Monday, October 2, 2017

Leveraging KPIs and Insights to Achieve Targeted Outcomes

Data / Strategy

I’m frequently asked which Key Performance Indicators (KPIs) are important to ecommerce—and honestly, it depends. There are hundreds of metrics that are tracked on any ecommerce site, in various analytics programs. In fact, there are too many KPIs for any individual to interpret and use in a meaningful manner. Some typical KPIs that people talk about frequently include:

  • Conversion rates (orders, carts, email sign ups and other events)
  • Unique visits and total visits
  • Abandoned carts and checkouts
  • Gross margin
  • Average order value
  • Average line items per order
  • Bounce rate
  • Average promotional discount
  • And the list goes on...

The reality is that many of these are really just metrics, not true KPIs. A metric is a measurement of a discrete event. A KPI is a measurement against a baseline that should be tied to a specific goal or business outcome. Many KPIs actually are comprised of several metrics or several other KPIs. They tell you “what” happened over a period of time.

KPIs are not really useful by themselves, other than to gauge performance and execution. The real value of a KPI is the analysis of “why” it is at a given value. This provides the insights you need to improve your business.

KPI Definition

Assume that in your last month, your conversion rate was 3%, your average order value was $100, and you had 100,000 unique visitors. By themselves, those metrics have no real value, but by doing some quick math, you can determine that your online revenue was $300,000 for the month. Did that achieve your business goal? Is that normal for your industry?

As mentioned earlier, to be most useful, these metrics (or basic KPIs) must be turned into KPIs that measure the change over time against a specific goal. Those KPIs can then be used to measure progress on achieving your desired business outcomes.

Total Revenue is a KPI that is frequently used to measure sales performance. Assume you set a business goal of 15% year over year revenue growth for your online channel. Let’s use the $300,000 per month number reference above as our baseline. This means your total annual revenue will grow from $3,600,000 to $4,140,000 over a 12 month period if you are successful.

We all know that there is no straight line for revenue growth. Seasonality, competition, new products, search rankings, ad spend, user experience, price, and promotions are examples of variables that impact your operation. So, on a monthly basis, you will need to evaluate what is impacting your revenue so that you optimize your strategies to drive growth.

Breaking Down Revenue as a KPI

Let’s look at the components of a total revenue KPI that can be used to measure performance from a more granular level. There are actually several ways to calculate revenue for this KPI. The easiest is from the ERP (enterprise resource planning), but here are some of the lower level KPIs that will help your business gain desired insights. Let’s use the ones that were referenced earlier to keep this very simple.

  • Unique visitors (I prefer this over total visits or visitors)
  • Conversion rate (equals # Orders/Unique Visitors)
  • Average order value (AOV) (equals Total Revenue/# Orders)

Total Revenue KPI = Unique Visitors * Conversion Rate * Average Order Size

You have now defined a Total Revenue KPI and the metrics that are used to build the KPI. Why bother to look at your data this way when you can look at revenue as a direct output of your ERP? Because “revenue by month” by itself does not tell much of a story or help you improve your sales performance. You need to have insight into why your revenue is increasing, decreasing, or varying on a monthly basis, and be able to break revenue down into smaller units and analyze those.

Now let’s look at a 3-month data set of hypothetical performance. You will want to look at your KPIs in a dashboard in this manner (better yet through data visualization) so you can get quick insights. Assume our goal was Year Over Year (YOY) Growth of 15% for this particular period as mentioned earlier.


Unique Visitors

Conversion Rate


















Total Revenue


Target Revenue @15% YOY Growth


At first glance, your overall KPI measurement is really good. You are over your quarterly goal of $1,035,000. But, by looking at the metrics on a more granular level, there are all sorts of roller coaster rides going on with your traffic, AOV, and conversion rate. This is where analytics goes beyond data and into the realm of insights. Understanding those insights is what’s really important for your business.

You need to spend the time to unwrap the meaning behind the metrics to really understand whether your KPI accurately reflects your desired business outcome. In this case, assume that month 1 was simply a baseline and representative of a fairly typical month. Month 2 included a campaign that attracted many new buyers who made a very specific purchase on promoted items, which lowered the AOV, as well as the conversion rate since these were new customers. Month 3 was a campaign directed at existing customers that included bundled products that drove the AOV higher than the norm of $100, attracted more visitors than a typical month, and delivered a higher conversion rate because you have a relationship with those customers.

If those campaigns had not occurred, I would be concerned about the wide rage in the three-month performance and that would warrant more investigation into other KPIs around referral traffic, pricing, customer engagement, cart abandonment and so forth.

Gaining Insights from Your KPIs

Other KPIs can provide more insight as well. If you research KPIs around your individual marketing campaigns, you will see the relationship between increased traffic and higher/lower AOV and conversion rates. By selecting a set of KPIs that are micro-focused on your targeted business objectives, you will gain a much better view of your execution. By monitoring KPIs on a frequent basis, you will be able to act quickly when metrics begin skewing in the wrong direction. Below is a dashboard example that includes summary and comparison data for KPIs that are relevant.

dale kpi 1

How Roles and Time Affect KPIs

You need to track the metrics that comprise your KPIs at an appropriate level. You need to choose KPIs that are appropriate for your measuring your business objectives and commerce maturity. You also need to invest the time to analyze the data to seek insights that are truly meaningful. Only then, can you be confident that your KPIs are accurately reflecting your business performance.

If done properly, your KPIs will actually evolve over time as your business objectives will change. Customer migration to online sales and site traffic may be the most important KPIs in the first year of a B2B site. In Year 2, it may be new customer acquisition and conversion rate, and average order value. Keep in mind you are developing these to measure and track your business objectives, which will be changing on a regular basis.

Different roles in your organization should be tracking KPIs that are relevant to their individual goals. Merchandising managers should care a lot about conversion rates, abandoned carts, and average order value. Product managers should care about unit sales, gross margin, and inventory availability and turn. Digital marketing managers monitor inbound traffic and referrals, return on ad spend, and so forth.


  • Defined KPIs and how they differ from metrics
  • Used Revenue KPI to better understand the relationship between metrics and business goals
  • Gained insights from your KPIs to help you understand why things are happening
  • Reviewed how KPIs differ between roles and change over time with your business objectives

Rightpoint leverages core capabilities in Digital Strategy, Customer Experience Design, Technical Implementations, Sales and Service, Change Management, and Digital Execution to design and implement solutions that deliver the business outcomes our customers are seeking. Learn more about how our deep understanding of B2B and omni-channel retail commerce enables our teams to drive digital transformation across all your sales and marketing channels.

Dale Traxler is Vice President of Commerce Solutions at Rightpoint. Follow Dale on Twitter and LinkedIn.