In the world of ecommerce, it’s easy to get lost in the sea of vanity metrics, those metrics that don’t reveal much about your sales performance. While metrics like impressions and clicks might look impressive on your Google Analytics reports, they don’t offer a deep understanding of what’s truly happening.

Seeing 10,000 unique visitors on your site is fantastic, but did they make any purchases? How much did it cost to attract each visitor? And how many interactions do visitors typically have before buying?

The truth is, many ecommerce KPIs can be deceiving, creating a false sense of success. In reality, only a handful of KPIs truly matter for ecommerce success.

Eager to discover which ones? Let’s explore the four most crucial ecommerce KPIs that can significantly impact your online store’s growth.

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Ecommerce KPI #1: Cost per acquisition AND lifetime value

Let’s begin with the heavyweights of ecommerce KPIs: cost per acquisition (CPA) and lifetime value (LTV).

Why are they so important? Because they shape almost every marketing and sales decision you make.

Let me break it down. First, let’s address acquisition costs. Acquiring customers comes at a price. Whether you’re leveraging content marketing, social media lead magnets, pay-per-click advertising, on Snapchat or even sponsoring a new podcast, every action requires investment.

While PPC directly translates clicks into costs…

…expenses still arise when you’re crafting social media posts or detailed content marketing materials to drive organic traffic.

For example, creating best blog for content marketing demands a minimum of six hours. And in today’s competitive landscape, mediocre content won’t suffice on search engine results pages (SERPs).

Image Source And that’s just for a blog post of 1,151 words:

Image Source Research indicates that blog posts exceeding 2,000 words achieve the highest rankings. This implies investing 12 hours or more of labor for a single high-quality content piece. And when you’re enlisting top-tier writers, labor isn’t cheap.

All of this necessitates labor, design, and development, which inevitably factor into your acquisition costs.

In essence, cost per acquisition represents the average amount your ecommerce store spends to acquire a single customer.

Understanding CPA is crucial because it can significantly influence your acquisition strategy.

However, for a comprehensive view, you must also consider lifetime value.

Customer lifetime value (CLTV) is the average revenue a single customer generates throughout their entire relationship with your store.

The interplay between these two KPIs is vital; analyzing them in isolation won’t provide meaningful insights.

Why? Let’s illustrate with an example:

Suppose your cost per acquisition is $50. That’s how much you spend to acquire one customer.

So what? On its own, this information isn’t very revealing.

Now, let’s assume your lifetime value is $45.

Only now can we glean meaningful insights from these KPIs. In this scenario, your acquisition costs are too high because they exceed the customer’s lifetime spending.

However, if your lifetime value is $500, a $50 CPA is negligible!

When analyzing ecommerce KPIs, always start with lifetime value and customer acquisition costs (learn how to lower your CAC here!).

Based on these metrics, you can easily plan your next steps:

If your CPA exceeds your lifetime value: You’re spending more to acquire customers than they’re worth. This translates to operating at a loss. To address this, you have several options. You can reduce advertising expenses or find ways to create more cost-effective lead magnets and content marketing. Alternatively, you can prioritize customer retention and focus on upselling to existing, loyal customers to boost lifetime value. Increasing CLTV per customer will enable you to absorb those acquisition costs.

If your lifetime value surpasses your CPA: Congratulations! You’re on the right track. This opens up significant growth opportunities. If LTV significantly exceeds CPA, you’re generating profit per customer and have room to invest further in customer acquisition due to your high lifetime values. LTV can be particularly high for ecommerce subscription businesses or companies offering selling online courses and digital subscriptions, as recurring monthly revenue can significantly elevate LTV. With a return on ad spend (ROAS) exceeding 3:1, you can confidently focus on new customer acquisition and sustainable growth.

Ecommerce KPI #2: Cart abandonment rate

Cart abandonment rate represents the percentage of visitors who add items to their cart but leave your store without completing the purchase.

This frustrating metric can reveal a lot about your store and website’s performance. It indicates whether your website is effectively converting visitors or driving people away them away. While it’s one of the most disheartening metrics to encounter, it’s also one of the most insightful and helpful for analysis.

According to Statista data, the average cart abandonment rate for online retailers in 2018 was 74.2%.

That’s alarmingly high.

While not all stores experience such high rates, it’s the unfortunate reality for the average ecommerce store. What are the most prevalent reasons? Most stem from key purchasing pain points:

• Prohibitive shipping costs
• Lack of free shipping options
• Uncertainty about shipping costs
• Slow shipping times
• Product research
• Lengthy checkout processes
• Poor website user interface (UI)

Thanks to Amazon, shipping has become a value proposition in itself. Gone are the days of patiently waiting 7-10 business days for an order to arrive, not when Amazon offers two-day (or even same-day) delivery.

Do you face competition from sellers on Amazon offering similar products and pricing? Are you experiencing high cart abandonment rates?

It’s highly likely that customers are abandoning your cart, turning to Amazon, finding competitors, and making purchases due to more appealing shipping options.

So, how can you combat this?

