KPIs Every Ecommerce Brand Must Track πŸ‘€

published on 19 May 2021
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E-commerce is growing faster each day. Whether its through Amazon FBA, direct-to-consumer Shopify merchants, or omni-channel marketplaces including Target, Walmart and Ebay - the growth is immense, compounding and accumulating more and more. With that comes increased competition, more ways to acquire customers and tougher for brands to differentiate themselves. It's no secret that the brands that focus on metrics, driving decisions with data and measuring performance, are higher equipped to be successful. No matter the size of your company or number of products / services you sell, knowing the critical metrics to track and how to track, can be just enough to separate from the pack.

What are the most important KPIs to track?

1. Conversion Rate

Conversion rate is the best way to answer the question, How well does my website convert traffic? It's a great metric for evaluating the performance how the collective marketing efforts to bring customers to the site, and what your site does next, to get them across the checkout finish line. Once you have a good grasp of how well or not well this metric performs on your site, you can develop conversion rate optimization (CRO) strategies to decrease the friction on the path to conversion. This come in the form of creating dedicated landing pages, A/B testing customer experiences, and offering a number of engagement activities to push the customer to purchase (e.g. offers, promotions, call-to-actions (CTA), etc..)

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2.  Lifetime Value

Customer lifetime value - CLTV or LTV - is the common dinner conversation, where, no matter who you ask, they will say they know what it is. But, when you ask how they track it, you'll get anywhere from questionable faces to various conflicting methods. To make it simple, LTV is the total dollars (revenue) collected by a customer over your entire relationship, minus the costs associated with acquiring or maintaining that relationship. It could be said that this is the most important metric to track because it will tell you how much you can spend to acquire more customers, given the higher the number, the higher the ROI. 

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3. Average Order Value

Average Order Value (AOV) is the total number of dollars collected over the total number of orders, by your customers. It points directly to what products customers are purchasing, those price points, and how many of those products / services are in their cart each purchase. Deploying strategies such as order minimum for free shipping, bundling products, or upselling complementary products in the customer buying journey, can help boost this metric as well as learn about your customer buying behaviors.

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4. Repeat Rate

In a perfect world, ecommerce brands acquire new customers cheaply and retain customers for a long time. Due to the ever-increasing competition and the customers' ability to switch brands, it's becoming harder to execute on both of those objectives. As the business rule goes "The cost of acquiring a new customers is 7x more expensive than keeping a current customer". Also, case studies have showed us that repeat customers tend to spend more, easier to understand your product and new features of it, and help promote your business. The great Bain & Co pointed out that by increasing customer retention by just 5%, a company's profitability will increase by an average of 75%. That alone shows how critical it is to track how often your returning customers purchase against your total customer base.

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Next Steps

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