simple: the more traffic you have, the more webstore visitors you get. But check carefully your traffic source to make sure your customers are relevant.
- Time on site. Use this indicator to understand what is wrong (or right) with your webstore, what can be improved or simplified.
- Conversion Rate. Every customer is you webstore visitor, but not every visitor is your customer. Your purpose is to turn customers into visitors.
- First-time and returning visitors. After comparing the number of different types of visitors you will understand how to spend your marketing budget: is it better to attract new visitors or should you rather focus on the existing customers.
None of the mentioned metrics alone will give you a clear data about your business. Combine them to see the big picture. For instance, the conversion rate combined with time on site will help you to understand whether your customers leave the webstore immediately or they spend some time on it but don’t find what they were looking for.
Don’t ignore KPIs to see your business progress. Choosing the right indicators will help you to better understand your business and simplify the process of decision-making.