Sep 7, 2021

Top 10 Ecommerce KPIs to Optimize Today

Find success with your eCommerce store by understanding these eCommerce KPIs.

Shanif Dhanani

How do you know your eCommerce store is performing well?

You can’t just look at sales. 

You have to dig deeper and look at the key metrics that can make or break your conversion funnel. 

Measuring KPIs, or key performance indicators, will help your online store strive. We’re sharing 10 eCommerce KPIs for your business with tips how to improve those metrics and meet your online business goals.

What is a Key Performance Indicator (KPI)?

A key performance indicator, or KPI, is a metric used to gauge the success of an activity performed by an organization. KPIs give insight into which processes are working and which could be improved. Relevant KPIs differ from industry to industry or even from department to department. For eCommerce, the following ten KPIs are the ones your online business should be measuring and applying to your decision making.

Conversion Rate

Conversion rate is one of the most important KPIs your eCommerce business should be measuring. In a nutshell, conversion rate is the percentage of people who perform a desired action on a website. In eCommerce, it often refers to making a purchase, but it could be something else based on your organization’s goals like signing up for your email list.

To calculate conversion rate, simply divide the number of visitors who perform the desired action by the total site visitors. You can make custom conversion rate calculations on Google Analytics and other metrics reporting platforms.

It’s a great idea to measure multiple conversion rates based on the channel they come from, like social media, pay-per-click (PPC) campaigns, display advertising, email or any other way your customer may reach your online store. This way you can get a thorough understanding of which channels are working best for your company and which may need some improvement.

How To Improve Conversion Rates

Improving overall conversion rate is a broad task, but once you begin measuring it, you can narrow down specific goals. Here are some examples of how to improve your conversion rate:

  • Tailor your marketing campaigns using A/B testing to make sure your message is resonating with your audience.
  • Ensure your website is user-friendly and your checkout process is smooth so no customers drop out from their purchase.
  • Make sure your website is ranking on search engines. When a user is actively searching for a product, that means they intend to make a purchase—half your marketing work is done for you. Don’t let your site get buried by competitors - which might mean running ads on your own brand name.

Shopping Cart Abandonment Rate

The cart abandonment rate is the rate at which users add items to their shopping carts but don’t complete the purchase. Measuring the cart abandonment rate for your online store is important because it’s indicative of issues that users may have with your store’s checkout process.

According to the Baymard Institute, the top reasons for shopping cart abandonment were hidden and excessive fees, lack of a guest checkout option, security concerns and issues with the checkout process and website.

To measure cart abandonment rate, divide the total number of shopping carts initiated by the number of shopping carts that did not have a completed sale. Google Analytics has a great tool for automating this measurement through its Goals and Sales Funnel capabilities.

Once you’ve begun measuring cart abandonment rate, you can begin working on improving this metric. Pay close attention to the insights you get when you analyze your organization’s data so you can make the best changes to optimize your online store. 

How to Improve Shopping Cart Abandonment Rate

Here are some general tips to improve your eCommerce site’s shopping cart abandonment rate:

  • Include an option for guest checkout. First-time shoppers may not be willing to create an account with your store just yet, and that’s okay. Instead, allow them to checkout as guests and then offer a simple account creation process after their purchase is complete. Make sure you share the benefits of creating the account with your new customer.
  • Make sure your site is secure and looks secure. Customers don’t want to share their personal information, especially payment information, with a site that doesn’t seem secure. Even if your checkout process has the necessary security features, like an up-to-date SSL certificate and tokenized payment information, the average customer may not know how to recognize them. Tell your customers outright that their payment information will never be stored on your business’s servers and include a “secure checkout” graphic to explicitly communicate that their information is safe with your store.
  • Prioritize having a mobile-friendly checkout process. According to Shopify, 69% of eCommerce purchases in 2019 were made on a smartphone or tablet. A customer who gets frustrated in a mobile checkout session may not return to make a purchase.
  • Keep fees from overwhelming the customer, including shipping and taxes. Customers will be put off by a sudden increase in how much they’re paying. Include estimated shipping and taxes in the cart subtotal and change them if necessary during the checkout process. 
  • Provide flexible shipping options. Some customers are willing to pay to get their items quickly, while some prefer to minimize shipping costs and receive their items later. Try to cater to these two preferences and add a third if possible.

Customer Lifetime Value (CLV)

Customer lifetime value is the concrete value of each individual who makes a purchase from your business at any time. CLV is indicative of the overall health of your eCommerce store and reflects a number of other metrics like conversion rates and average order value (AOV), so it’s an important KPI to keep track of.