By addressing cart abandonment at its core:

• Highlight and mitigate pain points during the checkout process
• Enhance website speed

Firstly, you must tackle pain points during checkout, the most significant of which revolve around shipping:

• Cost
• Shipping duration
• Estimated delivery dates

Amazon excels in the shipping game not only because of its two-day shipping but also its transparency regarding shipping expectations before you even place an order:

Customers know precisely when to expect their order instead of encountering vague messages like “7-10 business days after order processing.” What does that even mean for a customer? How can they possibly know your order processing timeline? Is it one day? Next week?

These uncertainties breed frustration and contribute to cart abandonment. On your checkout page, strive for Amazon-like clarity regarding shipping.

Another major culprit behind cart abandonment is poor user experience. How fast is your website? Is it easy to navigate? Opt for a top-tier web hosting provider with uptime history monitoring to prevent website speed issues. Google data reveals that most websites are far too slow:

Image Source This can lead to high bounce rates and increased cart abandonment:

Image Source Are customers forced to endure seconds of loading time between each checkout step due to slow website speed? They won’t tolerate it. Data indicates that a majority of websites are built using WordPress.

Image Source Beyond WordPress ecommerce plugins, countless others integrate seamlessly with WordPress to increase speed.

Simplify your checkout process, boost website speed, and address shipping concerns directly within the checkout flow by providing detailed information. This will significantly reduce cart abandonment and increase sales.

Ecommerce KPI #3: Branded online search impressions

“But didn’t you just dismiss vanity metrics as worthless?” you might be thinking.

Indeed, I did.

However, online search impressions for your brand are not mere vanity metrics when brand awareness is the focus. For most ecommerce stores in their growth phase, this would be considered a vanity metric. But once you’ve established a consistent flow of organic sales, it transforms into a crucial ecommerce KPI.

You see, many new ecommerce stores make the mistake of prioritizing this metric too early, leading to a distorted perception of which KPIs truly matter. Only when you have a steady stream of organic sales should you begin monitoring your branded online search impressions..

In ecommerce marketing, as with any business, it’s essential to adopt a funnel-based approach:

Image Source Ecommerce KPIs can vary depending on the stage of the funnel.

When developing a growth strategy with key metrics, you must start from the top, identifying metrics you can track years in advance alongside those that hold more short-term relevance as your store develops, such as brand awareness:

Image Source Branded online search impressions reflect how many people are organically (not through paid advertising) searching for your brand across various channels.

Tracking branded search impressions is easily accomplished using a keyword tool, either directly within Google Ads or through platforms like nexus-security, Moz, SEMrush, or Ahrefs.

For instance, to track branded search impressions for nexus-security, I would input variations of “nexus-security” into the keyword tool to determine the monthly search volume:

You can then monitor these impressions over time, ideally witnessing an upward trend month over month.

Organic branded search impressions provide insights into the effectiveness of your marketing efforts in building brand awareness, even within local markets.

If more people are searching for your store using branded terms, you’re doing something right!

Another effective method for managing online impression building is through customer reviews. This can offer valuable feedback, reveal trends in customer sentiment, and highlight areas for improvement:

Image Source Moreover, selling to brand-aware customers is considerably easier than converting those who have never encountered your brand before!

Ecommerce KPI #4: Average order value

Average order value (AOV) is an ecommerce KPI that reveals the average amount spent per order on your website.

This figure represents the average across all orders placed on your website during a specific period. It indicates how much customers are willing to spend with you and in what quantities.

In simpler terms, AOV is calculated by dividing total revenue by the number of orders:

Image Source AOV offers valuable insights into the effectiveness of your current sales strategy.

There’s a significant difference between having 1,000 new orders at $5 each and 500 orders at $100 each. The revenue disparity is substantial. Many businesses prioritize increasing order volume, especially from new customers. However, the quickest path to higher revenue often lies not in acquiring more customers, but in increasing the average amount each customer spends.

Why?

Because acquiring new customers incurs costs, and they typically aren’t your highest spenders.

Repeat customers are often the most valuable, spending the most with a business. In this case, you don’t need a constant influx of new orders; you simply need to increase the average value of each order! That’s why, as an ecommerce entrepreneur or digital marketing expert, maximizing AOV should take precedence over simply increasing order volume.

Another interesting aspect of AOV is its role in determining your free shipping threshold. You can even leverage this as a tactic to boost average order values over time!

For example, this is a strategy employed by Pura Vida Bracelets to increase their AOV while catering to their customers’ shipping preferences:

“Free Shipping On All Orders $30+”

By implementing this strategy, they incentivize AOVs above $30 while offering shipping value. This way, they don’t require thousands of $5 orders; they can achieve the same revenue with fewer, higher-value orders. AOV is a valuable metric for tracking your effectiveness in selling to new, existing, and loyal customers.

Prioritize ecommerce KPIs that matter!

The realm of ecommerce KPIs is vast. In my experience, CPA, AOV, branded search impressions, CLTV, and cart abandonment rate are among the most critical.

If your reporting primarily revolves around vanity metrics like clicks and impressions, it’s time for a shift in perspective. While these metrics can be useful for gauging brand awareness, they don’t effectively measure direct revenue gains from your ecommerce marketing strategy. Overemphasizing these superficial metrics will drain your company’s resources faster than you can imagine.

By concentrating your ecommerce data strategy on the KPIs discussed today, you’ll be well on your way to becoming a better leader in the space and positioning yourself for future success.