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cac payback

Best E-commerce KPIs with examples

Best E-commerce KPIs with examples

Key Performance Indicators

As wikipedia says: (KPI) is a type of performance measurement.[1] KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages.

Remember the most important part of each one of these KPIs is to analyze them under trends charts. All of these KPIs are going to give much more information when you can compare the data under daily, weekly, monthly, yearly basis, even under source, keyword, product basis.

A Key Performance Indicator for ecommerce, the best metrics to track:

Customer KPI:

Customers:How much clients are you earning monthly, daily, weekly, yearly,…?

It’s important to know how much customers you are attracting to your business.

Remember, clients are the blood of the businesses, nor money, nor investment, nor SEO, Clients!

ecommerce-kpi

New Customers:

New Customers are very important to be tracked because it’s an important indicator about how much new customers you are achieving each month. If your e-commerce is not attracting new clients then all your conversions come from recurring customers.

Recurring Customers:

Let’s imagine that this month is a good month, you’re selling a little bit less than past month but you’ve improved your CPA, sounds good, right? But, what if 80% or more of these conversions are coming from recurring clients?

You would be generating conversions from customers that with an “email” would be going to buy in your site with $0 cost. Obviously the conversion rate of these customers are higher than new customers conversion rates.

It’s very important to keep separately tracked both KPIs and with source segment. Google Ads is an amazing channel for generating Add to carts from New Customers, but finally who closes the deal are Search Engine Optimization (SEO) or Direct. But, if we are generating sales through google ads and who is buying are recurring customers, we wasting money with users that, as they already met us, they could buy our products from Direct, or email marketing campaigns.

Frozen Customers:

ecommerce-kpi-frozen-customers

All those customer that don’t buy our products for at least 3 months. If you have this KPI tracked you can create a Customer Audience in Google Ads or Facebook Ads and create a special campaign to try to reactivate them.

Revenue KPIs

Total Revenue

It’s the income generated when we sold products from our web stores. So, it’s crystal clear that is very important for our companies that revenue increases year after year.

How can we take advantage of Revenue as KPI?

When we can segment it per source, keyword, months,… We can find some digital marketing channels that are not generating enough revenue, so these channels are unprofitable channels.

New Revenue:

kpi-ecommerce-revenue

It’s very important for your company generate new customers, new revenue every month, year,… But it’s very important to keep both KPIs separately because we could be generating a lot of new customers but with a low revenue. So these clients could be unprofitable for our e-commerce. Remember, we need clients, but we need to earn money as well.

Recurring Revenue:

Once you know how much revenue is generating your online store, it’s interesting to detect how much of these revenue is coming from our loyal customers. Specially, because if the percentage from recurring customers is decreasing, the reason is that your clients are not repeating purchase in your store. This is one of the best ways to track your customer loyalty or even your brand awareness

Average Revenue per Purchase (ARPP)

Average revenue per puchase

How much are you earning every time that a purchase is done on average? This is the question answered with this KPI.

It’s important to know when you need to predict how much revenue you’d get if launch a new marketing campaign for you e-commerce, for example.

Average Revenue per User (ARPU)

This KPI indicates how much revenue is generate for each customer on average.

Average Revenue per New Customer (ARPNC)

average revenue per new user

If we know that New Revenue and New Customers are two important KPIs for our e-commerce. ARPNC is as important as two previous KPIs. How much revenue will be generated for our new customers on average?

Average Revenue per Recurring Customer (ARPRC)

It’s the same KPI than ARPNC but taking data from Recurring Customers.

Revenue per Click

Revenue per click (RPC) indicates how much revenue we are generating each time that we generate a click, form example google ads.

RPC formula:

Revenue : $10.000

Clicks: $20.000

RPC: Revenue / Clicks, $0.5 per click. Every time that we generate a click from google ads we are earning $0.5. So it’s important that our average CPC from Google Ads is lower than $0.5. If RPC is greater than CPC every single click that we generate is profitable for our business.

Purchase KPIs

Purchase per User:

How many purchases made each user on average during his life as your customer?

purchases per user

and obviously per Source as well 😉

purchases per user and source

Time Between Purchases:

How many days spend your customers on average each time that they buy your products.

Time to Purchase:

How many hours spend your customers on average from they land on your e-commerce until the purchase is done?

Time-to-puchase

Cart abandonment:

Detect when or which traffic sources are you generating more cart abandoned. It’s important to track because this KPIs indicates that the users that added products to the cart, were really interested to buy. If finally they didn’t buy, we should investigate the reasons.

Cart to Purchase Conversion Rate.

What percentage of your carts with products finally end up doing a purchase?

Refunds:

Interesting to be tracked this KPI, because we’ll know how much refunds we are receiving every day and try to understand why in some seasons we have more or less refunds, or which sources are generating more refunds.

Business KPIs

Return On the Investment (ROI)

How much we are earning per every single dollar that we invest?

How much we are earning per every dollar invested on Google Ads campaigns?

ROI formula: (Revenue – Cost)/Cost.

If your revenue from google ads is $10.000 and our investment was $2.000:

(10000-2000)/2000 = 4, 400%

Lifetime Value:

How much we are earning on average per user during all his life as our client?

LTV helps us to predict how much money we are going to earn every time that we achieve a new customer.

Once we know how much profit we get per user, it’s very easy to set up our target CAC.

LTV ecommerce

Cost per Acquisition:

How much are we paying to get a New Customer?

This important metric is very important because we’ll see which sources are more profitable than others in terms of customer acquisition.

If our LTV>CAC we have a good business.

This KPI is very important because we usually see just one half of the movie of our business.

If this month we have a revenue = $100k and costs =80k, our profit is 20k. But the problem comes when profit is new customer + recurring ones,… because actually you don’t know how much you should invest next month on google ads, per example.

But if you know that your LTV = 900€ and you want to have a margin of 80%, you’ll work to get customers with a CAC of 180€. Probably this CAC is much more higher than your current CPA, isn’t it? The main difference between each methodology is:

  • With LTV you are working and analyzing the whole life of your customers with you.
  • Without LTV and with CPA: you are working with how much you’re selling today, this month.

If you work with LTV, you can be much more aggressive with your CPCs because you know that you’re going to recover your investment during the life of your customers.

But working with LTV is as profitable as risky, because you need to advance the money, you have to invest on your traffic for getting customers, TODAY. And you’ll recover this investment in the future? When in the future? Take a look to our Purchase KPIs and you’ll find the answer.

Here you can find the perfect LTV formula (we highly recommend read the post):

LTV:CAC

This ratio indicates how many times we are profitable. If our LTV = 2000 and CAC = 100, we are 20 times profitable.

Add to Cart Rate

This percentage indicates how many add to carts are generated daily, weekly,… per source, keyword,…

As you can see on your Google Analytics account, google ads is an excellent traffic source generating add to carts, but remember the business success in all online shops go beyond that time on site, time spent on your site, page views or your number o visits, the success of all kind of e-commerce business is at the end of the checkout process, when the purchase is done.

CAC Payback

CAC Payback is how much time or how many purchases will you need to recover your Customer Acquisition Cost.

For example, if your CAC = $100, and your average revenue per order is $50, you’ll need 2 purchases to recover the investing of acquiring a new customer.

cac payback