How Measuring Key Performance Indicators Can
Improve E-Commerce Strategy. Part one.
The problem with most e-commerce marketing strategy today is
that companies don’t understand how they use things like web
analytics. Most e-commerce directors or web marketers are given a
budget and told to stick to it, and good analytics don’t usually
come cheap. Without web analytics you can’t even begin to measure
key performance indicators (KPI’s), which should be a part of any
good e-commerce strategy. We often see that marketers face a
problem in that they know they need Web Analytics, they just don’t
know why they should pay for it and don’t know what to measure.
This three part series of articles will hopefully help clear up
some of the things that marketers should measure as key
performance indicators concentrating on one KPI per article.
What is a key performance indicator?
In website measurement terms a key performance indicator is a
metric which will help your organization define and measure
progress toward your websites business objective. Key Performance
Indicators are quantifiable web site measurements that reflect
whether you are successfully meeting or falling short of your
websites business goals.
That’s quite a boring definition of a KPI even if it is important,
so in a last ditch attempt to keep you from falling asleep lets
talk about Formula 1 (or the Indy 500) and the KPI’s they use.
What has Formula 1 got to do with KPI’s?
There are many minute factors in formula one that constitute being
a winner. Everything down to the performance of the fuel, the
tires, the speed of the pit stops, the quality of engine parts,
the weight of the car, it’s aerodynamic ability, everything is
measured and tested, long before the driver even gets into the
car. The difference between the winner of a formula one race and
second place can be as little as a hundredth of a second.
That extra hundredth of a second could be because the fuel used on
that particular race day allowed the driver to get more out of his
car than the guy in second place.
How did the race team know which fuel to use?
Because before hand they had tested maybe 50 different types, each
one tuned for the demands of different circuits - or even
different weather conditions.
They got that extra performance by knowing the key performance
metrics of the fuel, so they could say with confidence that ‘fuel
a’ was better for their car if ‘condition a’ was satisfied.
Condition ‘a’ might have been the cars weight that day the type of
road surface and the weather. When all matched together it meant
that the race team had a particular choice to make when selecting
the fuel for the car.
The web site KPI I’m about to discuss is the fuel that powers your
e commerce sales and lead generation strategies. Both are measured
by practically all web analytics systems, but both not commonly
measured to their full potential.
Page views per session, the fuel behind your web business
objectives
For those of you that know why page views and sessions are
important bear with me for a paragraph or two. For those of you
that don’t here we go.
Why are page views and sessions important?
Page views are a metric that represents the amount of times your
pages are viewed by the people that visit your website. On it’s
own it might be an important measurement if you’re a very well
trafficked content website looking to sell B2B advertising in the
form of some kind of ad (banners for instance).
If you can accurately say to an advertiser that you have 10
million page views per week, it’s very likely that this alone will
be one of your KPI’s, simply because if it goes down, your
advertisers will most likely not want to pay you as much to
advertise with you. It would be important in this case that you
keep the page view count at least to the same level every week in
order to keep the same level of banner revenue for example.
Sessions represent the amount of users (people) visiting the
website over a given period. Again it’s a very important metric to
know, the general idea being that more of the right kind of people
visiting your pages will eventually mean your bottom line
improves.
By combining these two metrics however we get a much more
powerful way to use the figures.
Combining the two metrics as one KPI is done by taking a ratio of
page views per session as an average. So if 1000 visitors viewed
2,000 pages the mean page views per visit KPI is 2, (2,000 / 1000
= 2).
Why is this combination important?
If your website e-store system required that you need to view 5
pages in order buy a product and your KPI is telling you that your
site gets an average of 2 page views per session, then the site is
under performing badly.
If it takes 5 pages for your visitors to buy something then your
goal should be to get an average KPI of at least 5 page views per
session. Otherwise it means that the vast majority of your
visitors aren’t going deep enough into the process.
Much more importantly deciding on a KPI like this is giving you a
measurable objective to work towards. If you know that the vast
majority of people are abandoning your website after only viewing
one or two pages there is a problem which you need to work hard to
solve.
It means you know that somewhere within your web analytics you
will be able to detect the areas of abandonment that are the
problem. The simple fact of the matter is, if you have a low page
views per session KPI then your analytics system (if it’s any
good), WILL be able to show you where the problem lies. Once you
have found the problem areas, congratulations, you’re becoming a
web analytics expert. Now you know which pages have the problem
and you just need to figure out the why.
Figuring out why is the real secret
It may be that you’re driving the wrong kind of visitors, such as
people who aren’t interested in your offer. It may be that you
don’t have enough compelling content to keep visitors interested.
It may be that your shopping cart has a problem with abandonment
or your lead generation process is too long or has a scary form to
fill in. In all cases your page views per session KPI is the first
warning signal and you can monitor it quite easily.
Other warning signals
The other side of the coin is if this KPI is too high. What if you
have a 1000 people viewing 20,000 pages? Unless you have
incredibly compelling content there is a problem. It probably
means that people are very interested in something but can’t find
it on your site. So having this KPI be too high is also a warning
flag that means you need to analyze your web analytics and see
where the problems are. Are people skipping around pages? How long
do they stay on your site? (another KPI we’ll come to in the next
article of this series), have you got site architectural problems
with navigation?
Too high or too low, it’s all useful measurement
The point is to find out how to use the fuel remember? If you
start measuring page views per session as a KPI, you will begin to
see if you have a problem or not. You can get as deep and as
sophisticated as you like, I’m just trying to show you the idea
with this article.
For instance you could measure page views per session of visitors
only hitting your shopping cart, or lead generation system.
Content websites could use page views per session in particular
content groups to work out how compelling particular kinds of
content are. It all depends on the web site business objective.
To summarize
Developing KPI’s allow you to measure things on your website which
directly effect your business objectives. In the example I’ve
demonstrated by finding ways to improve the number of pages people
view per session there is more chance that those users will
complete your calls to action (buy, register, subscribe, whatever
web business objective you may have). This first KPI that I’m
suggesting you consider is an early warning signal that something
is wrong and it’s very easy to determine how to set a measurement.
The next KPI I’ll discuss is time spent on site and why it is also
important as well as how you can use this in combination with page
views per session.
Till then….
Author: Steve Jackson, Editor - Conversion Chronicles
Steve Jackson is CEO of
Aboavista,
editor of
The
Conversion Chronicles and a published writer. You can get a
free copy of his e-book sent to you upon subscription to the
Chronicles web site
www.conversionchronicles.com.
Three Part Article:
How Measuring Key Performance Indicators Can
Improve E-Commerce Strategy, Part One. ----
Part Two ---- Part Three
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