The 5 Key Indicators
Hundreds of key performance indicators exist so you can monitor your business’ progress.
But guess what?
You can ignore most of them.
Well, having options in abundance may sound nice, but quite frankly, it can become super overwhelming, especially when it involves telling you how your business is performing.
As if your day-to-day isn’t demanding enough.
Plus, you only need to pay attention to a handful to take your business to the next level.
What one company needs to focus on may vary from yours because of factors such as being in different industries or stages of growth, but the five KPIs Good Monster recommends benefit all companies operating an ecommerce store.
Return on Ad Spend
Revenue from Advertising/Cost of Advertising = Return on Ad Spend
Spending marketing dollars on advertising that does not drive revenue can lead to things like debt and bankruptcy.
However, spending marketing dollars on advertising your target audience connects with can lead to things like increased revenue and earning your customers’ trust.
This is why knowing your company’s return on ad spend is vital.
Staying on top of your ROAS will keep you afloat and enable you and your team to identify what to focus on. Tracking this information results in a clear-cut winner from A/B tests, but what, exactly, determines a winner? 🤔
Ah, glad we asked ourselves this question!
To make money (an important part of business), your ROAS should be 3:1, according to Search Engine Land’s Jacob Baadsgaard.
While boasting a 3:1 ROAS does not make you the most profitable company to ever exist, it is a damn good start. Using this as a benchmark is a productive way to figure out the advertising that resonates with your target audience.
Three Easy Ways to Improve ROAS
Not only is ROAS easy to track and determine, but also easy to improve:
- Reflect Ad Copy in Landing Page Copy: The message you convey to your target audience must be consistent across ALL platforms. Not taking the time to make certain of this will only increase your bounce rate.
- Improve UX: Customers have too many options to navigate through a this-shit-is-way-too-hard-to-use site. Simplify it and see how they will stick around and boost your ROAS.
- Test Ad Copy in AdWords: AdWords is a powerful tool you should be utilizing when creating ads. Use it to test which copy generates your desired results.
Increasing your ROAS rewards you by leading people to your site, which will put the next metric ahead of your competition.
Ecommerce Conversion Rate
Number of Conversions / Total Number of Visitors = Ecommerce Conversion Rate
Inspiring customers to place orders can be grueling work, so if your ecommerce conversion rate is low, don’t get down on yourself!
(The average sits at two percent. Hopefully this makes you feel better.)
However, this figure is crucial to your company’s success because it directly correlates with revenue.
Make sure you and your team monitor your ecommerce conversion rate and do everything possible to improve it👇
- Adopt a simple design
- Dedicate one page to one action you want customers to take
- Enhance the customer experience
- Eliminate technical issues
Ecommerce experts can help you out with these to-do items and positively impact your revenue.
They also ensure the following KPI reflects customers are completing purchases.
Shopping Cart Abandonment Rate
(1 — (Transactions Completed/Transactions Initiated)) x 100 = Shopping Cart Abandonment Rate
If your ecommerce conversion rate is below where you want it to be, chances are you boast a high shopping cart abandonment rate, and, no, this is not a consolation prize.
But rather indicative of why you have a low ecommerce conversion rate.
Remaining cognizant of this KPI is key to scaling because you can narrow down where exactly you lose the customer.
Putting a product in the cart is no accident, so something between that point and checkout brought upon a change of heart.
But what was it? 🤔
Review the following elements to make certain customers check out with a full cart.
While consumers spend a lot of money online, they do not buy everything in sight. They like feeling comfortable about their purchases, and what better way to reassure them than to provide other consumers’ reviews?
Position reviews to create excitement around buying the product and reinforce they are making the right decision.
Simplify the Process
Speaking of the checkout process, is yours easy?
A big part of creating a memorable and enjoyable user experience is by making it an easy one, leaving customers with nothing to figure out and encouraging them to advance to the final step.
Avoid Mandatory Profiles
We get you are trying to establish a relationship with them, but consider this👇
What’s the better scenario: having several one-time-buying customers or having several customers abandon their cart and buy from the competition because you asked them to create a profile?
Review Shipping Options
High shipping costs will kill your customers’ excitement. Review yours to ensure they do not detract them from proceeding. Even see if you can include a “free shipping” option in there (maybe that is when you can ask them to create a profile).
The average shopping cart abandonment rate sits at around 70 percent, according to the Baymard Institute, so if yours is anywhere close, there is a lot of room for improvement!
Just trying to look at the bright side of things.
Customer Lifetime Value
Customer Value x Average Customer Lifespan = Customer Lifetime Value
Your customer lifetime value indicates how much a customer is worth to your business over the span of the relationship.
A clothing brand with a customer who orders its seasonal winter coat every Black Friday for $50 and nothing else for the last five years has a CLV of $250.
Because developing a relationship and earning your target audience’s trust is such a big part of running a successful ecommerce store, the sky is the limit for your CLV! 🤩
Seeing your CLV rise year after year is a real possibility after taking these steps👇
- Engage with your target audience on social media to demonstrate you want to understand them
- Address and solve customers’ problems to prove you care
- Encourage loyalty programs to receive repeat business
- Deliver benefits to members of loyalty programs, such as special promotions and free shipping
Above all else, you must be willing to invest in your customers. At first, it may stretch you thin, but, believe us, the time and money you invest in meeting customers’ needs will pay off in a big way.
Your CLV will be the proof, and it will simultaneously boost the next KPI we love.
Customer Retention Rate
(Customers at the End of a Period — New Customers Acquired During Period)/Customers You Started With = Customer Retention Rate
Calculating your customer retention rate provides you what percentage of your customers are sticking around over a particular period of time.
We like this indicator because it answers this question, “Are we doing enough to inspire loyalty?”
You do this by listening to everything (and we mean everything) your customers want and finding ways to implement them in your processes, products and/or services. They should feel so valued that they consider the idea of shopping anywhere else ludicrous.
And if you need tips on how to cater to them, reread the aforementioned strategies.
They all work towards the same goal.
One thing to keep in mind when determining your company’s customer retention rate is to recognize where your company operates. Comparing your ecommmerce store’s retention rate to a telecom company’s (which is close to 80 percent) is counterproductive because ecommerce’s average is 30 percent, according to Omniconvert.
It is comparing 🍏 to 🍊 , so don’t do it.
Just focus on making your customers happy.
Those results are bound to put a smile on your face.
“Work smarter, not harder” applies to deciphering which KPIs to analyze because attempting to stay on top of all of them will make your head explode.
But tracking all the necessary KPIs will lead to having happy and loyal customers and running a profitable business.