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What Is a Key Performance Indicator (KPI)?

What Is a Key Performance Indicator (KPI)?

A Key Performance Indicator (KPI) is a measurable value that tracks the performance and progress of how effectively a business is achieving its key objectives.

Why Are KPIs Important?

Ecommerce businesses and agencies use both high and low-level KPIs to monitor how close or far away they from achieving their specific targets. High-level KPIs track overall performance and low-level KPIs track function like sales and marketing.

Main eCommerce KPIs

#1: Return On Ad Spend (ROAS) in eCommerce

This measures the amount of revenue your business earns for each dollar it spends on advertising. It helps strategize marketing spend. For example, if you spend $1000 on a campaign in a month, and you make $20000, your ROAS = 20:1.

#2: Average Order Value (AOV)

This tracks the average dollar spent each time a customer makes a purchase. It reveals customers’ purchasing habits and helps you price your products effectively. If customers spend an average of $50, you won’t sell too many products over $200.

average order value

#3: Cost Per Acquisition (CPA)

This eCommerce KPI measures the aggregate cost to acquire one paying customer on a specific campaign or channel. It’s vital to measure your marketing success. For example, if you spend $100 on a PPC ad and receive five new customers, your CPA is $20.

#4: Return on Investment (ROI)

ROI is the ratio between net income and investment. It evaluates the efficiency of your spending. For instance, if your sales grew by $500 and your marketing campaign cost $50, your ROI is 900% ($500-$50 / $50) = 900%.

#5: Customer Acquisition Cost (CAC)

This is what it costs for a customer to make a purchase and helps a company gauge how much you’re spending acquiring each customer. To find out CAC divide your marketing costs by the number of acquired customers.

#6: Customer Lifetime Value (CLV)

CLV is the total amount of money a customer is expected to spend on your eCommerce business during their lifetime. It provides a picture of your business’s long-term financial viability. If a customer spends $50 every month, you can expect $600 from them in a year, and so forth.

customer lifetime valueCustomer Satisfaction Score (CSAT)

This key performance indicator measures customer satisfaction levels through a one-question survey. It helps you understand how well your products and services match their expectations. A typical question might be multiple-choice, requesting customers to rate your service from poor to excellent.

#7: Cost Performance Index (CPI)

This measures the financial effectiveness and efficiency of a project. It represents the amount of completed work for every unit of cost spent and enables you to forecast future performance and fund allocation.

#8: Revenue-per-Click (RPC)

This is the value allocated to every paid click. RPC indicates keyword profitability and identifies which keywords provide better results and which ones need to be adjusted. It can help you adapt your copy to ranger higher on Google’s search engine results.

#9: Overall Equipment Effectiveness (OEE)

OEE measures how well your manufacturing operation is utilized compared to its full potential. Once you know the true percentage of optimum productivity, you can adjust accordingly to reach maximum efficiency.

#10: Overall Labor Effectiveness (OLE)

This KPI measures the utilization, performance, and quality of the workforce and how it impacts productivity. As an eCommerce business owner, you need to know where you can streamline inefficiencies. For example, perhaps you’ve grown too big and need to outsource marketing so that you can focus on day-to-day management.

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    Catapult Revenue is a full-service digital agency. We help eCommerce stores increase targeted traffic, generate qualified sales leads, and improve their brand visibility. Contact us today for a consultation to learn how we can help you reach all your marketing eCommerce KPIs.

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