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What is a Key Performance Indicator?

Key Performance Indicator (KPI)

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What is a Key Performance Indicator (KPI)?

A Key Performance Indicator (KPI) is a business metric that measures the performance and progress of a business against its key objectives. The purpose of using KPIs is to help businesses evaluate their success at reaching specific targets. KPIs are divided into two groups: high-level KPIs that track the overall performance of the company and low-level KPIs that measure key business functions, such as sales or marketing.

How to determine Key Performance Indicators (KPIs)?

When it comes to identifying the right KPIs for your online store, start by asking yourself “what defines success for my eCommerce business?” and “what targets can lead me to that success?”. Often, the default, go-to metric is return on investment (ROI), which measures how successful a particular investment has been, comparing the return to the original expense. However, it isn’t always possible to tie every effort to the bottom line and sometimes, it is not worth doing.

To determine the right KPIs, you must first establish the goals and objectives for whatever you’re intending to track. The next step is to determine the specific conditions that will facilitate the meeting of set goals within a specific timeframe. The two key elements to this are identifying a measurable activity and a specific timeframe. For example, “Increase new visitors by 20% over the next 3 months”. These elements are critical success factors that will help you understand whether you are on track to meeting your goals. The final step is setting the actual KPI. In the case of the example used above, the KPI could be “Percentage of new visitors vs. returning visitors compared to last month”.

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There’s a host of different KPIs that online retailers like to track. Remember that you should only monitor those KPIs that make sense to your business, but the most important ones you may want to check out include:

  • Conversion rates
  • Site traffic
  • Average page views & Time on site
  • Bounce rate
  • Pages per visit
  • Shopping cart abandonment
  • Average order value
  • Exit pages
  • Referral sources
  • Return rate
  • Traffic sources
  • Assisted conversions
  • Highest traffic pages & content
  • Final sales (daily, weekly, monthly, etc.)

Why are KPIs important to your eCommerce business?

Think about KPIs as milestones on the road to success. Aimed at driving action, they are the measurements that can quickly and accurately reveal whether or not your business is successfully moving towards its goals. Monitoring your key performance indicators regularly (even daily) will help you make informed decisions about your online store and focus on and invest in initiatives that are driving your business growth.


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