Christopher Columbus had no GPS, no Internet, no travel club, no maps. The explorer made four trips across the Atlantic Ocean from Spain: in 1492, 1493, 1498 and 1502.
Columbus did have a compass and it did get the job done! Well, it sort of got the job done! He did use the compass along with his quadrant and a set of celestial navigation tools and techniques that were known during his time.
More importantly, because of his discoveries, the magnetic compasses became very important navigational tools. This led to more research & development of many more tools & techniques that were used with time which kept growing and has led to the sophisticated technology being used today for navigation.
Your business also needs navigation if you want to reach your business goals strategically.
A number of tools, techniques & tactics today is overwhelming. The focus should, therefore, be on something that will not change with time – i.e. a framework that you can follow rather than just a list of tools, metrics that you use to track your business and where it’s going
No. This is not another post on another set of metrics that you need to track.
Instead in this post, I want to provide a single basic framework to follow to decide your metrics and Key Performance Indices as your business grows. Every growing business needs to track metrics and more importantly, Key Performance Indicators (KPIs) to understand their performance, growth and much more.
1. Metrics & KPIs
Think of metrics as a bunch of numbers that will be part of your navigation toolset to wherever you want to go in your business. You decide where you want to go and then you reverse engineer your goal by looking at your toolset periodically and re-defining your approach as the metrics shape up gradually in your favor.
While deciding and tracking metrics one should always remember that “less is more” and find their most relevant KPIs (key performance indicators) in a very simple manner such that it’s always aligned to their business goals and not overwhelming for you to look at in a periodic manner.
Metrics vs KPIs – The simple difference between these two is that the former is just used for measuring and tracking anything specific, whereas the latter is the chosen metrics that are always connected to a business question and an objective that the company is trying to achieve.
Here’s a great collection of KPI examples and business dashboards by Klipfolio to understand them better.
2. Why even Track the Right Metrics
So, why do we even need to track the right metrics. Here’s some compelling questions and reasons why you should be tracking them periodically.
- Want to build a million dollar business? Noah Kagan’s #1 rule for it is to Track the Right metrics and it has been followed by various successful businesses.
- Which stage of your business are you in and what do you need to do this week, this month?
- What is the most important thing I should be focussing on to improve my business?
- What is something we should definitely stop doing that is hurting my business?
All these and many more business questions that you have on a daily basis will be answered just if you take the time to define and track the right metrics.
Tracking the right metrics (KPIs) is the #1 way to be fully aligned and accountable with your business goals at any point in time.
3. Framework & Method to Decide Which Metrics & KPIs to Track
All businesses are constantly changing, evolving and needs various levels of decisions by multiple people involved in them. The only constant is CHANGE. This means that as you grow or with time, the metrics that you track will not be the same. So instead of giving you a bunch of metrics list like every other post you would find on hundreds of E-commerce related websites – I would rather give you a simple basic framework that you should follow to find your right metrics and track them at a certain point in your business.
One of the famous quotes and really important ones from Jeff Bezos is as follows:
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time”
All of the above calls for a basic framework that you can consistently follow no matter what happens, what changes or the hundreds of external factors that influence you or your business.
To go about deciding the right metrics, this is the most basic framework – KPIs Framework – that you can follow.
- This extremely simple and basic model can be applied in most subparts of your business and rather any business to speak of.
- It makes sure that we are NOT dealing with data-dumps or reporting overload. It keeps you aligned to your business goals.
- The start is always with Your business goals, which can be broken down into several business questions that you have
- Each business question will then need to be branched out into a set of metrics. You can do this yourself via research or hire a data person (data analyst/scientist) if you want professional level help
- After listing down various metrics for each business question – you need to eliminate everything that is not helping you focus on your goals
- Jump to the “Live Example of Framework” section next to see a live example of how to go about this process
The above framework is a very basic and high-level one.
If you are running an entire digital marketing of your company, you should follow certain frameworks which are in much more detail for each part of your flow of user journey.
