Competition always gets stronger and stronger in eCommerce. Couple that with the evolving consumer behavior and you’ll need more than just a great product to survive. You need Marketing Performance Indicators that tell you how well you’re doing in business.
The 9 best Marketing Performance Indicators, or Key Performance Indicators (KPIs), specifically for eCommerce are:
Conversion Rate (CVR)
Average Order Value (AOV)
Customer Lifetime Value (CLV)
Customer Acquisition Cost (CAC)
Return on Ad Spend (ROAS)
Click-Through Rate (CTR)
Cart Abandonment Rate
Customer Retention Rate
Website Traffic
If you’re new to eCommerce, or you’re new to measuring the performance of your business, you’ll need to understand these KPIs.
But hey, you’re in luck because we’re just about to take you through it all. Buckle up!
What Are Marketing Performance Indicators?
Remember how we used to get grades on our exams back in school? Each grade represented how well we performed in the exam. Marketing performance indicators are sort of the same thing. Just that it’s focused on marketing rather than exams here.
Marketing Performance Indicators, otherwise known as Key Performance Indicators (KPIs), are numerical metrics used to measure the performance of marketing campaigns. Exams use a grading system to measure performance while KPIs use specific numbers for it.
An example of a KPI is Customer Acquisition Value (CAC). It measures the cost of acquiring a new customer by adding up the associated costs, such as marketing and sales expenses.
A low CAC is required to increase profits. So, a business can set a specific CAC amount as their KPI, which they can work towards.
Marketing Performance Indicators: 9 Best KPIs for eCommerce
This list is made specifically for eCommerce. Mainly because we’re a marketing agency specializing in eCommerce and we have experience with KPIs that proved vital for the hundreds of brands we worked with.
That said, in case you’d like someone to do the heavy lifting for you by managing, optimizing, and scaling your ads, let us know. We use UGC-powered digital marketing strategies that might just be your holy grail.
Just book a FREE ad consultation call with us and we’ll see if we’re a match.
Now, back to the marketing performance indicators. Let’s go through the best of them for eCommerce…
1. Conversion Rate (CVR)
Conversion rate basically measures the amount of people that have completed a desired action. The action could be submitting personal info, adding to cart, making a purchase, etc.
CVR percentage is calculated as follows:
Total number of audience who have completed a desired action / Total number of audience an ad or ad campaign was exposed to * 100
2. Average Order Value (AOV)
AOV is the average amount of money spent each time a customer places a successful order on your eCommerce website or app.
The major reason why you need to measure AOV is to evaluate your pricing strategy. Higher AOV means higher revenue and profits, so you can experiment with different pricing strategies to try and increase your AOV.
Calculating AOV is simple:
Total revenue / Total number of orders
3. Customer Lifetime Value (CLV)
One of the tricky KPIs to measure. CLV is the average amount of money a business can expect to earn from a typical customer throughout the customer-business relationship.
What makes it complex is the differences in products, costs, purchase frequencies, and purchase volumes.
The reason you need an accurate Customer Lifetime Value is to make informed decisions for the overall business. Especially for Customer Acquisition Cost (CAC) - you can increase or decrease your customer acquisition budget if you know how much a typical customer would spend on your business.
CLV is calculated as follows:
Customer value * Average customer lifespan
Here:
Customer value = AOV * Purchase frequency
Average customer lifespan = Average number of years a customer buys from you / Total number of customers.
4. Customer Acquisition Cost (CAC)
This is the average total amount of money required to acquire a new customer. Low CAC means more profit, and calculating it helps you figure out the efficiency of your marketing and sales efforts.
CAC is calculated based on the expenses that directly go into acquiring a new customer. So CAC is calculated differently for eCommerce and traditional businesses. Here’s how you calculate for eCommerce:
Total marketing and sales costs related to acquisition / Total customers acquired
As one of the best UGC agencies for eCommerce, we use advanced marketing strategies to lower the CAC for our clients. And it works at a pretty impressive rate too!
5. Return on Ad Spend (ROAS)
A widely used marketing performance indicator in PPC advertising. ROAS measures the amount of revenue generated for every dollar spent on ads.
That means if you spent $100 on an ad, and got $300 generated from it, the ROAS for that ad would be x3.
It’s based on the ROI principle, which measures the net income generated from investments.
ROAS is calculated as follows:
Revenue generated from ads / Cost of ads
6.Click-Through Rate (CTR)
CTR measures the number of clicks a marketing material gets. If you run an ad for your eCommerce business, the click-through rate will tell you the percentage of clicks your ad got against the number of total impressions.
For instance, if your ad got 1000 impressions and was clicked on 100 times, the CTR would be 10%.
Here’s how you can calculate CTR:
Total clicks on ad / Total impressions
7. Cart Abandonment Rate
Cart abandonment is a situation where a potential customer adds items to their online shopping cart but leaves the website without completing the purchase.
Oftentimes, a high cart abandonment rate is tied to poor user experience or a broken sales funnel. And reducing the rate directly leads to more sales, so this is an important KPI in eCommerce.
Cart abandonment rate can be calculated by:
Total number of completed transactions / Total number of transactions that were initiated
8. Customer Retention Rate
Customer retention is a company’s ability to keep its customers coming back and buying from them repeatedly over time. The retention rate measures the percentage of customers a company has managed to retain.
Customer retention rate directly affects Customer lifetime value (CLV) and customer loyalty.
It’s calculated as follows:
(Customers you have at the end of a period - Customers acquired during the period of time you’re measuring) / Customer you have at the start of the period x 100
9. Website Traffic
This is pretty much self-explanatory. Website traffic is the number of visitors your eCommerce website gets over a period of time.
This is also an important KPI for eCommerce businesses since it helps you understand how well your paid or organic efforts are performing.
There is no particular method of calculation here since website builders and web hosts have this metric available in the backend.
Conclusion
Pretty neat, aren’t they? These are the 9 best marketing performance indicators that you can use to measure the performance of your eCommerce business.
Talking about KPIs, if you need help with getting more sales, consider giving us a chance to help you. Because we’re a marketing agency using an underutilized marketing technique, which has proven to work well for eCommerce!
Interested? Just book a FREE ad consultation call with us and we’ll talk!
Good luck!
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