Ecommerce KPIs: Using a KPI Framework to increase our revenues

Ecommerce Key Performance Indicators are the measure of our ecommerce success. 

In an ecommerce organisation, each team and individual might be responsible for one or more KPIs. We use them to monitor the health of the business, make decisions and track the progress against individual, team and business objectives. 

What are Ecommerce KPIs?

Ecommerce Key Performance Indicators are measurements of the performance of the ecommerce function within the organisation.

Let’s unpack this definition: 

• Key – they are crucial and indispensable. They are chosen by ignoring many other performance indicators we could consider but don’t. 

• Performance Indicators – they act as proxies for the health of the ecommerce function. By understanding what they are telling us, we understand how well the ecommerce function is doing.

• Measurements – they are metrics, quantifiable. 

Example Ecommerce KPIs are Revenue, Customer Lifetime Value and Conversion Rate. 

Also, NPS or Page Speed scores. 

What are the benefits of using ecommerce KPIs?

Using Ecommerce KPIs brings many important benefits to the organisation. 

Providing feedback to the organisation and helping with decision-making. 

The main purpose of KPIs is to provide feedback to the organisation on the impact of our decisions and initiatives. They also help benchmark the current situation. 

For example, by measuring the checkout completion rate, we can understand the impact of reducing the number of fields on the checkout.  

In turn, KPIs enable us to make better decisions too! For example, we can prioritise new development features by reasoning what kind of impact we can expect from a given KPI on revenue (eg, more add-to-baskets or higher average order value). 

KPIs isolate the problem so that it can be tackled. In Ecommerce Experience Design, KPIs can surface issues in particular areas of the site – such as the Product Description Page. This means the problem can be dealt with more effectively. 

Setting targets and budget parameters for the organisation. 

KPIs can be used as targets. 

When we understand where we are and what’s possible, we can then formulate targets that focus the teams to achieve a certain level of performance out of a KPI. 

For example, the ecommerce team can be tasked to improve the conversion rate of the site by 20% – this could be based on the understanding that the conversion rate is too low compared to industry benchmarks, or through initial heuristic reviews that have found issues across the conversion funnel.

The beauty of measurable targets is that they often can be translated into an estimated financial return. In this example, it could be that a 20% increase in conversion rate, all other things being equal, results in an extra £1m in revenue.

If achieving a 20% increase in conversion rate results in an incremental £1m, we can also be confident in spending 1% (£10,000) of that in user research to better pinpoint the issues, and 10% (£100,000) in Magento development to solve them. 

Allowing for experimentation 

Finally, we should recognise that solutions are only theories until tested. 

When a solution has been prototyped and validated, it can be deployed. However, even the best validation still relies on a low sample of users. 

Teams experimenting with A/B testing can use KPIs to determine winning solutions and be more confident in deploying solutions that work. 

What makes a good ecommerce KPI?

A good ecommerce KPI has the following traits 

• It can be tracked.  

Most ecommerce KPIs can be passively tracked with a web analytics tool such as Google Analytics. Some ecommerce KPIs might need calculations that draw from different sources (eg, CAC), and some others might require active data gathering (eg, NPS)

However by definition, we need to be able to track a KPI, or we can’t use it. 

For example, it would be awesome to know how many websites a new customer checks before making their first purchase, however, if we can’t track that, we can’t have it as a KPI. 

Therefore the first consideration with a KPI is how we track it, and how good is the tracking method at representing the reality of that KPI. 

• It can be measured. 

Similarly, KPIs need to be measured, so that we can obtain a number. Numbers allow us to do wonderful things such as comparing, calculating, trending and experimenting, whereas qualitative statements don’t, or at least not as well. 

• It is useful 

This point might seem obvious, but if a KPI doesn’t have a use, it is a bad KPI.

Review any report or dashboard and ask yourself – have we made any decisions in the last year based on information from this KPI? If not, why are we tracking it? What would happen if we didn’t track this KPI at all?

Why be so inquisitive? Because the more KPIs you pay attention to, the less attention you will pay to each of them. Less is more.  

How many Ecommerce KPIs should I monitor?

Not many.

The whole point of an Ecommerce Key Performance Indicator is that it is, you know, a key performance indicator. 

This means we should pay a lot of attention to each of them. Which we can’t do if we’re trying to get our heads around 67 KPIs. No wonder some people ask in despair, “yes but, which ones are the key KPIs?”

The trick is to choose well. 

