Key Performance Indicators, or KPIs, are measurable indicators that reflect the success of an organization’s performance against its strategic objectives. Within the conversion optimization context, a KPI is a measurement that determines whether your conversion optimization efforts are successful.
The conversion KPIs are a measurement of conversion performance, conversion efficiency, or conversion cost. To calculate conversion performance, divide the number of potential buyers by the conversion rate. This yields conversion efficiency. This KPI is calculated by dividing the conversion rate by the conversion cost. The conversion cost is the cost of the conversion process divided by the number of potential new buyers.
However, in the conversion optimization process, there are more simple KPIs that you can track to see if your CRO activities yield some results.
List of CRO KPIs
1. Total number of conversions
If the total number of conversions is high, this indicates a significant conversion rate. However, if the number of conversions is low, this indicates that your CRO efforts did not yield results.
The total number of conversions can be tracked in different ecommerce channels such as organic search, paid search, and ecommerce websites. The number of conversions in each channel can also be tracked over different time periods to understand the impact of your CRO efforts.
2. Conversion rate
Conversion rate is the percentage of website visitors who completed an action (purchase, signup, etc). To calculate conversion rate, divide the number of conversions by the number of visitors.
Conversion rate = #CONVERSIONS / #VISITORS * 100%
This is a key KPI that measures the success of your CRO activities and landing pages. This is a key KPI that measures the success of your CRO activities and landing pages. You can track conversion rate over different time periods to understand the impact of your CRO efforts. It’s also a metric that tells you if your conversion optimization efforts are achieving their desired goal of increasing conversion rate.
3. Average order value
AOV (average order value) measures the average amount people spend on your store within one shopping session. AOV is the second most important metric in Ecommerce. To calculate AOV, divide total revenue by the number of orders.
Average order value=#REVENUE/#ORDERS
AOV is an important metric because it shows you the average amount your customers spend on your store. This helps you to measure your customer’s satisfaction. A high AOV means that your customers are satisfied with the purchase they made on your store. This also provides you with an indication of the demand for your products.
As an Ecommerce business owner, increasing your average order value is important because it shows that you’re providing value to your customers. This increases your chances of retaining current customers and attracting new customers. It also shows that you’re providing a high-quality customer experience, which builds a good reputation among your customers, so they feel comfortable spending more with you!
Revenue is the most important KPI for any e-commerce business. Revenue is the amount of money you make from your online store. Revenue is the primary driver of your business growth. It shows you the health of your business.
Revenue is the financial measurement of your success as an ecommerce business owner. Looking at the revenue, you can pinpoint a bottleneck in your marketing and CRO performance.
5. Unique Visitors
Unique visitors KPIs show the number of new people who visit your site. You can see this statistic in Google Analytics and Shopify dashboard. A high Unique Visitors rate indicates that a lot of visitors are coming to your store and that you have a good reach, which can result in higher revenue.
The unique visitors can also determine the success of your advertising campaign. If the number of unique visitors increases, this indicates that your ad campaign is effective. However, if the number of unique visitors decreases, this indicates that your ad campaign is not doing well.
6. Returning Visitors
When you launch your ecommerce store, you might get a lot of new customers. However, over time, you’ll start to see a decrease in the number of new customers. This is normal. Over time, you’ll see a higher percentage of returning customers, which indicates that you have a good retention rate. Returning customer rate determines the percentage of your existing customers who return to make another purchase in your store again.
Returning visitors are the key to your success if you want to see the results of your marketing efforts. A high returning customer rate also shows that your products are in demand, that your price vs quality is great, and that you’re providing good customer service, which helps you to build a good reputation and customer loyalty. This also indicates that you built a strong relationship with your customers which leads to higher revenues.
7. Cost per acquisition (conversion)
Cost per acquisition is a measure of the cost of acquiring a new customer. The cost of acquiring a new customer is the cost to you, the seller. For example, if you sell on Amazon, the cost per acquisition can be calculated as the cost of providing the service of selling on Amazon.
Cost per conversion is a marketing term that refers to the amount spent on a marketing campaign to bring a new customer to your store. It is calculated as the cost of acquiring a new customer, divided by the amount of revenue made from that customer. The more revenue made from a customer, the lower the cost per conversion will be. This shows you how much profit you are making from each customer that you acquire.
To calculate Conversion CPA, divide your marketing costs by the number of conversions:
Conversion CPA = ASSOCIATED MARKETING COSTS / #CONVERSIONS
Cost per acquisition is an important KPI to track because it shows you how much profit you are making from each customer that you acquire. It also shows you the financial health of your business. The lower the cost per acquisition, the more profit you are making from each customer. This indicates that your marketing strategies and CRO efforts are working and that you’re providing a good service to your customers.
It’s also a great metric to manage your marketing costs. If you have a high cost per acquisition, you can use this to identify where your money is being spent most effectively.
8. Customer lifetime value
CLV (customer lifetime value) is another important KPI to track. CLV is the total value of all the transactions that a customer has ever made with your business. This includes purchases made both through your online store and through other channels, such as a physical store and social selling. The CLV is calculated by multiplying the total amount of revenue that a customer has spent with you by the proportion of their purchases that were made with you.
The customer lifetime value shows you the financial impact that each customer has on your business. It’s another key metric that determines the health of your business. The higher the CLV, the more profit you are making from each customer. This indicates that your marketing strategies and CRO efforts are working and that your customers love your products.
How to select KPIs to track
KPI selection is a complex process and requires a coordinated effort to ensure that the selection process is effective. When selecting KPIs, the team should understand the process and the business objectives and determine the type of KPIs that will be used to measure the effectiveness of their web and marketing efforts. The team should be able to select KPIs that are meaningful to the business, the team, and the customers. Here are 3 steps to follow:
- Define a clear objective before selecting the KPIs. What is the goal of your conversion optimization process? Define a clear objective for each stage in your conversion optimization process. What type of success are you expecting – is it about lowering your CPA or growing the customer base?
- Select measurable KPIs that are appropriate to your business goals. Think what is the real measure of success for your conversion optimization process and make sure you have enough data to measure your KPIs. Select KPIs that are measurable in both time and cost to ensure that the KPIs are aligned.
- Make sure your team has the same understanding of the KPI and that they understand their roles in the process of achieving the business goals. You should also have a good idea about the time frame for achieving the goals. Otherwise, you’ll be on a guessing hunt. It’s critical for these KPIs to be accurate and measurable. They need to be realistic.
Most common Conversion KPIs mistakes
KPIs and company's goals mismatch
KPIs are a necessary evil in the world of marketing and conversion optimization. They are a way for an organization to understand its performance and to improve over time. Unfortunately, many companies focus on the wrong set of KPIs. This occurs when the goals of the marketing department are misaligned with the goals of the company as a whole.
For example, if you are looking to increase the number of people coming back to your site and purchasing again, your KPIs will be purchasing frequency and returning customer rate, and not the number of conversions.
Established KPIs are not challenged
One of the biggest mistakes ecommerce business owners make is not challenging established KPI. As your ecommerce business grows, the goals it faces change. An online store that is just starting out may have a single focus, such as increasing the number of website visitors. As the company grows, it must now think about growing revenue and expanding to new markets. It may also want to begin to think about building a brand and developing a loyal customer base.
Data is not analyzed properly
When you measure your KPIs, you should always analyze the data and interpret it into an actionable plan to adapt to your business goals and situation.
Understanding Conversion KPIs is critical for the creation of a successful online store and managing the CRO team. Wrong KPIs can distract you from real opportunities. If you need help with defining your Conversion rate optimization KPIs, get in touch with us!