Understanding E-Commerce Data: The Essential KPIs

This article was written by Mary Hutto who is a writer for TechnologyAdvice. She studied English/Writing at Western Kentucky University. She lives in Westfield, Massachusetts and often contributes to blogs as a guest writer. She also enjoys writing creative nonfiction, fiction, and poetry in her spare time.

Businesses in the modern age are increasingly trading their brick-and-mortar locations for e-commerce stores. While this can be a very profitable way to engage with customers, building an online presence can be challenging. How do you make the public aware of your product? How do you attract them to your website? How do you know if your efforts are working?

What many business owners do not realize is that there are a number of data points available for online stores that can be used to establish key performance indicators (KPIs). In other words, a handful of essential KPIs can provide valuable insight into the effectiveness of your marketing campaign, the usability of your website, potential clients’ interest in your products, and where there is room for improvement.

Web Traffic

Tracking the number of people who visit your website is the first step in determining whether you are actually reaching potential customers. When you start an e-commerce business, your web traffic will probably be fairly low at first because potential customers do not know you are there. However, where there is a healthy business model with good products or services that properly advertises, web traffic and sales should grow over time.

Keep in mind that simply comparing the number of people visiting your website from one month to the next may not give a completely accurate picture. Sometimes there may be a lull in sales due to factors outside your control. For example, if you are in the business of selling lawn mowers, you probably should not be surprised by a decrease in traffic to your website during the winter months when grass is not growing. However, if your web traffic for the month of May is significantly lower than the traffic from May of last year, there may be a cause for concern. That is why it is important to track and compare these numbers over time.

Network Referrals/Clickthrough Rate

Most social media networks have a way for business owners to track the number of people who visit your company’s website by clicking through from your social media advertisements. This data is valuable for determining which social media applications are actually generating new customers. By comparing the number of clickthroughs to your website from each social media page, you can determine which page is generating the most potential clients and how to reallocate your advertising funds.

Sales Conversion Rate

Because advertisers are often charged for each time a potential customer clicks on your ad, this type of advertising cost can get expensive. Your ad may be doing its job by getting people to visit your webpage, but if those visitors are not actually interested in the product or service you are selling, then you are wasting valuable advertising dollars. How many of the people visiting your website are actually making purchases?

If you have plenty of web traffic but no customers, it is a sign that something is wrong. Try visiting your own webpage and clicking through each link to verify that (a) it is working properly, (b) the steps to making a purchase are logical and do not require the customer to provide more information than necessary to complete a purchase, and (c) your instructions and product descriptions are clear, understandable, and easy to locate.

If the website is easy to use and functioning properly but your visitors still are not making purchases, it may be that the language in your ads is misleading or subject to more than one interpretation. It may be that your prices are too high. Perhaps you are not successfully explaining to potential customers why they need your product or service.

Percentage of Returning Customers

The best business models offer products or services that attract new customers while finding ways to keep them wanting more. They are the businesses whose customers return time and time again and/or attract new customers through word of mouth. For every returning customer or customer attracted by word of mouth, you will need to spend less money on your marketing budget in order to keep your business afloat. By having each new customer open an account through your web page, you can easily track the number of new or returning customers on an ongoing basis.

Customer Acquisition Cost (CAC)

When analyzed correctly, your customer acquisition cost is one of the most important performance indicators to consider when attempting to determine whether you have a healthy, sustainable business model. You find the customer acquisition cost by calculating the amount of money spent on marketing during a given time period and then dividing it by the number of customers who made purchases during that same time period. This will tell you how much it costs for you to acquire customers under your current marketing campaign strategy. Many customer relationship management (CRM) tools and marketing automation will calculate CAC for you, and you can get software recommendations that fit the needs of your agency here.

While calculating the customer acquisition cost is fairly simple, it can be difficult to determine whether your marketing campaign is worth the cost, and this makes knowing your CAC even more important. It may not make sense to spend $2.00 for each new customer you acquire if you are making an average of $1.50 per purchase. However, spending $20.00 per client acquisition is a small price to pay if you sign $2000/mo contracts that last 6 months to several years.

It may also be worth the investment—even if you lose money at first—if you are a new business trying to establish first time buyers or a well-established agency trying to expand into new territory with new product offerings. In order to make this judgment, you need to analyze the customer acquisition alongside other KPIs including startup costs, staffing needs, and program manufacturing needs.

Gathering your most essential KPIs and keeping track of them in a sales and marketing dashboard is the first step to moving the needle on your e-commerce store. Start with these to get a read on your company’s sales.