Friday, 11 August 2006

KPIs for an Online Retail Site

The Online Retail or an E-commerce site is the most advanced of all the types of website, as it is very critical for these sites that they get their sites absolutely right as both their top and bottom lines depends on the site’s performance. Though the KPIs could vary from one site to another, some of the basic and most commonly used KPIs of the ecommerce site are listed below:

  • Order and Buyer Conversion rate: is the Holy Grail of retail metrics and the leading indicator of change for retail sites. It is the Buyer or order/ Visitors.

  • Average Order Value: is the Total value of orders/ no. of order. A close watch on the average order value on a daily basis, over a period of time would show customer buying behavior and present opportunities to up sell and cross sell.

  • Average Revenue per visit: is the metric of Total revenue/ No. of visits. According to Jim Novo it is the "grand dame" of retail site KPIs. This metric distills all marketing, merchandising and site design efforts into one key question - Did we get revenue during this visit?

  • Average Cost per Conversion: helps in keeping a close eye on the per conversion marketing cost. It is calculated by Total cost/ conversion.

  • Average time to respond to email inquiries: creates an opportunity to delight and surprise your prospects and customers which usually positively impacts your overall customer satisfaction. It is calculated by Avg (Date+time of response - Date+time of inquiry).

  • Ratio of New to Returning visitors: is New visitors/ returning visitors. This metric gauges the mix of visitors on the site and compare that to marketing efforts

  • New and Returning Visitor Conversion Rate: Helps managers set expectations about visitor acquisition efforts. It is Conversion from new visitors/ No. of new visitors, etc.

  • Percent of Revenue from New and Returning Customers: Will give a complete picture of customer purchase behavior. The percentage is calculated by (Revenue from new/ no. of new customers x 100). The classic case where this metric could help is, when the site-wide AOV declines slightly, causing senior strategists to panic. The good mid-tier strategist will hopefully be able to report that while AOV is down slightly, sales to new customers are up overall, shortening the sales cycle and improving overall site profitability.

  • Home Page and Key Landing Page “Stickiness”: Often time’s changes to key landing pages or audience targeting will cause a dramatic and unexpected increase in the number of visitors “bouncing” off your site as quickly as they arrive, thus increasing visits without increasing revenue.

  • Search to Purchase Conversion Rate: The Search function in a retail site helps shoppers quickly find the “right” products to purchase. This metric shows the relevance of the search results to what the shopper is looking for. (Orders from search/ No. of searches ) This KPI is important to track because good search functionality has been shown repeatedly to help drive purchases and any significant decline in your site’s order conversion rate may be tied to problems with search relevance or results presentation.

  • Percent Low Recency Visitors: According to Jim Novo, recency is the most powerful predictor of whether or not a customer will repeat an action. The lower the recency of visitors, greater will be the likelihood they’ll make a purchase. Percentage of visitors who have been to the site recently (total number of visitors in a given time frame/ overall visitors to the site). Jim novo uses the RFM model to determine the lifetime value of the customer by scoring each individual customer in a file of customer transactions against all other customers based on the "most Recent Date of Activity (Recency) and the "Highest Total Activity (Frequency) on a scale from 55 (highest) to 11 (lowest). I will try to elaborate on this KPI in my future blogs.

  • Cart and Checkout Completion Rate: This compliments the order conversion rate, to know quickly whether any measured decline can be attributed to the carting or checkout processes on the site. No. of orders/ Number of visitors (page views of) to cart.

  • Order Conversion Rate per Campaign or Campaign Type: Helps you to identify which marketing activity yields the highest returns, and an opportunity to optimise the same. This KPI is calculated by No. of orders from campaign type/ No of PVs (clicks) from campaign type (can be used for channels, position, ad unit, creative, etc.)

  • Effect on offline sales: This could be the relation of the website that could be linked to offline sales that could be sourced through the following:-
    o Unique toll-free numbers
    o Store locator
    o Order printout

Tuesday, 1 August 2006

KPIs? Keeps us Ponderings & Investigating, eh..?

In this industry the most common and frequently used buzzword is the KPI or the "Key Performance Indicator". Rightly so because it gives us the ability to measure accurately, predict and forecast customer behavior and hence has earned the new media the edge over the others in the recent times.

KPIs are quantifiable metrics which reflect the performance of an organization (in our industry website) in achieving its goals and objectives. The concept emanates from the principle “What gets measured, gets managed”.

Umh... Now that we know what a KPI in Web Analytics is, it brings us to which ones to choose. There are so many standard KPIs and Metrics, how do you decide which one is for you?
To answer this in short - "It Depends"

Depends on;

- Who is our audience?
- What are they trying to accomplish?
- How well are we helping them get the job done?

While a KPI can be either a count or a ratio, it is frequently a ratio. While basic counts and ratios can be used by all Web site types, a KPI is infused with business strategy - hence the term, “Key” — and therefore the set of appropriate KPIs typically differs between

- Site type KPI:
E-commerce, content, lead generation & customer service
- Process type KPI:
Reach, Acquisition, conversion and retention

However most sites would have overlapping business models, and would also require customized KPIs. This is where an experience consultant would be able to help. In the coming blogs, I shall elaborate on the various most commonly used "Site Type KPIs".