If you are in the process of building out an eCommerce store, or you’ve completed one and you’re just starting to get a few sales going, these key performance indicators (KPIs) will help you in a big way.
Knowing these will help you:
- Make better decisions
- Increase customer satisfaction
- Make your eCommerce store more profitable
With numerous metrics available, it can be daunting to identify which ones to prioritize, especially for beginners.
This guide explores seven crucial ecommerce KPIs that every online store owner should understand and monitor, accompanied by their definitions, formulas and examples, and why it matters.
Let’s dive in!
Online Store Sessions
Definition: The total number of visits or sessions on your ecommerce website.
Why it matters: Tracking online store sessions gives you insights into the overall traffic volume and helps identify trends or patterns in visitor behavior.
This metric serves as a baseline for understanding the impact of your marketing efforts and website performance.
Online Store Conversion Rate
Definition: The percentage of online store sessions resulting in a desired action, such as making a purchase.
Formula and Example: If 500 purchases were made out of 10,000 sessions, the conversion rate would be (500 / 10,000) x 100% = 5%.
Why it matters: The conversion rate is a key indicator of how effectively your website and sales funnel are converting visitors into customers. A higher conversion rate means more sales and revenue from your existing traffic.
Average Order Value (AOV)
Definition: The average amount spent by customers per order.
Formula and Example: If the total monthly revenue was $50,000 with 1,000 orders, the AOV would be $50,000 / 1,000 = $50.
Why it matters: Increasing your AOV can significantly boost revenue without necessarily increasing traffic. Strategies such as upselling, cross-selling, and offering bundled products can help improve AOV.
Customer Acquisition Cost (CAC)
Definition: The total cost of acquiring a new customer, including marketing expenses and advertising costs.
Formula and Example: If $10,000 was spent on marketing, acquiring 200 new customers, the CAC would be $10,000 / 200 = $50 per new customer.
Why it matters: Keeping your CAC lower than the customer’s lifetime value (CLV) is essential for ensuring profitability. Monitoring your CAC can help you optimize your marketing spend and focus on the most cost-effective acquisition strategies.
Click here to try our CAC Calculator.
Cost per Acquisition (CPA)
Definition: The cost of acquiring a new customer or lead through a specific marketing channel or campaign.
Formula and Example: If a $5,000 social media ad campaign acquired 100 new customers, the CPA would be $5,000 / 100 = $50 per acquisition.
Why it matters: Tracking your CPA for different marketing channels allows you to identify the most cost-effective acquisition strategies and optimize your marketing efforts accordingly.
Customer Lifetime Value (CLV)
Definition: The total revenue a customer will generate throughout their relationship with the business.
Formula and Example: If the average customer value was $1,800 and the average customer lifespan was 2 years, the customer lifetime value would be (1800 * 2) = $3,600.
Why it matters: A high CLV indicates valuable, loyal customers. Prioritizing customer retention and providing excellent customer experiences can help increase CLV and overall profitability.
Click here to try our CLV Calculator.
Cart Abandonment Rate
Definition: The percentage of visitors who add items to their cart but leave without completing the purchase.
Formula and Example: If 2,000 carts were initiated and 500 abandoned, the cart abandonment rate would be (500 / 2,000) x 100% = 25%.
Why it matters: A high cart abandonment rate can signal issues with your checkout process, pricing, or other factors that discourage customers from finalizing their purchases. Identifying and addressing these issues can help recover lost sales and improve conversions.
Frequently Asked Questions (FAQs)
How often should I monitor these ecommerce KPIs?
It’s recommended to track and analyze these KPIs regularly, ideally on a weekly or monthly basis, to identify trends and make timely adjustments.
What constitutes a good conversion rate for an ecommerce store?
A good conversion rate can vary depending on the industry, product, and target audience. Generally, a conversion rate between 2-5% is considered average, while rates above 5% are considered excellent.
How can I improve my Average Order Value (AOV)?
Strategies like upselling, cross-selling, offering product bundles, and implementing minimum order values can help increase your AOV.
What factors influence Customer Lifetime Value (CLV)?
CLV can be impacted by factors such as product quality, customer service, loyalty programs, and the frequency and value of repeat purchases.
How can I reduce my Cart Abandonment Rate?
Simplifying the checkout process, providing guest checkout options, offering free shipping, and implementing cart abandonment recovery campaigns can help reduce cart abandonment rates.
Some of these metrics are available in the Shopify platforms Analytics > Reports and Live Views sections.
If you still haven’t built your eCommerce store and are looking for a platform, check out our Shopify review.
We do a deep dive and explore the entire platform to help you make an informed decision.
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