My grandfather often tells me “If you fail to plan then you plan to fail.” The same can be true of any ecommerce business. We all know our main goal is to get more sales which require more traffic to our websites, but that’s a very broad statement. I’m a big fan of S.M.A.R.T goals. This simply means goals that are specific, measurable, action-oriented, realistic, and time-based. Let’s analyze 4 KPI’s (key performance indicators) that you as an ecommerce business owner should be tracking.
There’s plenty of blog posts that list KPI’s that you should track but I’m only focusing on KPI’s you can make actionable changes to in a reasonable amount of time. As well I will share examples of how I have applied these goals at Propertyroom.com as the Digital Marketing Coordinator. Speaking of goals, we focus on increasing the registration conversions and bid conversions. These two goals directly affect net profit.
The industry average conversion rate is around 2%. So that means for every 100 people you can expect two sales. If your website conversion rate is below 2%, then you may have a problem with your copywriting, landing page, or simply put a product/service that sucks. If you have an eCommerce website and aren’t tracking conversions, Google Analytics is a free tool that’s pretty much the industry standard for SMBs. After installing Google Analytics then set up goals within Google Analytics.
At Propertyroom.com some of the goals we have setup in Google Analytics include “registration conversion” and bid conversion”. A traditional eCommerce website would more than likely track their “Buy Now” button and shopping cart checkouts.
Average Order Value
The basic calculation is: (Sum of Revenue Generated)/(# of Orders) = Average Order Value
Do you know how much a lead is worth to your business? The rule of thumb I use is 1/3 of net profits. An eCommerce company AOV can help determine how the marketing department can allocate its budget. For example at my company Propertyroom.com we sell both vehicles and electronics. As you probably guessed vehicles have a higher AOV so more money can be allocated to marketing for this particular category. You can find out your company's AOV by setting up a monetary value for each of your conversion goals in Google Analytics. For Propertyroom.com our AOV varies based on merchandising categories.
If you're struggling to increase, your AOV try these five methods.
- Get Product Recommendations
- Cross Sell Products
- Set Order Minimums
- Setup A Loyalty Program
- Bundle Products Or Create Packages
When it comes to net profit, we can say hands down this is the most important KPI to measure. Your AOV can help determine the health of your business and analyze what marketing/sales efforts performed well to determine how to adjust your marketing strategy. Within Google Analytics after giving each of your goals a value, you can select a date range. Upon doing this, you can see the value of your conversions. With that number you can analyze the number of conversion goals vs. the company's net profit, then divide by 3 for all the line items marketing is responsible for to get an estimate of the ROI.
Digital marketing has grown substantially and is continuing to grow daily. Referral traffic is websites that have linked to your site which sends you visitors. Some of the most popular methods to get referral traffic include writing guest blog posts, submitting your company into directories, and performing blogger outreach.
Google continues to change its algorithm on a constant basis. With that being said writing good content that attracts inbound links will never go out of style. If you're looking for an integrated way to measure your KPI's and focus on marketing vs. tracking data consider using HubSpot marketing automation software.
I hope you find this helpful. Please share with me what KPI's your business deems most important and why.