So far, on our journey to understand how to best market an ecommerce store, we’ve looked at how to devise a strategy (the overarching plan), creating a basic digital marketing plan, and how to calculate a budget.
But, we’re yet to discuss measuring performance. Today we will look at setting digital marketing Key Performance Indicators or KPIs that help you focus on achieving your goals.
Don’t worry if you don’t know what a KPI is or if you’ve never set a goal, as you’ll know exactly how to by the end. I’ll even give you a few to start with.
I think it’s critical for ecommerce founders to set and use KPIs across their business, including marketing, procurement, and delivery. However, many I’ve talked to don’t have these measurements in place.
Let’s explore how setting digital marketing KPIs can transform your ecommerce brand.
KPIs, What are they?!
Let’s start by defining what a Key Performance Indicator (KPI) is. Here are 3 helpful definitions:
- Oxford’s Dictionary definition of KPI: A quantifiable measure used to evaluate the success of an organization, employee, etc. in meeting objectives for performance.
- Investopedia’s definition of KPI: A set of quantifiable measures that a company uses to gauge its performance over time.
- Macmillan’s Dictionary definition of KPI: A way of measuring the effectiveness of an organization and its progress towards achieving its goals.
If you want to learn about setting business (or life) KPIs, I encourage you to read this guide by klipfolio.
Why Does Your Ecommerce Store NEED KPIs?
I see KPIs as an instant health check. You probably wake up every morning and ask yourself how do I feel today? The answer is likely to be bad, ok, or good. That’s a basic KPI.
Your business should use KPIs to check that you’re moving in the right direction. As a high-level look at your goals, they should allow you to view the big picture in a few seconds.
Here’s the great thing about KPIs. You can set daily, weekly, monthly, and annual goals and measure them as much or little as you see fit. Of course, as a way to view the big picture, you’ll want to be obsessive and check your results daily.
Beyond your KPIs, you can dive into the data and look for small improvements that help drive you toward your goals. And when you hit your goals, you can set even bigger ones!
What Can We Measure?
There are thousands of things we could measure. Here’s some:
- Page views
- Revenue per visitor
- Marketing spend
- Returning visitors
- Conversion rate
- Customer Acquisition Cost
- Bounce rate
- Ad impressions
- Return rate
- Keyword rankings
I’ve kept this list very generalistic to make a point. Just because there are hundreds of data points, doesn’t mean any of them help drive business growth or profitability. So we need a smarter approach.
Ok, So, What Should We Measure?
I recommend client (and myself) pick 2 or 3 data points that are easy to measure daily or weekly and stick to them. These should describe the big picture but not the tactical plan in detail.
Most stores would benefit from setting daily digital marketing KPIs for revenue, conversion rate, and customer acquisition cost.
From there, it’s worth setting KPIs for each marketing channel you’re using. But, I’m getting ahead of myself.
Overall Digital Marketing KPIs
So we have three KPIs to measure: revenue, conversion rate, and customer acquisition cost. Let’s dive into how, what, why, and when.
If you created your marketing budget based on the assumption of hitting a revenue goal to be profitable, then measuring if you have hit this figure or not, makes a lot of sense.
Let’s say your goal is to hit $1m in revenue. If we divide that by 365 (days in a year), we get a daily revenue figure of $2,7440.
It’s easy to know if you have hit that amount or not every day. Hint, log into your ecommerce platform, and it’ll tell you!
You’ll want to check if you pass/fail this daily and record it in a simple spreadsheet. Over time, you’ll see days or weeks when you need to push harder to hit the target and days when it’s easier.
To hit your revenue goal, you’ll need some visitors to buy. Sounds simple but a lot of businesses don’t know their conversion rate from Pi!
If you’re just getting started, you might not know how to calculate your conversion rate or have enough data to be confident in your math. That’s fine for now. Over time, you can adjust it.
Even if you only have a handful of sales, you can calculate your conversion rate and use this number to start with. Here’s how.
Take the number of sales you’ve made in the last month or quarter, and divide it by how many visitors you had in that period.
For example, if you had 12 sales last month and 1,000 visitors, your conversion rate would be 1% (well 1.2% but still).
Using this figure, you could asses daily if you hit it or not. Doing so would allow you to predict the number of sales you’ll make based on average website traffic figures.
Customer acquisition cost
Any idiot can spend their way to a sale (and for years, I was that special idiot). However, it takes someone with a few brain cells to profitability acquire customers. As with conversion rate, this figure looks at the overall picture, not the tactics you’re using.
Again, if you don’t have a lot of data to work with, that’s fine. But having a figure is better than not. Here’s how to calculate your customer acquisition cost.
Take the amount you spent on marketing last month and divide it by the number of last month’s sales.
For example, let’s say you spent $1000 on marketing and made 10 sales. Your customer acquisition cost would be $100.
So far, so good. As one of your digital marketing KPIs, if you know how much profit you make per item, you could use this figure as your goal and mark if your customer acquisition cost is in line with this amount.
I’m a big fan of spreadsheets and so it’s easy for me to build a simple tracker. I’d encourage you to do the same. Along the top, write in the KPIs you’ve set. Down the first column, write in the date. Now commit to writing pass or fail for each KPI every day.
Should We Set KPIs For Each Marketing Channel?
So far, we’ve talked about setting overall digital marketing KPIs. They are worth having and monitoring daily. But you might wonder if you should have another set of targets that help you decide if a marketing channel is performing or not.
Again, I’d suggest you keep it simple and pick 2 or 3 data points to measure. Any more, and you start to overcomplicate things unnecessarily. Here are a few hints to get you started.
For paid search, you can set KPIs for revenue, conversion rate, and customer acquisition cost. These channel-specific goals will help you fill in the big picture with some analysis. Plus, they will help you decide if paid search ad campaigns are profitable.
Measuring the performance of organic search can be tricky as the majority of the budget is spent on labor costs. However, you can still measure the revenue and conversion rate. It’s also worth tracking your keyword ranking and setting a KPI to get at least 50% of them in the top 3.
Even with the recent privacy changes, you can still track clicks to products and sales. So, you can set KPIs for revenue and conversion rate for your email marketing.
You can go deeper and look at list size, open rates, and other metrics, but I’d advise against it as you start to look at tactic improvements, and not the overall outcome you’re trying to achieve.
Going even deeper
As you dive deep into individual tactics, that’s the time to really analyze what’s happening and search for tiny improvements you can make to hit your KPIs or at least move them in the right direction.
Using Digital Marketing KPIs To Drive Improvements
By now, you have a clear idea of what digital marketing KPIs are and why you should have them for your business. You’ll also know how to set them for your marketing plan and for each channel.
After you set some digital marketing KPIs, you should do two things. Firstly, get into the habit of recording daily, how you measure up against them. Simply mark them as pass or fail. Secondly, as you gather more data, you can improve your KPIs.
When you’re comfortably hitting one or more of your KPIs, you can increase it! Growth is good, especially if you keep pushing yourself to achieve more!
You can have all of the marketing tactics in the world. But without the right digital strategy, you won't get the results you deserve.
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