Wednesday, May 4, 2011

3 steps before you start measuring performance of an e-commerce site

Recently I came across one e-commerce site for a Web Analytic consulting assignment. To my surprise the website was doing more than one million dollar of business from online channel but have no formal web analytic reporting in place. Most of its online sale last year came from their offline customers choosing to order online.
There was a huge market potential which they felt they were losing just because of their lack of attention on web-commerce.

This was the reason they approached us and we started designing web analytic strategy for them. We decided to start from basics:

Step 1: Goal of the website

We interviewed their key stake holders, which in this case initially were mostly IT director and its team as they were the ones maintaining website, and there was no existence of a formal digital marketing team and not to mention least co-ordination with sales. (Sad, isn't it?)

Not too our surprise, the organization felt that site exists to sale but there was no defined profile for target audience. So we took a step back and interviewed some senior sales and marketing people. This helped us establish the overall goal of the website:

Goal of an e-com website:
1) Generate additional revenue by selling products from online channel
2) Attract more prospects engage them on site and convert them into customers
3) Increase revenue from existing customers

Step 2: Segmentation of visitors and setting the target

Based on discussion with senior management, we segmented the site audience into two categories:
A) 1) Prospect and 2) Customer

B) Sources of Aquistion:
2)Social campaigns
8)Offline channels

Step 3: Setting up Key Performance Indicators (KPI) for the site:

According to me, KPI setting is the most important exercise for the site.
I always love to draw an analogy of personal fitness to KPI: like your gym instructor has a chart for you where he notes down your weight , biceps, triceps, Blood pressure etc before you start your work out and then monitors it at regular interval, similarly KPI sheet is like that chart, which you need to monitor at regular interval

So for this e-commerce site we started identifying key questions which our KPIs can answer. (These questions have derived from Goals which we set up in Step 1):

Q1: what is the revenue generated from site; is it increasing or decreasing; who is buying?

-Revenue achieved v/s revenue targeted
-Percentage revenue generated from prospects v/s from customers
-Ratio of new v/s returning visitor to site

Q2: What is likelihood that a visitor on site will place an order; How much each visitor worth?
-Order conversion rate = Total number of orders taken/total visits
-Average order value= total value of orders/number of orders placed
- Average value of each visit= Total order value/Total visits

Q3: What is the success rate of my shopping process?
- Check out completion rate= Total orders /Total visits where product was added to cart
- Add to cart rate= Total visits when product was added to cart/ Total visits to site

These were the high level KPIs which we decided for the site after consultation with management. We then reported these KPI separately for Prospect and customers and each Source of Aquisition

One most important point any analytic person should keep in mind that any value in isolation is of no use, it need to have a context. To provide context to it we did collected some historical values for each KPIs for the same period so that we can compare performance. For many data point’s historic data was not available as reports were not set up, for such KPIs we decided to use industry bench mark value to have a context.

There can be 10 -20 more KPIs relevant for an e commerce site , but one should always avoid having laundry list of KPIs and should just stick to few relevant and actionable ones. Though we can have a separate set of KPIs for strategic level and tactical level managers or functional managers.

Many times I am asked how you identify which KPI should be reported to strategic manager and which one to tactical. To identify this, I always rely on technique of questioning and answering:

Q1 what kind of question is answered by a KPI. For e.g. a ratio of new v/s returning visitors answers question about loyalty (from returning visitors) or repeat purchase and new customer acquisition.

Q2 Who can take action on this information.
Strategic manager will  try to increase the conversion from new and repeat customer and will define strategy and budget for that. Tactical level manager will take that strategy, define the tactical moves, implement them  and bench mark the existing values against which it can monitor progress. e.g. if Strategic manager decide the goal of increasing new customer revenue, optimization manager will work on increasing conversion, campaign manager will work on increasing new customers and all will have their own set of KPIs which they will monitor

So this the way we started setting up analytic frame work of organization. I will cover next steps followed by us like setting up reports and dashboard, etc in subsequent posts.  What do you think about these steps? Share your feed back in the comment section

I will also try to touch upon other relevant KPIs for an e commerce site in a separate post. Kindly let me know your views on the approach we took for the site. I would love to receive your feedback. Thanks


  1. Nice post. Thanks for sharing

  2. InstaBuilder 2.0 review that really doesn't need to be seen, read or listened to., if you have kick arse landing page software. Instabuilder 2.0

  3. Have you given the thought of finding a great SEO company a good thought? Well it's about time you learned how to find the best! seo marketing services


  4. Spot on with this write-up, I really believe this site needs a great deal more attention. I'll probably be back again to see more, thanks for the information! apple itunes login

  5. nice bLog! its interesting. thank you for sharing.... Shane Perry Marketing

  6. Its constantly great to learn tips like you share for site posting. As I just began posting remarks for site and confronting issue of loads of dismissals. I think your proposal would be useful for me. I will fill you in regarding whether its work for me as well.

  7. I recommend you to check this tutorial. Easy steps for beginners in web marketing

  8. Youre so cool! I dont suppose Ive read anything this way before. So nice to uncover somebody by incorporating original applying for grants this subject. realy thank you for starting this up. this website is one thing that is required on the internet, someone after some originality. helpful job for bringing new stuff to your world wide web! اردو شاعری Naveed Ahmed

  9. very good post, i surely enjoy this fabulous website, continue it

  10. 12 Minute Affiliate may be a decent program that permits you to simply find out 12 minute affiliate sales funnels and begin to form money online. However, it’s not as easy to form money with it because the sales page suggests, there'll be an enormous learning curve especially if you are a newbie.

  11. This short article posted only at the web site is truly good.
    Businesses in Amarillo

  12. Your articles and contents are encouraging.
    Chris Munch

  13. Nice written!! I have been a big fan of your blogs. thanks

  14. They were a breeze to figure with; therefore the engagement's been seamless thus far. UI design punctuality and professionalism industrial design companies NYC , and therefore the client also appreciates their great talent.

  15. I know this is quality based blogs along with other stuff.
    design firm la

  16. This written piece gives fastidious understanding yet.It’s amazing in support of me to truly have a web site that is valuable meant for my knowledge

  17. It’s my fortune to go to at this blog and realize out my required stuff that is also in the quality.
    Law firm marketing

  18. I was searching for many blogs site and now finally I have got this cool place with lots of information.

  19. Hi Dear, have you been certainly visiting this site daily, if that's the case you then will certainly get good knowledge.
    UX design firms

  20. they have other specialization courses that you can take up online. Take the first step to building your career in this field by enrolling in these courses. digital marketing course in hyderabad

  21. This blog has very distinct features. Thanks
    image source