The 9 most important KPIs for e-commerce
KPIs (Key Performance Indicators) are a set of fundamental metrics that allow you to effectively monitor business performance, giving you the ability to track the performance of a specific activity over time.
Properly tracking and analyzing these indicators allows e-commerce businesses to make more informed decisions about marketing, site interventions, customer satisfaction, and operations.
While there are countless metrics you can focus on, in this article we’re going to take a detailed look at the 9 most important ones, in our experience, for acquiring new customers through online activities.
Revenue per user ⬆️
EPV = (total revenue/number of website visitors)€
This, in our experience, is the most important metric of all regarding the website, as it includes in one shot a series of other metrics (addressed later) and allows you to effectively monitor how much the site is capable of generating from each individual visitor.
Its formula allows us to obtain the average expenditure of each visitor on our website, giving us an idea of the maximum amount we can pay to bring a visitor to our e-commerce (CPC).
It is very important to try to maximize its value by all possible means.
Conversion rate ⬆️
CR = (Total Conversions/Number of Website Visitors)%
As per definition, the conversion rate indicates the percentage of visitors who on average complete the conversion action considered (purchase, newsletter subscription, etc.).
Considering the purchase as a conversion action, this metric directly impacts revenue per user and should be increased as much as possible.
Average order value ⬆️
AOV = (Total Income/Number of Purchases)€
This metric looks at the average value of orders placed on e-commerce. This value, along with CR, also affects revenue per user.
Unlike the two previous indicators, however, trying to increase the average cart does not always bring a benefit. Prices that are too high or purchase conditions that push towards an excessive cart could in some cases penalize both the conversion rate and the revenue per user.
Margins on the service/product sold ⬆️
P = (Price - Taxes - Costs)€
It may seem strange, but we forget this factor: to have an online business it is important that the difference between the price and cost of the products or services is adequate.
An online business faces many costs outside of the product itself, such as logistics and management costs, and it is important to have the right space especially to be able to move with effective social marketing campaigns .
Not having the right margins can therefore determine the impossibility of advertising and therefore leave the products to gather dust in the warehouse without anyone ever knowing of their existence.
Cost per click ⬇️
CPC = (Cost of advertising campaign / Number of visitors obtained)€
Unlike the previous metrics, which can also be calculated independently of the traffic sources used, the cost per click is specific to each individual campaign/ad group/ad .
Typically, it should be as low as possible and should never exceed the overall EPV on the website, but this is not always the case: there are traffic sources where clicks can cost even fractions of a cent but which will rarely generate conversions, while there are placements with very high CPCs that however enjoy a conversion rate well above average.
Cost per customer acquisition ⬇️
CPA = (Advertising Campaign Cost/Number of Conversions)€
This metric is also absolutely specific to the campaign/ad group/ad being examined; thanks to this value it is immediately clear whether the campaign has all the credentials to generate profit.
If the CPA is higher than the customer's lifetime value , the campaign should be stopped immediately!
It follows that keeping an eye on the acquisition cost becomes fundamental for the success of the business: a CPA lower than the margins will allow us to have a profit and scale the advertising campaigns, otherwise we will incur economic losses.
Customer lifetime value ⬆️
CLV = (Average Order X Purchase Frequency X Margin / Churn Rate)
This is definitely the most underestimated metric by most e-commerce companies.
Thanks to this indicator, it is possible to obtain the value generated by the single customer over time once acquired.
With the CLV you can therefore determine the target CPA of marketing campaigns with more precision, also taking into account the future purchases that the customer will make on average on our store.
Return on Ad Spend ⬆️
ROAS = (Revenue / Advertising Spend)
Unless your product margins are stellar or your business requires paying taxes, it is good practice to always have your ROAS above 2.
This metric in fact indicates how much revenue corresponds to advertising expenditure and if these are not at least double the amount invested, it is clear that something is wrong.
Return on investment (advertising)⬆️
ROI = (Net Profit/Advertising Investment)%
This is definitely the final metric that you can’t escape.
Not constantly monitoring or calculating the ROI on campaigns and also in general on the entire e-commerce means throwing money away blindly.
Return on investment is vital for any business including e-commerce. All business and marketing decisions should be made based on this indicator.
It is normal that in an initial phase or in the test phase this KPI can assume more or less negative values; but if this condition were to continue over time, it is clear that one or more changes of direction are necessary.
