Tuesday’s concept #8
You don’t make data driven decisions yet ? Start now !
themes : e-commerce, technology
KPI literally means Key Performance Indicators. They are decision-making tools and represent your business’ well being.
False common preconception : all businesses must check the same KPIs. In this article, we focus on e-commerce.
We realized, as we met customers and partners, that most of them were not used to take time to analyze anything else than the evolution of their sales and revenue. We thought that maybe it was because they consider this as sufficient to know how well their business was doing. Most of the time, it is because we are overwhelmed with dashboards and KPIs, and we don’t know at all what to do with all these numbers. Actually, emphasizing KPIs more will not only help you to know when something goes wrong, it will also pinpoint the root of the issue.
We selected 6 KPIs an e-commerce manager cannot just let go – on top of revenue.
Our tip: create an excel sheet with these 6 and fill it up every month. Will take you approximately one minute once you know where to find those.
Knowing where your visitors come from allows you to calculate your lead acquisition cost, and compare which referrer brings you more or less traffic, which is the cheapest or the most expensive.
2. Conversion Rate
= (Number of sales / Visits) x 100
Your conversion rate is what will tell you if your traffic is well targeted and if your website is efficient enough. For example (figures are approximations based on our experience) :
· If you conversion rate is under 0,5% and you are a pure e-commerce website, you have problems in conversion and/or targeting.
· If you conversion rate is between 0,5% and 3%, your design is good and you can improve your performance with real-time product recommendations.
· If your conversion rate is over 3%, your business is working real well! Keep improving the customer experience.
3. Average basket size and its evolution
By average basket size we mean average spending of a customer and number of article bought together.
Once you know your average basket, your referrers and your conversion rate, you can start to make decisions on which referrer to keep paying for. For example, you know that for 100 persons entering your store, only 3 make a purchase, leaving you with 10€ of benefits each. It means that attracting one person should cost you a maximum of 3€ if you don’t want to spend more in traffic than what you earn. And even 3€ does not leave you much money to use elsewhere … Is it worth it ?
4. Conversion by element
It is also very useful to know which product, which brand, which category generates more sales, which one transforms your visitors into customers. This kind of information allows you to choose the star product of you future communication campaign, and to detect errors in pricing, targeting or placement.
5. Unique visitors and second time buyers
Knowing how many buyers come back and buy again, or how many times a visitor enters your website before buying is also primordial. Actually, more that 50% of our customers’ sales are from repeat customers.
How to get this metric? Get a tracker to drag and drop in your pages’ code, and check results in analytics. It is that easy.
6. Last but not least : Impact of the tools you use to increase your sales
When and if you use tools, check if they have a dashboard, with clear graphs and schemes of the impact on your traffic / sales / after sales. You will be able to check whether investing in this tool is worth it, or if you should stop using it.
Share your opinions or questions with us, we are interested!
Or send us a mail at : firstname.lastname@example.org
See you next Tuesday !