Measure the Right Key Performance Indicators for Success in Ebusiness
by Dennis Consorte - June 3rd, 2010 8:46 am
When starting any Ebusiness venture, knowing how to test, track and evaluate your results is crucial. By setting up Key Performance Indicators (KPI) otherwise known as Key Success Indicators (KSI), you can in turn create progress and overall company momentum toward a shared goal.
Before delving into the specific KPIs of Ebusiness, it’s important to understand the difference between Ebusiness and Ecommerce – two terms that are often used interchangeably but by definition have different meanings.
E-commerce is the process of selling an actual product online. It includes the transaction, inventory and sales tracking and internet marketing to name a few. E-commerce includes the front-end design of the site, integrating that site with the relevant technologies needed to sell products to customers and creating the processes used to fulfill, track and ship orders. E-business is a much broader concept and includes E-commerce under its umbrella but also addresses other factors such as risk management, product development, customer relations and supply-chain relationships. It also includes turning a website visitor into a client, even if no transaction occurs. For example, a site visitor may see a product on your website, and then make the actual purchase in a bricks-and-mortar store close to home. A more in-depth explanation of these subtle differences can be found here.
Now that we understand the differences between Ebusiness and Ecommerce, we can talk about Key Performance Indicators. KPIs vary from industry to industry and from business to business. For example, a telecommunications company may gauge customer support satisfaction by the number of calls answered. A university may consider the percentage of students who graduate in a given year to be a measure of success, and for the long-term, how many students find jobs after graduation. In each of these cases, a KPI reflects a long-term goal that’s attainable and measurable.
KPI’s for Ecommerce often rely on metrics that can be measured using a web analytics tool such as Google Analytics. These indicators include such things as traffic volume from various marketing channels (e.g. SEO, SEM & Affiliate Marketing), rankings for specific keywords, percentage conversion of site visitors to actual sales, first-time-visitors versus repeat visitors to a website, bounce rates and much more.
There are however certain KPIs for Ebusinesses that can’t be measured accurately by an analytics package. These are changes that occur at the company’s core and reflect its own unique goals. Changing these Ebusiness Key Performance Indicators can have a direct result on Ecommerce success, so knowing them can put you well ahead of your competitors.
Important KPI’s Every Ebusiness Should Analyze
- Understanding how people behave on your site, through the use of heat-maps, multivariate testing and other landing page optimization techniques can help you pinpoint ways to improve the navigational flow on the website, webpage design and the overall User Experience. Improving these elements will inevitably lead to better conversion and more sales.
- Price Points – There will be a sweet spot that will produce the best ratio of profit to total sales volume based on setting prices higher and lower. By measuring this Price Elasticity of Demand, you can get closer to this value when pricing out your merchandise. Be sure to take any discounts, commissions and advertising costs when computing these numbers. On the positive side, you can adjust these numbers to increase sales volume, with the ultimate goal of Customer Acquisition and Customer Lifetime Value, rather than the immediate Return on Investment for the transaction.
- Time Spent on Site – You can gauge the time spent on your site through web analytics. If time spent is too short, you will need to find the reasons why, and how to create a compelling experience that keeps the interest of potential buyers.
- Overhead – Selling an exclusive, unique or in-demand item with a low overhead affords you the ability to compete on price and still come out on top. Reducing overhead in turn affects your average sales price and increases your profit margin, but don’t do so to the detriment of your product or your business. For example, Infinity Shoes promotes the Miz Mooz shoe brand at the top of their site’s left navigation, with all other brands beneath it. The concept here is that in addition to being a reseller of a large selection of shoes, they are also a Consumer Brand Manufacturer, with their in-house brand being Miz Mooz.
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