Every business wants to grow and make progress. But how do you know you’re on the right track? You need to measure your business performance in order to see how you’ve been doing and how you can get better. As the saying goes, what gets measured gets improved.
However, you want to make sure the metrics you choose to focus on are right for your business goals. Trying to measure everything will make your head spin. The trick is to identify and focus on a few key performance indicators, or KPIs, to keep tabs on progress.
For ecommerce entrepreneurs, learning how to create an ecommerce website is only the first step. You’ll soon find out that your ecommerce store generates so much data, it’s hard to separate the signal from the noise. By narrowing your focus to the key metrics, you can truly measure your business performance and achieve your goals.
Greater Business Goals
It’s great that you want to measure the progress of your business, but in what way do you want to make progress? What are your business goals?
When it comes to identifying performance indicators, your business goals need to be specific. Instead of aiming for general business growth, get specific. Do you want to increase sales? Increase conversion rates? Improve customer service?
Make sure your goals are SMART: significant, measurable, agreed upon, realistic, and time-based Good examples of ecommerce goals include boosting sales 15 percent in the next quarter, increasing the conversion rate 2 percent by year end, or reducing customer service emails by 50 percent.
Company’s Stage of Growth
Companies just getting off the ground have much different priorities than more established businesses. Early-stage companies are typically more concerned with validating the product market fit and the business model, while later-stage companies are busy exploring metrics like cost per acquisition. Keep your KPIs relevant to your business’s current stage of growth.
Industry and Business Model
Just as KPIs differ among businesses in different stages, they also vary depending on the industry. For example, a software-based business is probably more concerned with customer churn than an ecommerce apparel store.
Business models also play a role when developing KPIs. You wouldn’t expect B2B, SaaS, retail, consulting, and online publishing businesses to have the same metrics. For ecommerce businesses, the most common KPIs revolve around order value, conversion rate, and days or visits to purchase.
Key Metrics Means Key Metrics
Your key performance indicators should be precise, effective, and narrow. With all the available data at your fingertips, it’s easy to get lost in the sheer volume of information available about how to measure your business performance.
Don’t make the mistake of trying to track everything. By tracking everything, you’re essentially tracking nothing. Measure what matters. Track what is truly important to your business that will help you make improvements.
Recommended KPIs for an Ecommerce Website
In no particular order, here are some of the most common KPIs for an ecommerce business according to Metrilo:
-Conversion Rate: The percentage of users who complete a desired action, such as making a purchase.
-Average Order Value: The average dollar amount spent per customer order.
-Cart Abandonment Rate: The percentage of users who bounce from a cart check-out page without making a purchase.
-Days and Visits to Purchase: How many days or website visits it took a customer to complete a purchase.
Remember, not all data is valuable data. Social media followers and other vanity metrics are only part of the story. It’s better for your business to choose what’s best to track based on your own goals, stage of growth, industry, and business model. By focusing on your key performance indicators, you can grow your ecommerce business more quickly and efficiently.