Now, it is true that different functions in the ecommerce business will have different KPIs. What matters is that they contribute to the revenue and profits of the organisation – or whatever is important to them.  

Equally, it is important to consider which KPIs belong to which team. The higher we go in the organisation, the fewer KPIs someone should be responsible for. This is because those in management need a top-level view to make fewer, more important decisions, whereas those leading teams and executing plans need more granularity to make decisions on a daily basis. 

Here’s an example of how the number of KPIs might vary across the organisation levels 

	How many KPIs	Examples
CEO	2-4	Profit ratio  Topline revenue  Customer NPS
Ecommerce Director	4-8	As above, plus CAC  LTV Conversion Rate
Ecommerce Manager	8-12	As above, plus  Add-to-basket  Checkout completion rate Page speed score
CRM Manager	8-12	RFV #Subscribers  Email Open rate  Email Click Through Rate
Media Manager	8-12	CAC  LTV CPM / CPC / CPA ROAS

GENE’s Ecommerce KPI Framework 

In order to have an overall view of all the KPIs that matter, a framework can help us visualise the relationship between each other, as well as the level in the hierarchy. 

Our GENE Ecommerce KPI Framework is a ruthless shortlist of the KPIs that we think every business should monitor. The framework also specifies the ways in which metrics ladder up to revenue, and how they interact with each other. 

Level One. Revenue 

At the top of the framework, we have Revenue. This is what we really want. But to get more of it, we need to take action at the lower levels. 

Level Two. Customer Acquisition Cost and Lifetime Value. 

The Customer Acquisition Cost (# new customers divided by the marketing budget) tells you how much you’re paying for each new customer. It’s the best KPI for the evaluation of your customer acquisition efforts. 

From an ecommerce experience point of view, the site has to engage users and convert them effectively if we want our CAC to be healthy. Of course, the efficiency of the marketing budget at driving new people to our store is crucial too, but we leave that out of the KPI framework.

Lifetime value is the sister KPI to CAC. 

Lifetime value is the total (or time-constrained) revenue that we see from the average customer. For lifetime value to grow, we need to get customers to stay with us for longer periods (retention rate), purchase often (purchase frequency) and have big baskets when they check out (average order value). 

Most important of all, CAC and LTV have to be in balance.  We can’t pay more for a customer than what they spend with us. 

Level three. 

At this level, we have KPIs that we hear about more often in weekly and monthly reports. 

An engaged user (in GA4) is someone who’s spent 10 seconds, visited 2 pages or triggered a conversion. Because we can’t really drive revenue from non-engaged sessions, we need to monitor how the site is engaging users, what pages and steps are causing abandonment and experiment accordingly. 

Ecommerce conversion rate tends to be the holy grail – we all want to improve this KPI, always. A healthy conversion rate improves both our CAC and our LTV. This is why we pay special attention to it, even if the best way to improve on it is by experimenting with metrics on level four. 

Lastly, AOV, retention rate and purchase frequency improve our LTV. 

Level four

Now, we get to the most actionable metrics. At this level, we can set up projects and experiments with the confidence that we can influence these metrics most directly, in order to make waves towards the higher levels. 

We improve our accessibility score to increase the number of engaging sessions. It’s the same with Page Speed. This way, we make the most of our traffic, which lowers our CAC and increases our revenue. 

Add-to-baskets, begin checkouts and complete checkouts are all smaller aspects of the conversion rate. For someone to convert, these three smaller things must happen.

The beauty of this way of thinking is that it’s more actionable. Monitoring Add-to-baskets on a PDP allows us to experiment with new designs and features, and then observe the impact. 

The problem with ecommerce conversion rate is that it’s affected by many extraneous variables such as seasonality, day of the week and acquisition channel mix. This makes experiments and pre- and post-analysis not (as) feasible.

Instead, these metrics are less affected by those factors, and can be used to better measure isolated sections of the ecommerce journey:

• Add-to-basket measures the ability of PLPs and PDPs to drive product consideration 
• Begin checkout measures the performance of the basket-to-checkout journey. 
• Complete checkout measures the performance of the checkout.  

Lastly, NPS is a customer satisfaction calculated metric. Originally developed by consultancy Bain & Company, we know it correlates with customer metrics such as retention rate and purchase frequency. Therefore with LTV, therefore with revenue and growth. We have written extensively about it.

Bonus Level Five

Page speed scores can be further broken down into more specific metrics such Largest Contentful Paint and Time to Interact. This again helps us be more targeted with our technical implementations.