Practical Ecommerce

Identify your KPIs

One of the things I love about Internet marketing is that it is so measurable. But I understand that for many web marketers, it’s a challenge to dig through the sheer amount of data that is available through most web analytics tools.

I’d like to suggest a New Year’s exercise that will help you make sure you’re taking advantage of the quantifiable nature of the web.

Step 1: Consider Business Goals

The first step that I’d suggest is to consider your business goals. It’s likely that they have changed during the past year. Think about the impact of changes in technology, relationships with vendors and suppliers, costs and margins, trends in your industry, actions of competitors, evolution of your target market, etc.

It’s possible that these factors have had an impact on your goals and objectives, but the impact might not be apparent until you sit down and think through the implications of these sometimes subtle changes to your business landscape.

For etailors, be aware that “more online sales” isn’t a great goal due to its broad scope. It would be better to identify goals within this, such as “increase units sold of xyz product due to its high margin‚” or “increase percentage of repeat orders.”

Step 2: Identify Key Performance Indicators

Once you have identified your current business goals, you should think through the performance metrics that provide insight into your success in these areas. These metrics are your “key performance indicators” (KPIs). KPIs should be unique to your company, just as your particular business goals are unique. It’s also likely that you’ll have a different set of KPIs than other people within your company. That’s perfectly OK, but at a high level, there should probably be a set of KPIs that determine overall company success.

The best KPIs are actionable. For example, an excellent question to ask is: “If we knew that _ (KPI) was consistently rising/falling over the past month/year, we would _(ACTION).”

With a good KPI, the action to be taken will be fairly obvious. However, some KPIs such as “revenue” may need breaking down into further metrics in order to make them directly actionable.

Step 3: Match Analytics Reporting

Once KPIs have been defined, it’s important to determine how these numbers will be reported. Ensure that your web analytics tool of choice provides the metrics that you need. Some of the best analytics tools even allow the creation of custom dashboards to constantly report on these key metrics.

Reporting should be periodic, based on the nature of your business. But be careful of looking a too small a time frame and leaping to conclusions that are based on unusual spikes or dips in visitor behavior. Web marketers should also consider any seasonal trends as they review KPIs. For many etailors, December is a peak sales month and a drop in sales in January probably does not indicate that something is “broken.”

Step 4: Plan and Implement Improvements

The actions taken in steps 1-3 are basically useless without step 4. It’s imperative to determine which KPIs are underperforming, and put into place a plan for making improvements to your web experience to address these deficiencies.

These actions might require changes to pricing, add-on and up-sell strategy, page layout, click acquisition strategy, etc. The important thing is that each action should be tied to a KPI, and the results of the change should be measured by that KPI. Be cautious of making too many changes at once; ideally you’ll be in a position to link a single change on the site to a single metric. This isn’t always feasible, and sometimes we have to implement broad changes that may impact multiple KPIs. In this case, it might make sense to rank, or weight your KPIs to determine which ones are most critical to your business goals.

I take the time to suggest this process at the beginning of a New Year, but your business might be moving fast enough that you should consider this twice a year, or perhaps even quarterly. The important thing is that as web marketers we have a solid approach to constantly improving performance.


Mat Greenfield
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Comment ( 1 )

  1. Legacy User January 5, 2007 Reply

    These two publications may be useful to those seeking to measure KPIs in order to turn the data into actionable conclusions: "Big Book of KPIs" & Web Analytics Demystified by analytics expert Scott Pederson: http://www.webanalyticsdemystified.com/web-analytics-books.asp

    – *David Wiseman*

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