Key Performance Indicator (KPI)
Key performance indicators (KPIs)
Key performance indicators (KPIs) are like milestones on the road to online retail success. Monitoring them will help ecommerce entrepreneurs identify progress toward sales, marketing, and customer service goals.
KPIs should be chosen and monitored depending on your unique business goals. Certain KPIs support some goals while they’re irrelevant for others. With the idea that KPIs should differ based on the goal being measured, it’s possible to consider a set of common performance indicators for ecommerce.
What is a performance indicator?
A performance indicator is a quantifiable measurement or data point used to gauge performance relative to some goal. As an example, some online retailers may have a goal to increase site traffic 50% in the next year.
Relative to this goal, a performance indicator might be the number of unique visitors the site receives daily or which traffic sources send visitors (paid advertising, search engine optimization, brand or display advertising, a YouTube video, etc.)
Types of key performance indicators
There are many types of key performance indicators. They may be qualitative, quantitative, predictive of the future, or revealing of the past. KPIs also touch on various business operations. When it comes to ecommerce, KPIs generally fall into one of the following five categories:
- Customer service
- Project management
What are key performance indicators for sales?
Sales key performance indicators are measures that tell you how your business is doing in terms of conversions and revenue. You can look at sales KPIs related to a specific channel, time period, team, employee, etc. to inform business decisions.
Examples of key performance indicators for sales include:
- Sales: Ecommerce retailers can monitor total sales by the hour, day, week, month, quarter, or year.
- Average order size: Sometimes called average market basket, the average order size tells you how much a customer typically spends on a single order.
- Gross profit: Calculate this KPI by subtracting the total cost of goods sold from total sales.
- Average margin: Average margin, or average profit margin, is a percentage that represents your profit margin over a period of time.
- Number of transactions: This is the total number of transactions. Use this KPI in conjunction with average order size or total number of site visitors for deeper insights.
- Conversion rate: The conversion rate, also a percentage, is the rate at which users on your ecommerce site are converting (or buying). This is calculated by dividing the total number of visitors (to a site, page, category, or selection of pages) by the total number of conversions.
- Shopping cart abandonment rate: The shopping cart abandonment rate tells you how many users are adding products to their shopping cart but not checking out. The lower this number, the better. If your cart abandonment rate is high, there may be too much friction in the checkout process.
- New customer orders vs. returning customer orders: This metric shows a comparison between new and repeat customers. Many business owners focus only on customer acquisition, but customer retention can also drive loyalty, word of mouth marketing, and higher order values.
- Cost of goods sold (COGS): COGS tells you how much you’re spending to sell a product. This includes manufacturing, employee wages, and overhead costs.
- Total available market relative to a retailer’s share of market: Tracking this KPI will tell you how much your business is growing compared to others within your industry.
- Product affinity: This KPI tells you which products are purchased together. This can and should inform cross-promotion strategies.
- Product relationship: This is which products are viewed consecutively. Again, use this KPI to formulate effective cross-selling tactics.
- Inventory levels: This KPI could tell you how much stock is on hand, how long product is sitting, how quickly product is selling, etc.
- Competitive pricing: It’s important to gauge your success and growth against yourself and against your competitors. Monitor your competitors’ pricing strategies and compare them to your own.
- Customer lifetime value (CLV): The CLV tells you how much a customer is worth to your business over the course of their relationship with your brand. You want to increase this number over time through strengthening relationships and focusing on customer loyalty.
- Revenue per visitor (RPV): RPV gives you an average of how much a person spends during a single visit to your site. If this KPI is low, you can view website analytics to see how you can drive more online sales.
- Churn rate: For an online retailer, the churn rate tells you how quickly customers are leaving your brand or canceling/failing to renew a subscription with your brand.
- Customer acquisition cost (CAC): CAC tells you how much your company spends on acquiring a new customer. This is measured by looking at your marketing spend and how it breaks down per individual customer.
What are key performance indicators for marketing?
Key performance indicators for marketing tell you how well you’re doing in relation to your marketing and advertising goals. These also impact your sales KPIs. Marketers use KPIs to understand which products are selling, who’s buying them, how they’re buying them, and why they’re buying them. This can help you market more strategically in the future and inform product development.
Examples of key performance indicators for marketing include:
- Site traffic: Site traffic refers to the total number of visits to your ecommerce site. More site traffic means more users are hitting your store.
