Unlock your online store’s potential with these simple Key Performance Indicators.
KPIs: what are they and how to measure them
KPIs, or Key Performance Indicators, is a crucial metric that indicates whether or not you’re on the right track to achieve your business objectives. Online stores all start out with a grand scheme on what their business will become.
It’s impossible to reach these goals and targets in the future without short-term flags that keep you on the direct route to success.
Selecting your KPIs
We’ve discussed the overarching concept of a KPI. You also need to know the criteria for a metric to be a KPI. Essentially, you need to source the outcomes in your online store that really indicate success to your company.
An effective KPI should:
Inspire action: your KPIs won’t necessarily be the industry norm - and that’s great! Think about how your team will react to KPI results, will it inspire action, adjustments and decision-making? If so, it’s a keeper!
Achievable: there’s no better way to demotivate your team than with unattainable KPI’s. Try hit the Goldilocks state; not ridiculously easy which can encourage complacency and not a wishful pipedream. In short, an effective KPI is an attainable one.
Measurable: you need to find a way to measure the success of this process. KPI’s tend to take the form of:
- Industry indexing benchmarking);
- Ratings and;
Reveal growth, decline and/or stagnation in vital areas of your business. Once your team has this knowledge, you optimise your business to reach your goals.
Popular KPI’s for eCommerce stores
This KPI is genius as you make use of your existing customer base alongside pre-collected data to increase your sales figures.
Keeping track of this indicator is simple, which makes it all the more realistic to keep track of in a busy eCommerce business.
AOV = (orders value) / (number of orders)
By building up your AOV, it not only indicates increased sales but also that you are connecting with your existing customers and that they are satisfied with your products and services.
If you’d like to learn more about how to improve your AOV, check out this article. We’ll also let you in on the best product recommendation engines for your Shopify store. Amazon relies on one of these engines to drive no less than 35% of their sales!
Speaking of the leading eCommerce store, here is the ultimate expression of a frictionless customer journey. Honestly, the attention to detail is a thing of beauty:
The layout and elements of this customer touchpoint is a masterclass in itself; from the one-click buy to the effortless addition of add-ons as well as the freedom for customer personalisation. They make it difficult for the customer not to buy the product!
83% of businesses find that video marketing provides significant ROI. Amazon routinely includes videos in the image thumbnail the thumbnail of images also includes a video, and you know it’s not for no good reason. Having a video marketing element raises the perceived value of a product.
True to its name, a CLV shows how much a customer spends throughout their entire business with you. A strong CLV indicates that you have a superior relationship with your customers.
Total customer spend-total acquisition and retention costs
Again, nothing that a simple phone calculator can’t spit out. So, how are you going to use this to reach your company goals?
You’ve got two options here:
- Spend less on customer acquisition/retention costs. Think outside the box when cutting back on these costs. If offering free gifts and discounts is out of the question right now there are plenty of alternatives. Look into pain-points for your customers, where are you losing them, maybe your UX needs tweaking. Look into how you can give your customers delightful experiences without taking a giant chomp out of your budget.
- Increase sales: this can either be pre-order or an initiative to increase over a period of time. Personalisation, marketing campaigns, exclusivity and re-engagement are all excellent tactics to increase your sales. However, you’ve got to balance the costs associated with the expected increase in sales.
Higher conversion rate = higher sales
Well… generally. But, it’s an excellent KPI either way. Your conversion rate tells you how efficiently your eCommerce store is able to acquire a customer.
The easy-peasy formula:
Desired action completion / Total qualified leads
Conversion Rate Optimisation (CRO) demands experimentation, it’s rarely linear to one variable so don’t worry if you find it a bit fiddly. This is why we recommend A/B testing across layout, design, functionality and content. You can then use conversion rates more intensely by measuring the click-through rate change with each implemented change.
Imagine you are tracking the conversion rates of your product pages. There’s a particular page in your new range that leaves a lot to be the desired in its ability to capture sales.
Once you see that there’s room from improvement you could change:
- The layout and design to be more appealing to your target audience or;
- The copy to strengthen the CTA
Make sure to implement changes by themselves so you can measure their singular effect on the conversion rate. This gives you a clear image of where to go next, one factor may be much more effective than the other, or neither may make a huge difference. In this case, it’s time to move onto a different set of variables or question if the specific product is worth keeping on the digital shelves.
Cart Abandonment Rate
Online retailers typically deal with a cart abandonment rate of 60-80%. It can be a scary thought for Shopify merchants when they realise that capturing leads and enticing them to fill a cart of goodies still only produces sales in 20-40% of cases.
What you want to implement here is what’s called a risk reduction strategy. Customers are still shopping in physical stores because they can tactically feel a product’s quality and feel. It can be hard to judge a product online, so your task is to overcome this hesitancy to purchase.
Influencer marketing and genuine testimonials of your product transform online window shopping into order fulfilment.
Here’s the formula you’ll need:
Completed purchases / Total carts created
Look at each touchpoint in the sales funnel, not just at the end where you’re struggling to convert. Assess the product experience from product discovery to purchase. Include and monitor triggers that acquire, delight and convert your customers.
Having a hassle-free returns policy also helps to combat indecision. We live in a world that forces us to make decisions all day long. This is why your prospects enter into decision fatigue by filling a cart but stopping before making a transaction.
You may feel that your company has the winning idea but your Shopify store is lacking the finesse and technical brilliance to shine out amongst online competitors. That’s why we’re here!
At Elkfox, we work to deliver results for our Shopify merchants. If you want a hand in developing and implementing a strategy for your online store, then we’d be delighted for you to get in touch with us.
If it’s more practical guidance you’re after, we have it in spades on our blog.