By Markus Nagel – Head of Consulting, Webtrekk
Most of the KPIs that experts recommend that are used by marketers and analysts just show snapshots; they only show a small segment and do not differentiate between customer groups or their current position in the user lifecycle.
No one should doubt the relevance of conversion rates and CPOs just as no business can be competitive without a long-term strategy, and reporting should never ignore long-term effects and developments. The worst case is if all conventional performance KPIs rise while profit stagnates or even decreases.
Through user history and cross-device tracking Webtrekk offers the possibility of tracing long-term user development analytically. These observations do not absolutely require a basis in extensive cohort analysis. I will explain seven such KPIs below that show companies new ways they can go about eCommerce reporting.
1. First Order Share
This KPI gives many insights about long-term shop performance. It provides information on how dependent order volume and profit are on new traffic – customers commonly place their first order during their first visit to the website. If the First Order Share is rather high, this shows a strong dependency on new traffic and less profit due to the high proportion of one-time only buyers. However, the First Order Share percentage should not be too low either, because customer churn can only be compensated by acquiring new customers.
2. Customer Conversion Rate
Converting a new visitor into a new customer is the moment of truth in the user journey. It marks a new level of engagement, directly points to more potential and enables a whole range of new (and often cheaper) marketing options. It is an engagement that means there is immediate sales potential plus enables a whole range of new (in some cases, less expensive) marketing approaches. The most critical of all is in-depth conversion analysis. If the Customer Conversion Rate is very low, investment in new visitors will not make a great impact on revenue. However, if the conversion rate is high, it makes sense to invest in new visitors for the short-term impact it gives. Of course, the goal of any optimization should always be to increase conversion rates.
3. Returning Visitor Rate
The Returning Visitor Rate represents a part of customer conversion. It is the share of new visitors that return to the website a second time. Depending on the product and business model, it is only here that the contribution to ROI happens – sometimes even later than the second visit. It is for this reason that Returning Visitor Rate gives more precise information than the commonly used New Visitor vs. Return Visitor comparison. If the Returning Visitor Rate is low that can mean the investment in new visitors is diminished. If this is the case, all optimization should focus on improving the Returning Visit Rate. This analysis becomes even more insightful when combined with the Customer Conversion Rate. If the return rate is high but the conversion rate is low, it is recommended that further analysis of website engagement and UX should be undertaken.
4. Repurchase Rate
The Repurchase Rate is the economic equivalent of the Returning Visitor Rate. The conversion of a visitor into a regular customer is the second most important part of the user journey. Depending on the product and business model, this is the point at which those well-known metrics Customer Lifetime Value and Customer Acquisition Cost come into play and provide good information. In addition, this KPI can be adjusted accordingly if, for example, the second order is more relevant than the first order.
5. Engagement Increase
Besides new visitors returning to the website, it is also important to observe the changes in user behavior when they do return. Of course, increased engagement is a positive result. Increased engagement indicates that the user is exploring the website in more depth which can often increase their likelihood to convert. On the other hand, if engagement decreases on return visits, the risk of churn increases – there is a higher likelihood that return visitors will not become loyal customers in the future.
6. Order Value Increase
Even more relevant than goal-oriented engagement is the development of order size. Of course, an ideal case is an increase in order value from the first to the second order. The worth placed on this number is strongly dependent on the product and business model. For example, a decline in order value for expensive products is more likely than it is for consumer goods such as clothing and accessories. A strong decrease in the order value is however always an indicator for a customer that uses upselling possibilities, so the second order will not yet ensure the user's transformation into a loyal long-term customer. On the other hand, a sharp decline in the order value always indicates that there are up-selling opportunities for this visitor and that the second order does not necessarily indicate loyalty.
7. Average Returning Customer Visit
This KPI primarily serves as additional information for Repurchase Rate evaluation. Further orders will only take place when new customers return to your website after their first purchase – will they come back with intent to shop or will they never return after their first purchase? If the number of returnees is very low, then orders are predominately spontaneous purchases without much potential for long-term loyalty. If this is not the intended business model, then optimization should start here. However, if the Average Returning Customer Visit is high and the Repurchase Rate is low, interested customers cannot find further buying options.
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