- New visitors vs. returning visitors: New site visitors are first-time visitors to your site. Returning visitors, on the other hand, have been to your site before. While looking at this metric alone won’t reveal much, it can help ecommerce retailers gauge success of digital marketing campaigns. If you’re running a retargeted ad, for example, returning visitors should be higher.
- Time on site: This KPI tells you how much time visitors are spending on your website. Generally, more time spent means they’ve had deeper engagements with your brand. Usually, you’ll want to see more time spent on blog content and landing pages and less time spent through the checkout process.
- Bounce rate: The bounce rate tells you how many users exit your site after viewing only one page. If this number is high, you’ll want to investigate why visitors are leaving your site instead of exploring.
- Pageviews per visit: Pageviews per visit refers to the average number of pages a user will view on your site during each visit. Again, more pages usually mean more engagement. However, if it’s taking users too many clicks to find the products they’re looking for, you want to revisit your site design.
- Average session duration: The average amount of time a person spends on your site during a single visit is called the average session duration.
- Traffic source: The traffic source KPI tells you where visitors are coming from or how they found your site. This will provide information about which channels are driving the most traffic, such as: organic search, paid ads, or social media.
- Mobile site traffic: Monitor the total number of users who use mobile devices to access your store and make sure your site is optimized for mobile.
- Day part monitoring: Looking at when site visitors come can tell you which are peak traffic times.
- Newsletter subscribers: The number of newsletter subscribers refers to how many users have opted into your email marketing list. If you have more subscribers, you can reach more consumers. However, you’ll also want to look at related data, such as the demographics of your newsletter subscribers, to make sure you’re reaching your target audience.
- Texting subscribers: Newer to digital marketing than email, ecommerce brands can reach consumers through SMS-based marketing. Texting subscribers refers to the number of customers on your text message contact list.
- Subscriber growth rate: This tells you how quickly your subscriber list is growing. Pairing this KPI with the total number of subscribers will give you good insight into this channel.
- Email open rate: This KPI tells you the percentage of subscribers that open your email. If you have a low email open rate, you could test new subject lines, or try cleaning your list for inactive or irrelevant subscribers.
- Email click-through rate (CTR): While the open rate tells you the percentage of subscribers who open the email, the click-through rate tells you the percentage of those who actually clicked on a link after opening. This is arguably more important than the open rate because without clicks, you won’t drive any traffic to your site.
- Unsubscribes: You can look at both the total number and the rate of unsubscriptions for your email list.
- Chat sessions initiated: If you have live chat functionality on your ecommerce store, the number of chat sessions initiated tells you how many users engaged with the tool to speak to a virtual aide.
- Social followers and fans: Whether you’re on Facebook, Instagram, Twitter, Pinterest, or Snapchat (or a combination of a few), the number of followers or fans you have is a useful KPI to gauge customer loyalty and brand awareness. Many of those social media networks also have tools that ecommerce businesses can use to learn more about their social followers.
- Social media engagement: Social media engagement tells you how actively your followers and fans are interacting with your brand on social media.
- Clicks: The total number of clicks a link gets. You could measure this KPI almost anywhere: on your website, social media, email, display ads, PPC, etc.
- Average CTR: The average click-through rate tells you the percentage of users on a page (or asset) who click on a link.
- Average position: The average position KPI tells you about your site’s search engine optimization (SEO) and paid search performance. This demonstrates where you are on search engine results pages. Most online retailers have the goal of being number one for their targeted keywords.
- Pay-per-click (PPC) traffic volume: If you’re running PPC campaigns, this tells you how much traffic you’re successfully driving to your site.
- Blog traffic: You can find this KPI by simply creating a filtered view in your analytics tool. It’s also helpful to compare blog traffic to overall site traffic.
- Number and quality of product reviews: Product reviews are great for a number of reasons: They provide social proof, they can help with SEO, and they give you valuable feedback for your business. The quantity and content of product reviews are important KPIs to track for your ecommerce business.
- Banner or display advertising CTRs: The CTRs for your banner and display ads will tell you the percentage of viewers who have clicked on the ad. This KPI will give your insight into your copy, imagery, and offer performance.
- Affiliate performance rates: If you engage in affiliate marketing, this KPI will help you understand which channels are most successful.
What are key performance indicators for customer service?
