6 Key Performance Indicators (KPIs) for Online Business Success

Key Performance Indicators (KPIs) are used to measure the success of business activities. This data can be used by all departments to increase profits, develop new strategies, make better decisions, and to reach your company goals (or set new ones).

6 KPIs for Online Business Success

[DISCLOSURE: We may receive compensation for links to products on this website.]

Some of the following KPIs are specific to those who sell products online in a more traditional ecommerce setting. You’ll be able to easily access this data with customer reports provided by a good ecommerce platform, like Shopify.

If you’re selling on a small scale or providing services, you’ll still have access to performance data that can be put to work for you. In either case, you can use some truly amazing tools to help you track, analyze and strategize, such as SEMRush services or Google Analytics. Dig even deeper by using tools designed for specific situations, like Junglescout for marketplaces.

1. Click-Through Rate (CTR)

Your CTR will vary according to the online marketing situation and perspective.

For example, Google ads explains it as, “CTR is the number of clicks that your ad receives divided by the number of times your ad is shown: Clicks ÷ Impressions = CTR.”

But online advertising comes in many forms and the click-through rate can mean something a bit different in each environment.

Generally speaking, Wikipedia explains it as, “Click-through rate is the ratio of clicks on a specific link to the number of times a page, email, or advertisement is shown. It is commonly used to measure the success of an online advertising campaign for a particular website, as well as the effectiveness of email campaigns.”

If you’re affiliate marketing on the publisher side, you’ll usually find your click-through rate in the affiliate management software or network. It doesn’t reflect traffic to your website, but instead the traffic that came from your website to the advertiser you promoted. If you’re the advertiser with an affiliate program, your chosen platform should also give you a CTR, but it will reflect the traffic you received from the ad on each publisher’s website.

Whatever the situation, it’s absolutely critical that you track this KPI or you will almost certainly pay more for advertising than you should.

2. Conversion Rate

Conversion rates for online businesses are usually defined and determined according to a basic formula:

Website Visits or Orders x 100 = Conversion Rate Percentage

However, there’s much more to it than that, especially from the strategic point of view. Your conversion rates can be based on product/service sales, but there are other types of conversions that you should also be monitoring. For example, you may track the conversion rate of a free download offer designed to increase email subscribers, or affiliate publisher sales in your partner program.

But what does a great conversion rate look like? The situational variables leave us with no definitive answer to that question, but we can narrow it down a bit with outside data benchmarks. For example, Adobe shares a lot of specific data, including Average Ecommerce Conversion Rate Benchmarks.

That article alone includes:

  • Average conversion rates for ecommerce websites
  • Average conversion rates by device
  • Average conversion rates by industry
  • Average conversion rates by region or country
  • Average conversion rates by channel

“Even if you’re tracking your ecommerce conversion rates closely, you might wonder whether you’re in line with industry standards, if you’re above average, or if you’re below the acceptable threshold,” writes the Adobe Experience Cloud Team. “Without some conversion rate benchmarks, you won’t know where you stand or how to improve.”

3. Shopping Cart Abandonment Rate

Most of us have added items to a virtual shopping cart, only to leave the site without checking out. Knowing the cart abandonment rate for your online business can provide critical insights and identify areas of potential improvement. Is it the cost of shipping? Is there a glitch in the checkout process? Is the path to purchase clear and easy?

You’ll see a wide range of numbers claiming to be the current shopping cart abandonment rates. I like to cite Baymard’s average of 70.19%, because it’s calculated from 49 different studies on the topic. One simple tweak could make all the difference!

Your ecommerce platform may provide this number for you. If not, it’s easy enough to calculate the shopping cart abandonment rate by dividing the number of completed checkouts by the number of shopping carts created. Subtract that number from one and multiply by 100 for the abandonment percentage.

4. Average Order Value (AOV)

Your AOV is, of course, the average amount each customer spends each time they buy from you. Simply divide revenue by the number of orders to calculate your AOV.

When it comes to developing a strategy to increase orders, however, you’ll want a bigger picture.

Shopify says Taylor Holiday, co-founder of Common Thread Collective, recommends considering all three measures:

  • Mean (AOV) – Average value of all orders
  • Median – Middle value of all orders
  • Mode – Most frequently occurring order value

5. Return on Ad Spend (ROAS)

This key performance indicator is just another ‘return on investment’ calculation, yet it is absolutely crucial to ensure you get the most value for your online advertising budget.

Ad Revenue divided by Ad Spend multiplied by 100 gives you your basic ROAS. Most of the more specific calculations will be done by whatever platform your ad is being served on, so it’s not as overwhelming as it may seem at first.

“Whether you want to measure ROAS for an entire marketing strategy or look at performance at the campaign, targeting, or ad level, it’s a key metric for measuring and determining strategic success in mobile advertising,” declares Adjust.

Read 4 Costly ‘Return on Ad Spend’ Measurement Mistakes for tips.

6. Customer Acquisition Cost (CAC)

Your Customer Acquisition Cost (CAC) is a critical part of calculating profit, making it a very important KPI for online businesses. You must track, monitor, test and optimize it, constantly tweaking it as you go. Luckily, the digital world comes with a myriad of tools to help, providing everything from tracking to analysis.

Basic CAC Calculation:

Cost of Marketing (MTC)
÷
Number of Customers Acquired (NCA)
=
Customer Acquisition Cost (CAC)

Is your CAC too high? Here are 5 Ways to Reduce Your Online Customer Acquisition Cost.

The above Key Performance Indicators (KPIs) are ‘key’ to your online business success. As you grow, you’ll find other indicators to track that are specific to your business. Base your strategies on them and continue to track your success or failures until your business is optimized for maximum profitability.

What KPI’s do you track? Please share your experience or questions in the comments below, or join us in the Online Business Canada Facebook group.
For weekly inspiration, insights, tips, and resources, sign up for the Online Business Canada newsletter!

Recession-Proof Online Businesses to Start from Home book

7 Recession Proof Online Businesses To Start From Home

Expert help to choose, start, and run a successful online business!
“Almost 200 pages of pure gold…”

GET IT ON AMAZON
Or Other Major Ebook Retailers

——————————————

© CanadiansInternet.com – Content on this website may not be used elsewhere without expressed permission. Thank you for respecting the effort that we have put into our original content.

DISCLOSURE: We may receive compensation for links to products on this website.  As an Amazon Associate, we earn from qualifying purchases. Our content is provided for informational purposes only and does not guarantee results.

Melody McKinnon
Digital Business & Marketing Manager at Online Business Canada | Website

Melody McKinnon is an internet entrepreneur with 25 years of experience in a wide range of online business models, backed by a formal business education and enhanced by training and mentorship. She has owned or managed both educational and ecommerce websites. Her book, 7 Recession Proof Online Businesses to Start From Home, is available from all major ebook retailers.

Melody has worked with many businesses & brands in a multitude of capacities. She can often be found on CanadianDigitalMedia.com, CanadiansInternet.com, CanadianFamily.net, and AllNaturalPetCare.com, as well as other quality digital publications. Her content has earned reference links from highly-respected websites, magazines and university textbooks.

Follow Melody McKinnon on Medium:
https://medium.com/@business_32556

Subscribe
Notify of
guest
1 Comment
Newest
Oldest Most Voted
Inline Feedbacks
View all comments
Wren Hachey

Calculating CAC ties my brain in knots but I like how you simplified it a bit. I’d probably have to hire an assistant just to track, translate and bring it all to order for me. That can’t happen this year but hopefully next year I’ll master the most urgent KPIS.