A very simple framework on usage KPIs in e-commerce

Performance informs business decisions, KPIs drive actions: I was discussing with another startup founder this week (hint hint) on the importance of being data-driven in all decisions (I did write about this on medium a few years back). Key performance indicators (KPIs) are milestones on the road to success and monitoring them will help product-driven entrepreneurs identify progress towards their goals (of world domination) – and as such, KPIs should be chosen and monitored based on a startup’s specific and unique business goals. But with that in mind, I was thinking I would write a quick reminder note on the most common funnel-driven KPIs in e-commerce. 
 
Discovery metrics: Help Measure the activities that create awareness and discovery
 

• Impressions: the number of times a unit content is presented to someone. They can occur really anywhere from search results, social platforms to paid ads. An impression is not a click and one of the most controllable metrics available because almost entirely based on their allocated budget.
• Reach: the total number of followers and subscribers, the sum of all of those who will see the company’s content (includes email opt-in subscribers, Facebook followers, and loyalty program subscribers. Reach is best improved by consistent campaigns (social media, email, or otherwise) to encourage subscribers, followers, etc. The better defined the company’s brand and voice are, the more effective your campaigns will be to improve reach.
• Engagement: Engagement is the intersection of Impressions and reach. Essentially: how many of your followers and subscribers (the reach) are engaging with the company’s content (the impressions). This may include acquisition-related activities like click-through, but it may also include non-acquisition-related activities such as likes and shares. Engagement will most benefit from continuous activities to promote the brand and product akin to farming (vs. hunting, which is one-off).

 
Acquisition metrics 
 
There are many, many metrics in this phase of the funnel, so we’ll only focus on a few.
 

• Email click-through: Email click-through rate is how many of email subscribers (who’ve received the email AND opened it, which are other metrics) clicked through to the site or app. Strong calls-to-action and good subject lines impact the metric drastically.
• Cost per acquisition (CPA): CPA has to be understood in the context of the Average Order Value (example CPA $25 vs. AOV $100 is good) and can be improved by segmenting campaigns to better target customers who will best respond to the campaigns’ call-to-actions, landing pages that will help reinforce call-to-actions, and (of course) managing campaign budgets carefully.
• Organic acquisition traffic: In the long run and in a blue sky, the idea is to attract people to the site without paying for them, so it’s important to measure how many visitors reach the site organically, which is commonly available in all analytics platforms. Organic traffic can be improved by ensuring that on-site/technical SEO remains true to best practices (proper tagging, good response time, etc.) and that off-page SEO performs well.
• Social media engagement: Social media metrics can provide a lot of value, the following the top social media engagement KPIs that should be tracked on a regular basis:

 

• Likes per post: “Likes” is a catch-all metric I am using for people that have upvoted your social media posts. These will come in the form of Likes, thumbs ups, favorites or +1’s. To calculate it, you will need to collate likes on each social media platform and divide it by the number of posts on the individual platform.
• Shares per post: “Shares” is a catch-all metric for “shares,” “retweets” and “repins.” This metric is indicative of the average number of times posts are shared over a given amount of time.
• Comments per post: “Comments” is a catch-all metric for mentions and comments to your social media posts. This metric is a gauge of how much of a community your brand is garnering on social media.
• Clicks per post: The clicks per post metric measures link click-throughs from social media posts over a given period of time. To calculate this metric, collate the number of clicks from your social media posts over a specific period (typically over a month) and then divide it by the number of published social media posts over the same time period.

 
 
Conversion metrics
 
Measure the performance in converting from a store visitor to a paying customer, adding products to their shopping cart and actually checking out.
 

• Shopping cart abandonment rate: Shopping cart abandonment is a measure of how many people add something to their cart but leave the site without making a purchase. This measure is important to see if there are issues with the funnel to the cart and checkout experience.
• Checkout abandonment: A critical metric of how many people leave without making a purchase after they begin the checkout process. While similar to shopping cart abandonment, it’s important to measure them separately to see if the checkout process is the root cause of abandonments or if the problem is something else entirely. Abandonment rates can be improved primarily by intuitive cart management, which includes persistent pages, urgency messaging, saving customers carts, etc.  
• Average order value (AOV): the average price customers are paying for the items in their cart when they check out. When measured over time, it is an important measurement to know as it relates to marketing effectiveness. AOV can be increased by selling add-ons, loyalty programs, or by having a good second looks at more fundamental business model questions like pricing, products quality, etc.  
• Sales conversion rates:  the total number of sales divided by the total number of sessions. Understanding this number is critical to determining how much traffic is required to generate target sales.

 
Retention metrics.
 
Acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. Retention-focused metrics drastically benefit from good customer service, loyalty programs, repeat purchase campaigns, and a true investment in customer satisfaction.
 

• Customer Retention rate: the percentage of customers (minus net new customers) maintained as clients over a period of time. The higher this number, the better the company’s doing in servicing their customers. 
• Customer lifetime value (CLV): CLV is the total amount earned from customers over the length of their relationship with the company, as measured by AOV, repeat transactions, and retention period. This is important to calculate as it’s likely to reveal underperforming repeat and retention activities.
• Repeat customer rate: the percentage of customers have made multiple purchases. This is another way to measure how well customers are being serviced. 
• Refund and return rate: Depending on the industry, returns might be highly common and already baked into financials models, or alternatively, they may be extremely rare. Returns can also be a powerful driver to entice customers to hit ‘buy now’. Use returns and refunds as fuel to drive the business, not to burn you.
• Churn rate: Tracks customer turnover, measures the number of users lost over a given period of time. It’s important to measure and work on strategies to delight customers when they’re around because It’s always easier to resell to a current customer than to gain a new one. 

 
5. Advocacy metrics
 
Advocates are a company’s goldmine, they’re the ones who deserve the white glove treatment. These metrics will help a company measure the efforts taken to show them the Company cares.
 

• Net promoter score (NPS):  how likely would customers be to refer the Company’s products? Based on their numeric answer, customers fall into one of three categories — detractors, passives, and promoters. The more promoters, the better. It’s important to note that different industries have different scales of good and bad NPS scores. NPS will benefit from the combination of everything in the business, from product quality to customer service quality, from the customer experience to the quality of the employment experience to employees, for example. NPS measures everything and is incredibly valuable to measure.
• Subscription rate: As email marketing remains high-value, it’s important to know what percentage of visitors have opted-in for email lists. This signals that customers want to hear from the business. On the flip side, unsubscribe rate is as important as new subscriptions. For example, seeing huge swaths of users fleeing from emails, it might be time to reconsider the approach. Unsubscribes will always be around, but it’s important to minimize it, aiming for less than 0.5% (and less than .25% is great).​
• Program participation rate: As ecommerce technologies and practices have matured, more and more merchants have turned to advocacy programs like loyalty programs or review platforms. 

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​My name's phil mora and I blog about the things I love fitness, hacking work, tech and anything holistic. 
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