How to Set Up Relevant E-Commerce KPIs to Determine Customer Value

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KPIs (Key Performance Indicators) are used to assess your e-commerce performances compared to its key business objectives. When it comes to defining which e-commerce KPI to use for your business, keep in mind that they must reflect your goals.
Even if there are standards in some fields, don’t just follow them because they exist; also use customized KPIs that will help you measure your very own e-commerce performance. We have compiled a method to help you find the right ones:

How to define your own E-Commerce KPIs?

If you want to track success and improve your business by steadily defining the right e-commerce KPIs, keep the following in mind:

  • Use data that is available to you, and reasonable, to create a solid mix of long and short term KPIs
  • Be specific, by avoiding the use of large range of KPIs that can be interpreted in multiple different ways
  • Define each KPI to create a common understanding

Seven useful steps to define metrics in order to create valid e-commerce KPIs are:

  • Step 1: Define the results your want to assess: What is your main goal? How does this goal change as your business grows (or doesn’t grow)
  • Step 2: Create short & long term measures: Keep the big picture in mind, but set out realistic short term goals to mark  your progress.
  • Step 3: Decide the actions to implement to reach those goals: Get a plan in place and stick to it.
  • Step 4: Analyse the 20% of KPIs that will have the biggest impact on results: Which KPIs are the best ones to take into account and which ones will help you reach your goals the quickest?
  • Step 5: Define everybody’s role: Each person involved in your campaign should have a specific role and responsibility.
  • Step 6: Create a measure list to check progress: Tracking your progress is the best way to see if you’ve defined your KPIs, short-term and long-term goals correctly. This is also the way you know if things are changing.
  • Step 7: Determine what has already been measured, what can be measured, and what cannot be measured: In an ideal world, we’d have all the data we want on a silver platter- but this isn’t the case. We need to determine what we know, what we can know, and what we can’t know- and build our strategy around what we can measure.

Some common e-commerce KPIs you can use as a start are sales growth, working capital, average profit margin, and so on.

Aligning your E-Commerce around KPI and Customer Development

Combining these actions with your customer journey or sales funnel, as well as with your customer types, you can create a good overview for your go-to-market approach.
You will encounter different shopping types online:

Digital Natives:

Young customers with a restricted budget. Due to limited finances, not all forms of digital shopping can be made use of due to a lack of credit cards or bank accounts. Therefore they mainly research online but purchase offline in brick-and-mortar stores.

Digital Grown:

Customers with a higher income, mostly university graduates. They prefer multi-channel strategies and search for the best deals.

Digital Practicable:

Middle-aged families or persons of the same age group and with higher education. They spread their search between online shopping and brick-and-mortar stores to create the best shopping experience. However, this group is not too familiar with the latest trends.

Digital Best Ages:

Mostly family people, who prefer the in-store shopping experience or choose multi-channel purchases. Their way of shopping is influenced by the fact that their children are grown up and they therefore have more time and money to spend.

Digital Silvers:

e-commerce KPIs

The generation which is over 60 years old, with different types of incomes and partly living alone. They generally prefer buying offline since they seek personal contact and reliable service. Some are open to modern technologies though.
After you combine all such information, you can create a sales funnel similar to the one below:

An e-commerce KPI which can be used as one of the most important metrics is customer value. This is part of financial KPIs, but can also be used as an overall orientation as it shows the success of marketing campaigns, sales promotions, and loyalty campaigns by measuring how often one customer buys and which costs a company has had. For an optimal process analysis, you should set your KPIs up along the sales funnel.
E-commerce KPIs are important because they will allow you to see the big picture. You will identify areas that work well, and analyze which ones need improvement. KPIs allow you to define clear objectives to attain, and stay focused while monitoring the results of your efforts.
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