Introduction: Defining Success

Is there such a thing as too much of a good thing?

If we’re talking about data, the answer is yes.

Data in itself has proven to be a great asset to any business, but the massive amount of available data can cause confusion rather than clarity (Google Analytics offers hundreds of metrics, dimensions, and filters). To avoid anxiety, businesses need to know what data to gather, which metrics matter, and how those numbers can turn into action.

In order to make the right data-driven decisions for your business’ website, it’s important to first identify what success looks like for your company. If your main objectives are driving traffic, conversions, or sales, then you should focus on metrics that reflect the success of those goals.

Note: if you already know your goals and KPIs, skip ahead to “Which Metrics Matter?”

While some metrics seem interesting and exciting, it’s important to focus on driving ROI and the success metrics that track it. Likes, comments, and page views can be exciting – and depending on your objectives, could be your goal – but maybe Facebook likes aren’t what keeps the lights on. These “vanity metrics” make you feel like your site is progressing, but don’t provide any important insight when it comes to the development of your business.

The measurement of success for a particular business activity is based off what is typically a few key performance indicators, or KPIs. Here are things to keep in mind when identifying KPIs and interpreting your data:

KPIs should directly measure the success of a website objective. Setting specific goals is what leads to measurable insights. With established goals, KPIs can then be used to understand whether progress is being made toward reaching those goals. For example: if your goal is to sell more t-shirts, a KPI might be 1000 t-shirts sold per month.

KPIs should be tracked over time to establish benchmarks. Benchmarks are standard points of reference to compare against. As KPIs are tracked, it’s important to set a standard for comparison over time. This way, you can see progress as you go from 50 t-shirts, to 500, to 1000.

Each KPI that meets this criteria needs to be quantifiable and irrefutable. They should be easy to measure, whether it’s through an interactive real-time dashboard or plain, old-fashioned numbers on an Excel spreadsheet.


Which Metrics Matter?

The answer to this question is different for every company. Determining this is a crucial first step before beginning to sift through your site’s data. For our purposes, we will use an e-commerce site as an example, though the same principles will apply if you are a media business gunning for clicks, or even an informational website generating awareness.

Typically, e-commerce sites should focus on metrics that follow a user through a “funnel.” A funnel is a series of actions that you expect visitors to take as they navigate your site before either making a purchase, buying a subscription, or doing whatever it is that will lead to the success of your business.

This typically starts at the advertising level (top of the funnel) and follows the user as they enter the website, click through specific pages, and ultimately complete a purchase (bottom of the funnel). Marketers are encouraged to map a user journey to identify any roadblocks that would prevent a customer from completing a purchase as they discover, explore, and invest in your site.

Once you’ve established your website objectives and mapped a typical user journey, it’s time to narrow down the exact metrics that are going to lead to a successful business model. Below are example KPIs for e-commerce websites and businesses that are typical to measuring ROI.

E-Commerce conversion rate (%)

  • What it is: The rate at which users on your site are converting (or buying).
  • How it’s calculated: Divide the total number of visitors (to a site, page, category, or selection of pages) by the total number of conversions (number of sales from your site).
  • How to interpret it: The bigger the better. A high conversion rate indicates a large number of conversions per visit. This means that more users are visiting your site and completing a purchase.

Cart abandonment rate (%)

  • What it is: The rate at which users are adding products to their shopping cart but not checking out.
  • How it’s calculated: Divide the total number of completed purchases by the number of shopping carts created.
  • How to interpret it: The lower the better. If your cart abandonment rate is high, then more people are considering a purchase but not following through. This can indicate friction in the checkout process.

Conversion rate by referral source (%)

  • What it is: The number of conversions resulting from a referral source (a shared link from a friend, for example).
  • How it’s calculated: Divide the number of referred purchases by the total number of purchases.
  • How to interpret it: Referrals are typical word-of-mouth tactics that indicate users are spreading love for your site to their friends.

Average order value (AOV) ($)

  • What it is: The average dollar amount spent each time a customer places an order.
  • How it’s calculated: Divide total revenue by total number of orders.
  • How to interpret it: AOV tells the average total of every order placed over time. This acts as a benchmark to understand how much revenue orders are bringing in.

New customer orders vs. returning customer orders (:)

  • What it is: Compares the quantity of new and repeated customers.
  • How it’s calculated: A ratio between the total number of conversions by new users to total number of conversions by returning users.
  • How to interpret it: While many businesses are focused on customer acquisition to increase their spread, customer retention can drive loyalty and referrals. Both order types are valuable to driving ROI.


Key Takeaways & Further Reading

At ISL our clients range from medium sized businesses to massive global brands. Our team understands that success metrics differ across company size and industry, and choosing the right ones takes time. Remember not to be overwhelmed by the amount of data that’s available to you. Set your goals, understand your objectives, and identify KPIs that will measure your site’s success. Search for aspirational businesses, see how they built a successful e-commerce program. Odds are they’re measuring KPIs.

Want to learn more? Check out these helpful resources that dive deeper into the topics we’ve introduced.

The Best Web Analytics Tools to Grow Your Business

4 Google Analytics Goal Types That Are Critical To Your Business

The 8 Google Analytics Features Every Site MUST Have Enabled

The Average Website Conversion Rate by Industry