Remember this riddle that one friend from middle school used to throw out there just for the fun of it:
“If a tree fell in the forest, but no one was around when it happened, did it make a sound?”
Then, someone would engage and say, “yeah, duh,” which inevitably sparked a whole conversation that always ended with a 50/50 split on the right answer.
It was quite the pickle.
But now, let’s consider another riddle...
If you successfully market and sell products online but don’t measure KPIs, did you even make money?
Ooo… that’s tricky…
On the one hand, you’re already selling products, so you’re generating revenue.
But on the other, without key performance indicators, it's almost impossible to measure your marketing, figure out profitability, manage growth, or discover new opportunities.
I know you know that.
I also know you’re a smart cookie who’s already measuring some KPIs for your eCommerce store.
But are they the right ones? 🤔
What is a Key Performance Indicator?
A KPI is something you define, which has a specific business outcome paired with something measurable.
Usually, a metric is used to benchmark and measure. However, a metric or data alone isn't exactly a KPI — and this is where things can get confusing.
You need to take the metric and add the outcome to make it measurable. For example, you could look at a metric like average order value (AOV) and determine that number is something like $37.
That’s great, but now we need to turn it into a KPI, like this:
- Increase the average order value to $42 by the end of Q3, or
- Increase the AOV generated from our email list by 5%
See the difference?
We’re still talking about the metric, but we’re using the current benchmark as the starting point and lacing it with a new outcome that is ultimately beneficial to other overarching business goals.
A KPI has been born!
In the past, we’ve covered some other important eCommerce KPIs and metrics, but we want to go a little deep and cover some of the best KPIs for eCommerce
Below, we will talk about some vital eCommerce metrics and some examples of using those to create eCommerce email KPIs that matter for your brand.
Average Order Value (AOV)
This data is valuable to every eCommerce brand.
If someone asks you, “On average, how much revenue is generated through every order?” then your AOV is where you’d go to get that answer.
You want to keep a constant eye on your AOV for many reasons:
- Number of products sold per order. As you study this data, you can get a good idea of how many items people buy in a single transaction. This clues you into your brand’s buyer behavior, which will serve you well down the road.
- Find where your AOV is falling behind. You do this by looking at the median price point of your products. Let’s say you sell educational products with a price range of $13-$83. A good AOV for you probably sits around $34. Higher is always better, of course, but lower than that might be cause for some concern. This would be a KPI showing a need for improvement. With marketing automation to back you up, you could develop enticing new automations that utilized up-sells or cross-sells to improve your AOV.
- Understand how your marketing efforts affect your growth. Your AOV is bound to fluctuate on a daily, weekly, and monthly basis. It might go up with a promo or even some good PR and go down without a current promo running — that’s to be expected. But as you watch things, you’ll have a keener understanding of how and what you and your team are doing in your marketing to impact this metric. Additionally, it’ll help you define the goal you want to reach here.
Many of the other KPIs below will involve your AOV, so it’s good to know what this is.
In email marketing, tracking AOV, and your customers who fit into the areas you want to target is best done through segmentation.
In Sendlane, you can create a new segment for your AOV. Then you can use one our the deep data integrations, like Shopify, to find and segment customers based on their AOV, like this:
You can create as many of these types of segments as you think are necessary.
Once you know where you're sitting, you can set a measurable KPI from your AOV. Look at what you can reasonably do, then stretch it a bit.
Stretch goals can really push you to do more than what you thought possible. You can be balanced here when creating a measurable KPI:
- Do you want to increase it during a promo or holiday season? If so, but how much?
- Do you want to increase it during a given quarter or year? If so, but how much?
Keep these simple and check in on your AOV every week to help you gauge your progress as you move towards your goal.
If you seriously want to boost AOV, it’s essential to segment your email list based on this metric. You can learn the best way to do this right here so that it’s automated and continues to generate new revenue.
Customer Lifetime Value (LTV)
You’ve worked hard to turn that curious website visitor into a customer. Then you’ve worked at turning them into repeat customers.