Calculating CLV is a bit more involved than some other metrics but can be found with this formula: 

CLV = (Value of purchases x Number of purchases per year x Number of years as customer) – Cost of acquiring and keeping customer

Keep in mind that you can calculate CLV for an individual customer, a segment of your audience or an average of all of your customers. Because there are a number of variables, it’s a good idea to use a spreadsheet to calculate CLV and check on it regularly.

How to Improve Customer Lifetime Value

CLV is an important eCommerce KPI with a number of moving parts in its formula, which means there are many chances to improve your online business’s CLV. Here are a few tips to improve your customer lifetime value:

  • Understand your business’s capacity for customer acquisition. If you overspend on efforts to obtain customers, you’re driving your CLV down. Make sure your campaigns are targeted properly so your messaging (and money) is reaching a worthwhile audience.
  • Provide excellent customer service. Customer retention will boost your CLV significantly. Happy purchasers are more likely to become repeat customers and recommend your business to their friends and family, expanding your store’s growth.
  • Create engaging content for your audiences. Keeping potential and existing customers engaged on social media and elsewhere will work twofold: You will work on gaining new customers and you will keep a top-of-mind presence in your existing ones between purchases.
  • Implement a loyalty program. Loyalty programs produce repeat customers, which are vital to customer lifetime value.

Average Order Value (AOV)

Average order value, or AOV, is the average of how much a customer spends on a single purchase from your store. Calculating AOV is simple: Divide the total revenue over a period of time by the number of purchases in that same time frame. 

Like customer lifetime value, it’s a good idea to analyze this metric regularly and over different periods of time, especially if you are running digital marketing campaigns that you need to evaluate. Regularly monitoring AOV will help you understand how circumstances like marketing campaigns or even seasons impact your buyers’ behavior.

How to Improve Average Order Value

The simplest way to improve AOV is by increasing the average value of a single purchase, but doing so can be tricky. Here are a couple of tips for improving average order value:

  • Add recommended products to several places on your website. Making it easy for your customers to add new items to their cart is a great way to increase the value of their purchases. Share recommended items on individual product pages and in the customer’s shopping cart.
  • Share upgraded products and add-ons tailored to the items the customer is interested in. Upsell products that offer more features to the customer when they have something similar in their cart and make it easy for customers to add items that will enhance their experience with their already-chosen products.

Bounce Rate

Bounce rate is the rate of users who leave your site after visiting a single page and is calculated by dividing the number of single-page visitors by total site visitors in a given period of time. 

Google Analytics has handy tools for measuring bounce rate: On the dashboard, you are given a site average bounce rate, and you can also view specific bounce rates based on Source/Medium pairings if you have site trackers set up.

There are a number of reasons a user may bounce from your site, like useability issues or lack of interest in the content they’re presented with. Try to keep your site’s bounce rate as low as possible. It will never be zero, but a higher bounce rate means your targeting the wrong type of customer.

To improve your eCommerce store’s bounce rate, make sure you’re doing the following:

  • Check the quality of your store’s landing pages, menus and links to ensure the site is user-friendly and technical issues aren’t frustrating potential customers. A well-made mobile site is also crucial to make sure users aren’t bouncing off your site.
  • Include a call to action or other chance to engage on your landing page. Users want to be met with content that fits their interests, but it’s hard to please everyone. Give your audience options for where to go next and use A/B testing to design and write a landing page that reduces bounces.

Customer Acquisition Cost (CAC)

Customer acquisition cost, or CAC, is the average amount of money spent on acquiring new customers for your business. CAC is found by dividing the total amount spent on customer acquisition by the number of customers gained in that period of time.

CAC is used to understand the cost-effectiveness of digital marketing efforts and ROI for those efforts. A rule of thumb for CAC is to keep it below average order value to make sure you’re not overspending on tactics that aren’t bringing in enough revenue.

How to Improve Customer Acquisition Cost

To make sure your CAC is at a healthy level for your business, make sure you’re doing the following:

  • Follow best practices for evaluation digital marketing campaign tactics. Use A/B testing to hone in on the best message for your audience and automate where you can to reduce marketing spend.
  • Have specifically segmented target audiences in mind and tailor your messaging to those audiences. A campaign that resonates with an audience will improve your revenue coming from that segment.

Click-Through Rate (CTR)

Click-through rate, or CTR, is the percentage of people who click on a search engine listing (organic or PPC), display ad, email link or other link that leads them to your site. CTR is calculated by dividing the number of clicks by the number of impressions, or how many times a link is presented to a user. 

Click-through rates can be found on many marketing and analytics services, like Google Ads, Google Analytics and email marketing services. These services will give further insights on specific links and ads as well as an average overall CTR for your advertising efforts.

ECommerce businesses aim for a high click-through rate because that means that the product and messaging is resonating with the audience, leading to more purchases. A low click-through rate, on the other hand, can indicate that your messaging needs work or isn’t meeting the proper audience.