Customer service KPIs tell you how effective your customer service is and if you’re meeting expectations. You might be wondering: what should the KPIs be in our call center, for our email support team, for our social media support team, etc. Measuring and tracking these KPIs will help you ensure you’re providing a positive customer experience.
Key performance indicators for customer service include:
- Customer satisfaction (CSAT) score: The CSAT KPI is typically measured by customer responses to a very common survey question: “How satisfied were you with your experience?” This is usually answered with a numbered scale.
- Net promoter score (NPS): Your NPS KPI provides insight into your customer relationships and loyalty by telling you how likely customers are to recommend your brand to someone in their network.
- Hit rate: Calculate your hit rate by taking the total number of sales of a single product and dividing it by the number of customers who have contacted your customer service team about said product.
- Customer service email count: This is the number of emails your customer support team receives.
- Customer service phone call count: Rather than email, this is how frequently your customer support team is reached via phone.
- Customer service chat count: If you have live chat on your ecommerce site, you may have a customer service chat count.
- First response time: First response time is the average amount of time it takes a customer to receive the first response to their query. Aim low!
- Average resolution time: This is the amount of time it takes for a customer support issue to be resolved, starting from the point at which the customer reached out about the problem.
- Active issues: The total number of active issues tells you how many queries are currently in progress.
- Backlogs: Backlogs are when issues are getting backed up in your system. This could be caused by a number of factors.
- Concern classification: Beyond the total number of customer support interactions, look at quantitative data around trends to see if you can be proactive and reduce customer support queries. You’ll classify the customer concerns which will help identify trends and your progress in solving issues.
- Service escalation rate: The service escalation rate KPI tells you how many times a customer has asked a customer service representative to redirect them to a supervisor or other senior employee. You want to keep this number low.
What are key performance indicators for project management?
Key performance indicators for project management give you insight into how well your teams are performing and completing specific tasks. Each project or initiative within your ecommerce business has different goals, and must be managed with different processes and workflows. Project management KPIs tell you how well each team is working to achieve their respective goals and how well their processes are working to help them achieve those goals.
Key performance indicators for project management include:
- Hours worked: The total hours worked tells you how much time a team put into a project. Project managers should also assess the variance in estimated vs. actual hours worked to better predict and resource future projects.
- Budget: The budget indicates how much money you have allocated for the specific project. Project managers and ecommerce business owners will want to make sure that the budget is realistic; if you’re repeatedly over budget, some adjustments to your project planning need to be made.
- Return on investment (ROI): The ROI KPI for project management tells you how much your efforts earned your business. The higher this number, the better. The ROI accounts for all of your expenses and earnings related to a project.
- Cost variance: Just as it’s helpful to compare real vs. predicted timing and hours, you should examine the total cost against the predicted cost. This will help you understand where you need to reel it in and where you may want to invest more.
- Cost performance index (CPI): The CPI for project management, like ROI, tells you how much your resource investment is worth. The CPI is calculated by dividing the earned value by the actual costs. If you come in under one, there’s room for improvement.
How do I create a KPI?
Selecting your KPIs begins with clearly stating your goals and understanding which areas of business impact those goals. Of course, KPIs for ecommerce can and should differ for each of your goals, whether they’re related to boosting sales, streamlining marketing, or improving customer service.
Key performance indicator templates
Here are a few key performance indicator templates, with examples of goals and the associated KPIs.
GOAL 1: Boost sales 10% in the next quarter.
- Daily sales.
- Conversion rate.
- Site traffic.
GOAL 2: Increase conversion rate 2% in the next year.
- Conversion rate.
- Shopping cart abandonment rate.
- Competitive pricing.
GOAL 3: Grow site traffic 20% in the next year.
- Site traffic.
- Traffic sources.
- Promotional click-through rates.
- Social shares.
- Bounce rates.
GOAL 4: Reduce customer service calls by half in the next 6 months.
- Service call classification.
- Pages visited immediately before call.
There are many performance indicators and the value of those indicators is directly tied to the goal measured. Monitoring which page someone visited before initiating a customer service call makes sense as a KPI for GOAL 4 since it could help identify areas of confusion that, when corrected, would reduce customer service calls. But that same performance indicator would be useless for GOAL 3.
Once you have set goals and selected KPIs, monitoring those indicators should become an everyday exercise. Most importantly: Performance should inform business decisions and you should use KPIs to drive actions.