You know how to make that money money!
But would you like to predict growth and revenue?
I’m sure the answer to that is, “hells, yeah!”
Right now, the world is a bit topsy turvy so being able to grasp at tangible data to give yourself an idea and where you’re gonna be at this quarter, and the next is going to help you a lot.
Lifetime Value (LTV) is a KPI that gathers current data points to predict how much a customer will likely spend in the course of their relationship with your brand.
This is important for finding customers who look to be long term customers and continuously bring in revenue. It also gives you a better idea of how well you’re doing with customer retention and experience and keen insights on your customer’s behavior which should drive your marketing.
This calculation is done by multiplying your AOV by purchase frequency and customer lifetime.
Finding the Average LTV isn’t super straightforward, but it will prove very helpful for your marketing strategy. Here’s how you can find the averages for each of these:
- Average order value = Total revenue / total orders
- Average purchase frequency = Total number of purchases / unique customer purchases during a defined time frame
- Average customer lifetime = 1 / your churn rate (you can find your churn rate like this: total customers who bought this year and last year / total customers who bought last year)
I know, math. Gag me on a spoon! (That’s my valley girl comin’ out for ya.)
Finding the numbers to do this math and then using them to find your average LTV isn’t something most people do. Heck, your competitors probably don’t even know the answer to this.
But you can.
Without doing all that math, though, you can still create email marketing segments that identify customers with various LTVs, like this:
These segmentations are a great way to identify customers in various spending brackets and find and curate lists of your best customers. It’s honestly ROI heaven because you can target these list segments with personalized messaging for better results.
And you can use this powerful KPI to up your customer experience game, create more personalized customer journeys and find ways to add value to the relationship you’re building with customers.
Email Generated Revenue
How this is calculated: Total amount of money made through email campaigns or automations
When I sit down to chat with eCommerce store owners who want help with increasing revenue through email, I ask three questions:
- How much revenue does your email generate right now?
- How much revenue have your campaigns and automations generated?
- How much revenue did your last 3 campaigns generate?
And at least one of those questions, they don’t know the answer until we sit down and dig into the data.
This KPI is one of the most important ones out there that you should be tracking in your eCommerce email marketing because email and email automations should be driving your revenue anyway.
Your email should be driving revenue, so you should know how much it’s generating right now by looking at both revenue brought in through both campaigns and automations.
When you know what these numbers are, you can set goals around this KPI to make sure you’re making progress. I honestly love this KPI because you easily connect what you did with your emails to an exact amount of money.
Not only does that help you see what’s working, but it also adds value to your role as an email marketer.
In the Sendlane dashboard, finding these numbers is easy.
Within the Revenue section of the dashboard, you can find Revenue by Source. In the dropdown menu in the top right corner, you can adjust the period to generate the correct number you’re looking for.
Here is where you’ll find money that comes in through campaigns, automations, and total revenue generated during that period.
It’s natural for campaigns to drive more revenue during promos, but you need to do some testing to ensure your automations do not drop off a lot.
Since we’re dealing with a global pandemic, it would be good to make sure you go into these automations to make sure you change the tone, copy, and other content to be more empathic with the times we’re living in.
An easier way to see how your automations are performing is to look at them in six months, one year, and a five-year timeline. This will show you how much your automations and campaigns made over this course of time in the top-left graph.
If you see a steady decline in that graph over time, that's your red flag that something needs to be done. It also gives you a good idea of what numbers you should be hitting instead and revenue generation patterns for your campaigns.
What’s not to love there?
KPIs and Your Brand
These are just a few KPIs you can use to set new goals for your brand. There are a lot more, but these are the top of the list.
Once you find the data here, use them to set measurable goals, and work your strategy to attain your goals.
This will be different for each brand, so we’ll leave it up to you to decide what you can do. But, if you’re ready to give Sendlane a spin for free and start tracking those KPIs, sign up for your 14-day trial!