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The Secret to Making Your Online Store Metrics Actionable

Boris Krstovic, Senior Product Manager, 02/10/2016,

As an e-commerce business owner, you’ve probably read your share of articles on e-commerce metrics and KPIs, hoping to understand the performance of your store better, but still ending up without having a clear idea how to improve it.

A Google search of “ecommerce KPIs” returns tons of articles all titled basically the same - “10 most important metrics…”, “25 best KPIs…”, “43 useful performance indicators…”

They are all somewhat informative, but share two common problems which render them useless to an average e-commerce business owner.

First and foremost, you can’t have 43 KPIs. Your store is not an Airbus A380. You choose the metrics that matter to your business the most - depending on the business life cycle stage. Newly opened stores shouldn’t track the same KPIs as well established ones do.

Secondly, what most of those “great KPI” articles are missing is how to make metrics actionable. A KPI must drive action that helps you grow your store.

Marketing Mix

Now, the good thing is - you don’t need to be a certified analytics expert, or pay $1,000+ per month for tools that will give you the right piece of information.

You can easily learn to do it yourself, so instead of giving you a fish - this article will teach you how to fish.

Without actionability, a KPI is nothing but a vanity metric, a plain number on the dashboard for you to share or brag about.

Let’s take an example. Average order value (AOV), is - after revenue - one of the most important metrics for any e-commerce business. But AOV per-se is a completely useless piece of information. What “a-ha!” moment, or valuable insight do you get by knowing that your AOV is $37? Now what if we say instead something like this: AOV is up $12 over past 30 days for t-shirts, and dropped $8 for orders from California.

What I did here is I provided trend and context. Trend and context are two hallmarks of every actionable information. Unless you segment your data by at least a few different dimensions, there’s a very little chance you will get any value out of it.

KPI graphs

I suggest these as the 3 most important dimensions by which you should segment each of your KPIs:

  1. Source (traffic / campaign / channel)
  2. Time
  3. Product (product category, or other taxonomy)

To illustrate better, here are a few typical e-commerce KPIs, placed in actionable context:

###Average Order Value (AOV) by Region and/or Product Category### AOV is probably one of most important metrics for every store, but won’t do much use unless you segment it per taxonomy (category), region or demographic. Larger AOV for certain categories will help you manage your product inventory, understanding your demographic, or knowing the location of where your higher AOV’s are from, will clearly help you steer customer acquisition and allocate marketing budget more precisely.

###Revenue by Product### Understanding revenue per individual product (especially if segmented by demographics/region) is the most important piece of information to help you manage product inventory better, and understand how to distribute marketing/acquisition efforts.

###Conversion Rate by Acquisition Source### The conversion rate (sales/visits) tells how effective your store is at closing deals. Understanding how certain campaigns or channels contribute to it will immensely help optimize your marketing dollars.

Each of the above needs to be presented with week-over-week, or month-over-month indication (trend), as only that will present the real situation, no matter how brutal it is. Only brutally honest information drives real actionability!

There are of course more examples, but I hope these will send across the point, and help you properly segment KPIs that are uniquely important for your lifecycle, stage, and intentions.

Doing this will inevitably yield results, however don’t expect to find one improvement that will give you 50% increase in some KPI. The truth is, it is much more likely to make a bunch of 1% improvements. Be methodical. Be patient. Results will follow.

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