Beyond sales and profit: KPIs that measure the success of your eCommerce venture
Imagine you need to drive to an unfamiliar destination for some urgent work. Since you are thorough and like to plan, the previous night you dust off a physical road map and study the route. Your trip happens to coincide with your temporary detox from devices, so you decide to see if you can do it the old-fashioned way. The next morning you set out confident about reaching your destination in a few hours. Just a few hours into the journey, you begin to realize that the trip isn’t going as planned. There are unforeseen roadblocks, bad roads, and other glitches. You decide to end the digital detox, switch on your phone and turn on the GPS. With more accurate and detailed information and alternate routes at hand, not only is your navigational experience much superior, but you also manage to reach your destination much faster.
Now take this analogy and view it in the context of your eCommerce business. In this case, the GPS would be the key performance indicators or KPIs that tell you if the business is headed in the right direction, and if no, where you need to change track. KPIs are crucial metrics, especially when it comes to eCommerce since digital marketing is all about accurate and actionable insights that can help you make strategic decisions at the right time. Effective KPIs are well-defined, quantifiable, easy to calculate, and available in real-time. While measuring the performance of a campaign, the emphasis is usually given to obvious KPIs like sales, profits, and traffic, etc.
4 KPIs that measure the success of your eCommerce venture:
Conversion rate: One of the top KPIs in eCommerce is the conversion rate or the rate at which consumers make a purchase indicates how effective your strategies are in getting people to actively engage with your brand. For instance, your campaign might be getting a lot of clicks and traffic to your website, but it is the rate of that traffic converting into actual sales that makes the real difference.
Cost of customer acquisition: The cost of customer acquisition is derived by calculating your marketing spend and the number of leads generated. For instance, you might spend $500 and get 50 sales in a campaign. This would get your average cost of customer acquisition to be $10. Knowing how much you are spending on marketing, advertising, and other outreach to get one customer on board can help you decide how effective your strategies are and how healthy you are as a company.
Customer lifetime value: This refers to the estimated spending of an average customer on your brand over his/her lifetime. It can help you build a long-term connection by taking measures to increase the value of the customer and improve their experience with your brand. This is of utmost importance to companies selling products that are of a subscription nature or require regular servicing, purchase of accessories, upgrades, etc. A company’s overall revenue strategy and cost per customer acquisition are reliant upon these metrics.
Average order value: Average order value is the spending by customers on your website or mobile app. Tracking the average amount that a customer spends on transactions can help you decipher their preferences. Cross-selling and targeted marketing can get them to spend more as well. The major eCommerce brands deploy tactics like showing past purchases, similar products, recommended products alongside the products that a customer adds to the cart. This can often lead to a higher average order value.
Adobe Analytics is a comprehensive digital analytics system that works across several platforms, draws data from multiple sources, and helps you get a unified view of your customer. From knowing about their preferences, their perception, and other granular insights, you get an overall picture of what they like or don’t like about your brand. The metrics such as conversion rate, specific customer value, most profitable categories, and transaction frequency can help you determine how effective your strategies are and what you need to do to stay on top of things to become a successful eCommerce business. To understand more, visit NVISH Solutions.