How to Improve Click-Through Rates

Here are a few ways to boost your business’s click-through rates:

  • Make sure your PPC and display ads are targeted for the proper search terms and audiences. Do keyword research to understand what users are looking for and how it can relate to your products.
  • Follow best practices for email marketing, like including appealing design, engaging content and a powerful call-to-action. 
  • Optimize the copy and design of your ads with A/B testing so you know what your audience responds to best.

Churn Rate

Your company’s churn rate is how many users, customers or subscribers are lost over a period of time. To find your business’s churn rate for a designated time period, use the following formula:

(Customers at end of period - Customers at beginning of period) / Customers at beginning of period

Criteria for churn rate can differ from company to company based on the nature of your business, so you may consider using metrics like email subscribers to gauge churn rate if your customers tend to purchase infrequently.

Tracking churn rate will help you understand your business’s capacity for retaining customers. The goal churn rate for your business depends on your industry but should be kept as low as possible. Set your company’s goals based on what you know about your business’s customer journey.

How to Improve Churn Rate

Again, expectations for churn rate vary from company to company, but you can use the following tips to improve the churn rate for your business.

  • Provide customer onboarding communications and share updates on your products regularly. One of the best ways to keep customers is to stay engaged with them, and making sure they’re getting the most out of your products is a great opportunity to keep the conversation going.
  • Request feedback from your customers. Opportunities to share honest feedback will not only keep customers engaged, but will also give you insights into where your products or other elements of your business may need improvement. Customers who feel heard tend to stick around longer.
  • Reward customer loyalty. Loyalty programs keep customers interested in your products, making them more likely to stick around and make more purchases.

Net Promoter Score (NPS)

The best marketing tactic is word-of-mouth, but it can be hard to measure a strategy that you’re not in total control of. Your Net Promoter Score, or NPS, is a method used to understand how likely your customers are to share your product with others, which is an important metric to consider in eCommerce.

To get your business’s NPS, create a customer satisfaction survey that includes a question about how likely your customers are to recommend your products to others. Customers will answer on a scale of 0 to 10, with scores of 0-6 being “detractors,” 7-8 being “passives,” and 9-10 being “promoters.” To calculate your score, subtract the number of detractors from the number of promoters. The higher the better.

How to Improve Your Business’s Net Promoter Score

NPS is a great KPI to measure and aim to improve. Here are some tips on how to increase your business’s NPS:

  • Make it easy for customers to share feedback with your company using the survey method described above. Include the question in email marketing, review prompts or even random site visitor surveys.
  • Ensure your business’s promoters can promote! Allow customers to share their purchases on social media with “Share” links for products and allow users to tag your brand in their posts.
  • Engage with your detractors. They can influence other potential customers just like promoters can, so make sure you’re monitoring social media, reviews and customer satisfaction surveys for critical posts and reach out to those individuals. Making an effort and correcting an error can even turn a detractor into a promoter.

Cost of Goods Sold (COGS)

Cost of goods sold, or COGS, is a measurement of how much it costs to create and sell a product or set of products. COGS considers manufacturing costs, overhead costs and wages of employees involved in the process. 

The calculation of COGS can be complicated, so it’s a good idea to set up a spreadsheet to automate and track the measurement. Here’s a basic formula for COGS:

Inventory costs at the beginning of the time period + Additional inventory costs (purchased during the time period) – Value of inventory at the end of the time period

COGS can help you understand the pricing of your products and where adjustments may be made to increase profit margins. Additionally, keeping close track of your COGS can be helpful when you are doing your company’s taxes and overall accounting.

How to Improve Cost of Goods Sold

In eCommerce, controlling your company’s COGS can be tricky. Here are some recommendations for how to keep costs low:

  • Be mindful of options for suppliers and manufacturers. Never compromise on product quality, but seek out cheaper partners if you can. Additionally, consider negotiating with your suppliers to get better deals on materials or manufacturing costs.
  • Reduce waste. Materials you don’t use won’t gain your business any revenue. If your product has perishable components, keep your inventory at a reasonable level to reduce losses. Further, customers prefer to purchase from companies that are cognizant of the waste they create.

Ready to Optimize Your eCommerce Store?

Now that you understand how to calculate these top eCommerce KPIs, it’s time to put our tips into action. You can analyze all of these KPIs and more in Apteo’s no code predictive analytics platform. 

Schedule a demo to learn more.

About the author
Shanif Dhanani
Co-Founder and CEO, Apteo

Shanif Dhanani is the co-founder & CEO of Apteo. Prior to Apteo, Shanif was a data scientist and software engineer at Twitter, and prior to that he was the lead engineer and head of analytics at TapCommerce, a NYC-based ad tech startup acquired by Twitter. He has a passion for all things data and analytics, loves adventure traveling, and generally loves living in New York City.