I also asked a simple question to Avinash Kaushik (Author, Digital Marketing Evangelist – Google) regarding metrics and his answer was quite simple, yet profound.
Q: What do you feel is the biggest pain point or problem in deciding which Top metrics (KPIs) to track and then actually tracking it periodically for growing businesses?
The unwillingness to commit to a process like creating a Digital Marketing & Measurement Model. It is the key as it connect business strategy to what’s important in data.
If you don’t give data a purpose, data will not have a purpose.
To learn more deep insights from Avinash directly – I would highly recommend his TMAI newsletter – which I have personally been reading for quite a while now.
4. Live Example of Framework – Ecommerce Metrics to Track
Now, let’s breakdown the framework and do a live example on the same to understand the full process clearly. Let’s assume we have an E-commerce website and then go about breaking down each aspect.
Business Goal: To double my revenue over next 6 months by improving site conversions
Business Question: How can I double my revenue over next 6 months from my website by improving site conversions?
List of Metrics: Visitors, Orders, Revenue, Return Orders, % Returning Buyers vs First-Time Buyers, % Returning visitors vs New Users, Task Completion Rate, Conversion Rate, Checkout Abandonment Rate & Cart Abandonment Rate
KPIs: Task Completion Rate, Checkout Abandonment Rate, Cart Abandonment Rate & Conversion Rate
- Just as an example I have made sure that the business goal and business question are a little specific and it’s about revenue via improvement in conversions. They both come from the business owner
- It can also be open-ended by simply improving revenue, or website traffic or myriad other things that the business wants to accomplish. The business questions need to be a high-level and open-ended for debate and something that would need more exploration
- The list of metrics is ideally brought out by an analyst in discussion with the business owner and by looking at the available data in the particular business scenario. I have listed out just a basic set of metrics that would enable him to understand where his revenue is coming from and where the focus should be to improve conversions. A few more metrics can be added there depending on the business context etc
- Now, The final KPIs are taken such that it directly impacts the conversions and are also very actionable. The conversion rate in itself is not a very actionable metric at all. However, the two abandonment metrics will help you understand what is stopping users in their two last final steps to becoming a customer. Once you understand and fix these, the conversions would directly be impacted and for good.
- The breakdown above into KPIs follows the principle of stopping the obsession over conversion as it is right now in the E-commerce industry. At any point of time, most visitors/users on any website are just exploring and only a small minority is actually buying and business owners need to understand and acknowledge that.
- The focus on actionable metrics vs vanity metrics while doing your selection of KPIs is very important.
This is how you can actually apply the framework shared above. I would be happy to walk you through these for your business goals and questions too. You can book a free consultation call with me or contact me if you need help with the same.
5. Some Top Must Track Metrics for E-commerce
Most companies and businesses just want to jump to the metrics and the numbers directly – the meaty part. It’s all good and nice to look at them, but without much business context, they won’t make much sense in reaching towards your actual goals.
Having worked with various E-commerce companies from Fortune 500 to SMBs, I’ll provide some important metrics in various departments that you should ideally be tracking.
Remember – Less is more & Business alignment is crucial while deciding metrics.
Business Health Metrics:
- Net profits (compared to last year & last month)
- Revenue (compared to last year & last month)
- Website Visitors (compared to last year & last month)
- Average Order Size
- Conversion Rate
- Checkout Abandonment Rate & Cart Abandonment Rate
- Average Margin
- Sales at daily, weekly, monthly levels (depending on business context)
- Marketing Expenses vs Desired Output (in one graph – quantify your outputs)
- Customer Acquisition Cost
- Traffic Acquisition Sources
- Affiliate performance (if any)
One of the best ways to track the right metrics is to use a business dashboard. There are a plethora of options out there to create dashboards quickly. I even gave a detailed user and analyst perspective of some of the best dashboard softwares out there.
Let me know your thoughts in comments and I’d be happy to answer them for you.
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