Analytics & Data

How to Choose KPIs for Your Ecommerce Business

The purpose of key performance indicators is to quickly assess performance. For ecommerce, there are common, standard KPIs but merchants should also create custom ones unique to their goals and strategy.

The purpose of key performance indicators is to assess performance quickly. For ecommerce, there are common, standard KPIs, but merchants should also create custom ones unique to their goals and strategy.

Key performance indicators apply to many aspects of an ecommerce business. Examples include marketing KPIs to track, say, coupon redemptions, or return on investment from advertising, or annual sales growth. A human resources department may have a KPI to monitor employee turnover.

In this post, I’ll offer tips for building your ultimate KPI dashboard.

Default vs. Customized

Many KPIs, such as email bounce rate and overall profit margin, are standard and universally accepted. Standard KPIs are helpful in benchmarking against the industry and against competitors. They help monitor the overall performance of a business and otherwise identify weaknesses in operations.

The disadvantage of standard, default KPIs is that they may not apply to your business. Often, standard KPIs present only part of the story. Say you’re trying to grow a product line to a specific customer demographic. Presumably you would track sales performance for that demographic versus for the broader line.

Moreover, using your own KPIs can align your team around a common purpose and strategy.

In my experience, the best plan is to use a hybrid approach where you track both high-level predetermined metrics and, also, those that are company-focused.

Number of KPIs

KPIs are typically different for each department and area of focus. I’ve seen a single department with multiple dashboards containing many KPIs on each. However, it’s possible to track too many KPIs. Try to have roughly seven per dashboard and no more than 10. KPIs, after all, should be indicators of a business — not an in-depth analysis. KPIs should be easily understood within seconds.

Define KPIs

The easiest way to define a KPI is to look at your goals, plans, and strategy for the year or quarter and add metrics around it. For example, your sales goal could be 5-percent annual growth. So “Year over Year % Change” could be the definition. The KPI could be a gauge to quickly assess performance.

Not all strategic initiatives are quantifiable or easily measured. For example, a goal could be to improve communication among teams. That is hard to track, especially if you are not logging the number of internal emails, frequency of meetings, and so on. Nonetheless, you could still add a KPI by reporting survey results among employees that deal with communication.

Customized KPIs

Common customized KPIs include:

  • Sales by product category or type. This is especially helpful if a category has just launched or is declining.
  • Sales by promotion. This includes special events, unique promotions, use of coupons, sweepstake registrations, and other promotions.
  • Sales by channel. Sales could come from, say, your ecommerce site, from Amazon, and from email marketing. Also, merchants with brick-and-mortar stores typically track sales by location. Knowing your best-performing channels could guide your marketing strategy.
  • Fulfillment efficiency and speed. This could be tailored to your business to indicate a need to change fulfillment providers, or speed up transit times for certain locations. Slow transit times could reduce repeat orders.
  • Call center survey results. Common customer-service KPIs track the number of calls, time on hold, and average call durations. But these are not always helpful. A better solution is to survey callers afterward to help identify areas of improvement, recognizing the call duration and satisfaction depends on the purpose. For example, a call to place an order may be shorter than someone who is calling to cancel an order or complain. Thus analyzing call durations does not typically indicate customer satisfaction.

No Rules

There are no rules for creating KPIs. However, keep in mind that KPIs should indicate success or failure and be linked to a report or dashboard that can pinpoint the cause — good or bad.

Anna Kayfitz

Anna Kayfitz

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