It’s no secret that one of the best ways to grow your business and identify trouble spots is to keep a careful eye on your metrics. Your live data is the key to spotting problems before they happen, taking advantage of sales trends, better understanding your customers so that you can serve their needs and more. While you’re hopefully already watching the numbers behind your business for everything from sales to customer service, monitoring only the raw data isn’t enough. To truly focus your efforts and marketing dollars to the areas that really matter to your specific online store, you need to identify how exactly those numbers relate to what you want for your business now and in the future.
It all comes down to metrics. When used in conjunction with KPIs, metrics are key to monitoring your data in context and growing your business in the direction you want it to go.
What are metrics?
If you’ve been running your business for any length of time, you’ve likely heard the term metrics without having a clear understanding of what it means. While it can sometimes be used as a simple synonym for data or information, metrics for your business most commonly means your data in context. Metrics are the hard data for your business examined in conjunction with other relevant values. Its data put to work to illustrate more than a single informational set could do on its own.
For example, the total dollar value of your sales for the year is useful information, but separated by product type or plotted against a dateline to show exactly how those sales spread over types of items or a given time period, those same values become powerful and much more useful metrics. Metrics show how one set of values relates to another. But if you want to take an even closer look at your data, it’s time to set some KPIs for your e-commerce business.
What are KPIs?
KPI is a popular acronym that stands for Key Performance Indicators (you’ll also see it written as KSI for Key Success Indicators). KPIs can often be metric, but not every metric is a KPI.
While that sounds complicated, KPI is really just a catchall term that refers to performance based metrics or targets that you set for your e-commerce business to help you work towards specific, focused goals. KPIs are the metrics worth looking at, the ones that are the most important for your specific online store and how your business works. KPIs are tied to the real world of your online store, narrowing down the context for your data even more until you’re tailoring your efforts on everything from marketing to management to your specific needs. While a KPI can be financial itself, even if it isn’t financial growth usually results from a quality KPI.
While that sounds good on paper, what does it really mean for your business? Let’s look at how to effectively set KPIs for the metrics of a specific selling situation.
Putting KPIs and metrics to work together
In examining metrics for returning customers versus sales, let’s say you noticed that the majority of your sales are from a small but loyal group of returning customers. Once you get a customer to purchase from you, you’re retaining their business, which is good, but to grow you’ll also need to increase the number of new customers you have. Once you identify that goal, you can start creating one or more KPIs to help you achieve that target.
You decide to set a KPI for the next quarter: 10% of total sales must come from new customers. Once you’ve got this goal in mind, you can create actionable tasks related to it to help you hit that target. Whether you find those new customers by increasing external advertising, reaching out to a new demographic, diversifying your inventory or adding a referral credit to encourage your existing customers to share your store with a friend, the KPI guides your next moves. The metrics will help you gauge the effectiveness and progress of your goal, but it’s the KPI itself that helps target your efforts on exactly what your e-commerce business needs you to do next.
Of course, a KPI needn’t be limited to sales objectives. You can set a KPI for just about anything related to your business. KPIs can be for customer service problems like quantity of returns or support wait times, human resource issues like employee retention or morale, traffic and marketing goals or even benchmarks for your inventory itself. Exactly what KPIs would be best for your specific e-commerce business depends on your online store. Your metrics will guide you through your unique selling situation and the issues for your online store so you won’t waste time and money trying to implement one-size-fits all solutions with no application to your needs.
Here’s some tips to get you started with KPIs to set data based goals for your online store.
A good KPI works best when…
- It’s defined and specific over broad and general.
- It’s customized to your online store and e-commerce business instead of the industry as a whole.
- It’s realistic enough to be reasonably attainable while still encouraging growth.
- It’s tied directly to the goals of your organization as a whole.
- It provides personalized context to your raw data.
- It helps conceptualize the data in a way that’s more meaningful to all levels of your management chain.
- It focuses your attention on the areas of your online store that need your attention over general maintenance.
Data is knowledge and knowledge is power. KPIs are the key to harnessing that power and making it work for business.
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