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Six Important eCommerce Key Performance Indicators (KPI’s) And Metrics To Track

Six Important Ecommerce Key Performance Indicators (KPIs) And Metrics To Track

For every business organization, not knowing where you are can be a limiting factor. This means you can’t determine areas left for improvement and what needs to be added. Key Performance Indicators (KPIs) are like pointers. As an entrepreneur, they help you know what progress you have made in sales, marketing, and customer service goals. This will help you better prepare yourself and your employees for change. Metrics are basically used to measure things. They are the factors you use when calculating KPIs. For example the number of sales. In calculating KPIs, it is important that your final data relates to your goals. This requires careful and precise calculations and interpretation. Additionally, what you calculate should be applicable to your business and should elicit some form of change or action. Here are 6 important Ecommerce Key performance indicators:

1)Shopping cart abandonment rate: On average, about 70 out of 100 orders are abandoned before being completed. There are certain factors that could make a person cancel their order. Some of them are: website error, too long registration form, seeing unexpected costs on checkout, declined cards etc. You can easily calculate the shopping cart abandonment rate using the following metrics:

1 – [(No. of Completed Transactions) ÷ (No. of Shopping Carts Created)] x 100 = Cart Abandonment Rate percentage. Using this formula, you can calculate the percentage of shoppers that place things in the cart and fail to checkout. This will sure save you a lot of money.

2)Conversion Rate: Your conversion rate is the percentage of people that took action on your site. Actions like signing up for a newsletter, making a purchase. Basically, your conversion rate measures how well your website is able to encourage people to take actions. While you are tracking micro-actions, be sure they will eventually lead to macro actions like the purchase of products etc. When you know your conversion rate, you will be able to know ways to improve your landing page so people can be encouraged to take an action. To calculate your conversion rate, (No of conversions ÷ No of leads) × 100. You can then work to increase your conversion rate by working on your landing page so it can spur people to action.

3)Customer Acquisition Cost (CAC): Basically, this refers to how much it costs you to get a customer. Knowing your CAC will help you know the number of customers you wish to have for a particular time period. This will help you plan your marketing budget more effectively. With this knowledge, you won’t end up spending more on marketing and less profit. To calculate your CAC, Amount of Money Spent to Acquire Customers ÷ No. of Customers Acquired.

4)Average Order Value (AOV): You can increase revenue generated when you encourage your customers to spend more when making a purchase from your store. This means you have to improve your Average Order Value which is a measure of what your customers are willing to spend. Increasing your AOV might involve you having to persuade customers to purchase something more expensive or add to their order. You can also offer discounted prices so they can buy more products or set a minimum spend threshold with discounts. To calculate your Average Order Value, divide your total revenue by the total no of orders i.e Total Revenue ÷ Total No. of Orders = Average Order Value


5)Customer Lifetime Value (CLV): this parameter determines how much a customer is worth to your business. With this value, you will be able to calculate your ability to retain customers over a long time. To calculate this KPI, you have to calculate 3 other average from your metrics: 1)Average order value 2)No of times a customer purchases per year on average 3)Average buyer retention time in years or months. With this average scores, you can then multiply the values to get your CLV. i.e (Average order value) * (Average number of times a customer purchases per year) * (Average buyer retention time in months or years) = Customer Lifetime Value )


6)Gross Profit Margin: No business can survive if it doesn’t make profits. Profits are what determines if your business is succeeding. This means the amount of revenue (money generated from sales) minus the amount you spent on sales. From here, you can calculate your Gross Profit Margin. With this value, you can have enough money to put back into your business. To calculate, you first calculate your profit: Revenue- Cost. Next step is to calculate your Gross Profit Margin: (Revenue – Costs) ÷ Revenue x 100

Six Important eCommerce Key Performance Indicators (KPI’s) And Metrics To Track
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