Are you a new e-commerce business owner who has just started running paid ads and can't keep up with too many metrics? I know it can be mind-boggling to look into a lot of data. Shopify alone provides 100 metrics that will be enough for a new business owner to understand.

This basic article will cover all the basic key performance indicators that you will need in your day-to-day e-commerce business operations.

Note: This article is intended to be short and on-point. Hence I'm just writing the basic KPIs and an in-depth article will be published on-demand.

I have also published an eBook called The Ultimate Shopify Marketing Checklist that you can find on Amazon.

E-commerce KPIs

1. Conversion Rate:
   The first key performance indicator you should be looking at is, the conversion rate. Conversion rate is a global metric that means the percentage of website visitors who complete a desired action, such as making a purchase. It's calculated by dividing the number of conversions by the total number of visitors and multiplying by 100.

   How to identify: You can Google the industry conversion rate for your industry and compare it with your store, and then make changes accordingly.

2. Cart Abandonment Rate: Cart Abandonment Rate is a valuable key performance indicator and it means the percentage of users who add products to the cart but do not complete the purchase. It's calculated by dividing the number of abandoned carts by the total number of initiated checkouts and multiplying by 100.

   Note: Cart abandonment rate varies from market to market and industry to industry and it is roughly 50% of the total sales. You can prevent cart abandonment by having email marketing and sending out cart reminders to customers.

3. Average Order Value (AOV): Average order value is another key performance indicator and it means the amount of money customers spend per order.

   For example: Ella is selling a make-up kit for $200 and there are 10 customers who purchased from her store in a month. To calculate the Average Order Value (AOV), we divide the total revenue generated by the number of orders. So, if all 10 customers bought one kit each, the total revenue would be $2000 ($200 * 10). Therefore, the AOV would be $2000 divided by 10, which equals $200. So, Ella's Average Order Value is $200.

   Note: Average order value can be increased using upselling & cross-selling, the higher the AOV is, the more profitable the business will be.

4. Customer Lifetime Value (CLV): The last key performance indicator you should be looking at is customer lifetime value. This metric displays how much a customer will spend in their lifetime at your store.

CLTV = (Average profit per transaction x Number of transactions per period x Average retention period in periods) / (1 + Discount rate - Retention rate).

Paid Ads (Facebook/Google) KPIs

1. Return on Ad Spend (ROAS)[Most Important]: Return on a spend is the first key performance indicator metric that you should be looking at. Treat this as the backbone of your advertising efforts. Return on Ad Spend (ROAS) illustrates the revenue generated from your ads relative to the amount spent.

   Real life example: If you invest $100 in ads and subsequently generate $1000 in sales, your ROAS would be 10X. But it's not too easy because your revenue doesn't mean your profit so you will have to calculate break-even-roas that is another metric that outlines the minimum ROAS you need to at-least break-even, no profit no loss.

2. Click-Through Rate (CTR): Click-through rate is the second paid key-performance indicator that you should be looking at, it is a universal marketing KPI that you will ever need to look into. Click-through rate means the percentage of people who clicked on your ad after seeing it. It's calculated by dividing the number of clicks by the number of ad impressions and multiplying by 100.

   Real life example: You are running a Facebook ad that has reached 100 people but only 3 clicked on it and went to your website, then your CTR will be 3%. The higher the CTR is, the better the ad is (considering the objective and the marketing targeting is correct). If the CTR is low then you may need to change the audience, ad copy or the offer.

3. Cost Per Click (CPC): Click-through rate is the third paid key-performance indicator that you should be looking at after click-through rate, it is also a universal marketing KPI and it means the average cost you will pay for each click on your ad.

   Real life example: Imagine running an ad campaign with a daily budget of $100, which generates 120 clicks to the store, results in a cost per click of $0.8. Comparing this cost per click with the industry standard can provide insight into the effectiveness of the campaign.

4. Ad Delivery Frequency: Frequency is a key performance indicator that refers to the average number of times a user sees your ad within a given time period. You can check the ad frequency on Facebook & Google ad-manager.

   Real life example: You're running an ad that has spent $100 over the past 7 days, with a frequency of 2, indicating that each visitor has seen the ad twice. there's a risk of ad fatigue if users see the same ad too frequently and if they do it then they may stop clicking the advertisement which will increase your cost per click.

Email Marketing KPIs

1. Email Open Rate: Email open rate is the first key performance indicator that you should be looking at, it displays the percentage of email subscribers that opened your email. A high number of email open rate means that your emails are not landing to spam and your sender name and subject line is compelling to the email subscribers.

   Real life example: Let's think that you have a list of 1000 email subscribers and your open rate is only 1% then you need to troubleshoot the reason, there are chances that your email may be flagged as spam. You can use tools like mail-tester to check the quality of your email campaigns.

2. Email Click-Through Rate: After you have troubleshooted the Email Open Rate or you think that is fine, the another key performance indicator that you need is email click-through rate. It displays the percentage of email subscribers that click on your any link or call to action that you may have on your store.

3. Email Conversion Rate: Too simple, this simple key performance indicator displays the percentage of recipients who complete a desired action, such as making a purchase, after clicking on a link in your email.

   Real life example: You sent an email to 100 customers and you got 2 orders from it, that means your email conversion rate is 2% - the higher is better.

4. Email Unsubscribe Rate: This is a negative key performance indicator and means that your emails are too spammy or you are sending it to wrong audience. Having a very high email unsubscribe rate may also get your account flagged.

   Real life example: Let's assume you have a list of email subscribers for your hat store. If you were to send them an email with an entirely unrelated offer to buy watches, they would likely be furious, leading to a high unsubscribe rate.

Conclusion

Monitoring key performance indicators (KPIs) is very important for the success of your e-commerce business, whether you're analyzing website performance, paid ads, or email marketing campaigns. By focusing on crucial metrics like conversion rate, cart abandonment rate, average order value, return on ad spend (ROAS), click-through rate (CTR), and email open rate, you can gain valuable insights into the effectiveness of your strategies.

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