Monitoring and analyzing the performance of your online business should be one of your most regular activities.
Only by closely monitoring various metrics you can be certain that your business makes progress, or not. That your store really brings profit or you accrue losses.
However, many new online business owners seem to be confused about what to track, how to do it and also at what stage of their stores development.
In this post I am going to shed some light on all those issues.
To begin at the beginning then, according to the “official” definition, KPI (Key Performance Indicator) is a measure of a process, event, or activity within your business or relating to its goals.
Good examples of KPIs are: traffic to your site, the number of sales per day/week/month and so on.
By regularly monitoring your KPIs you are able to quickly identify potential problems and reduce the risk of losing business if something breaks.
Here’s a quick example. Let’s say that your usual bounce rate on the website has always been at around 30%. Suddenly though it doubles up. It might be an indication that something is broken on your website, pages load too slow or maybe do not even display at all. Or perhaps that you are driving a non targeted traffic to your site.
By tracking various KPIs you are able to spot and react to changes like that really quickly, ultimately reducing the losses in your online business.
Below is a list of the most common KPIs used to track and monitor internet marketing campaigns.
One thing to note though: KPIs differ between businesses. Actions or events you track may not necessarily relate to someone else’s business. Therefore, do not feel any pressure to track all of the KPIs from the list. At the end of this post I offer some advice on selecting the most effective KPIs for yourself and best ways to track them.
Not every marketing activity must directly result in increased sales. Some, like SEO or PPC give you the opportunity to put your website in front of potential buyers, regardless of the stage of the buying cycle they are in.
Why is this useful: This metric shows if there is a difference / change in your traffic since the start of your marketing campaigns.
Shows the number of pages on average your visitors are viewing.
Why is it useful: This metric can tell you how engaging the content on your site is. Also it could be an indication if you are receiving a targeted traffic, or whether the keywords you position yourself for really indicate what your potential audience is looking for.
A unique visitor is someone who has visited your site for the first time. This metric is useful to establish how many new but also how many returning visitors you get.
Why is it useful: Customers often visit the site a number of times before making a purchase. This is a standard part of their buying cycle. An increasing number of returning visitors can indicate that they find the site engaging and include it in their sales cycle.
Seemingly, an increasing number of new visitors suggests that your site attracts new people.
A bounce occurs when someone lands on your site and then leaves straight away, usually by pressing the back button or typing a new web address in the browser URL bar.
Why is this useful: Bounce rate can tell you if the keywords you position yourself for match what your website delivers and if your content engages your audience.
You should also track traffic by channels and monitor any changes to it. The best practice is to select main traffic sources to track, i.e. Google / Search, Direct, Advertising, Email, Selected Referrals, Twitter / Facebook.
Why is this useful: this metric can help you notice any anomalies in traffic. It is also a good method to monitor certain aspects of your online marketing efforts (i.e. social media campaigns etc.)
Your traffic will come from both sources, yet naturally, first and foremost you will be focusing on the latter in your online marketing efforts. Therefore, it is important to track this traffic.
Why is this useful: Allows you to see if your marketing campaigns are affecting sales or leads coming from the site. This metric not only helps to establish if your new traffic is buying but could also be used to analyze if you are bringing a targeted traffic to the site.
You may want to know how much on average your customers are spending with you.
Why is this useful: Knowing your average order value and any cycles / seasonality associated with it will allow you to plan ahead. This metric combined with your traffic, new visits and conversion rate can help you predict your future sales and estimate the cash-flow.
Conversion rate is the ratio of visitors who convert from just visiting your site to taking a desired action (buying, signing up for your newsletter etc.). This is probably one of the most important commercial KPIs.
Why is this useful: Tracking conversion rate allows you to establish whether your marketing efforts and your online store are delivering desired results. Also, conversion rate is an important metric to track after making big changes to the site, as these might greatly affect it.
This metric can help you establish how much dollars you gain for every one spent.
Why is this useful: knowing how much you gain allows you to decide whether your campaigns are paying back. It also allows you to plan ahead and make adjustments to your marketing plan.
An important metric, this KPI will tell you how much you spend per click for your campaigns. It is also a good idea to tie it in with your ads avg. position to see if you are not overspending and whether there might be an opportunity for reducing your cost per click.
Why is this useful: Allows to monitor spend and success of campaigns. Also, helps to establish if there is an opportunity for lowering cost per click without reducing the ROI.
Just like with general conversion rate, it is a good idea to monitor your conversions per channel. This is especially important when it comes to paid advertising, where you need to keep track of your spend and if it is worth it.
Why is this useful: Allows you to gauge whether you are spending money the right way and target the right keywords with your campaigns.
Social media has become an important part of a typical online stores marketing mix and you should also measure your efforts in that field. Here are some of the basic KPIs to implement into your tracking:
Why is this useful: The above allow you to quickly estimate if there is any response to your social marketing campaigns. This is especially useful if you are involving content marketing in your marketing efforts.
KPIs differ from store to store. Events that are highly important to one company might be irrelevant to the other. Therefore, the first thing you should do is establish which KPIs are the most relevant to your business.
The most effective way to do so is by tying them down to the stage of development your store is at as well as your overall company’s goals.
Ideally, you should start tracking KPIs right from the day you launch your store. Having said that, you don’t have to monitor every KPI straight away.
Instead, tie the KPIs you monitor to your most immediate business goals.
Right at the very start, when you have just launched your online business, your first objective is to get traffic to the site. Therefore, you should focus on those KPIs relating to traffic:
At this stage, you probably won’t get many sales, if any therefore you should leave those KPIs for later. Otherwise, you can find yourself being distracted by those metrics from your main goal.
In time, when your store grows, you can slowly start adding KPIs, just as you add more goals. When you start heavily market your site, you can add KPIs relating to advertising and promotion. And in time, when the number of your sales increases, you should also develop a set of metrics to tell you the performance of your site.
One of the common problems with monitoring KPIs is bringing all the information together. There are two ways of doing so:
Low Budget – Simply create an Excel spreadsheet with your KPIs as columns and each row representing the time you want to track them for (week / month etc.). Another good system to use is Google Docs, which allows to almost seamless multiuser control, without having to worry about files getting lost or overwritten.
The Downside? You need to pull the data in yourself by hand, which can be a time consuming process.
Big Budget – Use a 3rd party KPI Dashboard that will pull all the data automatically for you and create reports. KPI Dashboards are a good way to automate data gathering process.
The Downside? – Cost.
What KPIs do you track in your online business? Which ones relate to your online marketing efforts? Let us know in the comments.