The 9 most important KPIs for e-commerce
The KPIs (Key performance indicators) are that set of fundamental metrics that allow you to effectively monitor the progress of the business, giving the possibility to track the performance of a specific activity over time.
Tracking and analyzing these indicators correctly allows those involved in e-commerce to make more informed and informed decisions regarding marketing, site interventions, customer satisfaction and operations.
Although there are an infinite number of metrics on which to focus, in this article we will go into detail the N most important, in our experience, for the purpose of 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 contains in a single shot a series of other metrics (discussed below) and allows you to effectively monitor how much the site is capable of generating from each single visitor.
Its formula allows us to obtain the average spend 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, subscription to the newsletter, etc.).
Considering the purchase as a conversion action, this metric directly affects the revenue per user and should be increased as much as possible.
Average cart / Average order ⬆️
AOV = (Total revenue / Number of purchases) €
This metric examines the average value of orders placed on e-commerce. This value, together with the 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 a huge cart in some cases could penalize both the conversion rate and the revenue per user
Margins on the service / product sold ⬆️
P = (Price - Taxes - Cost) €
It may seem strange, but we forget about this factor: to have an online business it is important that the difference between price and cost of products or services is adequate.
An online business faces many costs outside 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 make it impossible to advertise and therefore let the products collect dust in the warehouse without anyone ever being aware of their existence.
Cost per click ⬇️
CPC = (Cost of the advertising campaign / Number of visitors obtained) €
Unlike the previous metrics, which can also be calculated regardless of the traffic sources used, the cost per click is specific to each individual campaign / group of ads / advertisement .
Normally it must be as low as possible and should never exceed the general 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 CPC. very high but enjoy a much above average conversion rate.
Cost per acquisition ⬇️
CPA = (Cost of the advertising campaign / Number of conversions) €
This metric is also absolutely specific to the campaign / group of advertisements / advertisement being examined; thanks to this value it is immediately clear whether the campaign has all the credentials to generate profit.
If the CPA is greater than the margin on the product or service for sale, the campaign must be stopped immediately!
It follows that keeping an eye on the cost of acquisition becomes fundamental for the success of the business: a CPA lower than the margin on the product will allow us to profit and scale advertising campaigns, otherwise we will incur economic losses.
Customer lifetime value ⬆️
CLV = (Average order X Purchase frequency X Margin / Churn rate)
This is certainly the most underestimated metric by most e-commerce.
Thanks to this indicator, it is possible to derive the value generated by the individual customer over time once acquired.
With the CLV it is therefore possible to determine the target CPA of the marketing companions 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 / Ad Spend)
Unless product margins are stellar or the business does not pay taxes, it is good practice that the ROAS is always greater than 2.
In fact, this metric indicates how much revenue corresponds to advertising spending and if these are not at least double the amount invested, it is evident that something is wrong.
Return on investment (advertising) ⬆️
ROI = (Net Profit on Products-Services / Ad Investment)%
This is definitely the final metric you can't escape from.
Not constantly monitoring or calculating the ROI on campaigns and also on the entire e-commerce in general means throwing money out of the window.
Return on investment is vital for any business including e-commerce. Based on this indicator, all business and marketing decisions must be made.
It is normal that in an initial phase or in the testing phase this KPI can assume more or less negative values; but if this condition continues over time, it is evident that one or more changes of course are necessary.