How do I know where to spend my e-commerce budget?

One of the things I love about e-commerce compared to offline selling is the relative ease in using data to drive marketing decisions. There can be hundreds of KPIs (Key Performance Indicators) that can be tracked and that matters, but at a high level they all stack up to just three.*

1. Sessions: Traffic to your website over the previous time period (usually month, quarter, or year). This is easily obtained from Google Analytics.

2. Conversion Rate: This is the percentage of your website traffic that converts into a customer, lead, or however you define a successful web interaction.

3. Average Order Value (AOV): This is the average amount spent per order or by each customer.**

The formula has two parts and goes like this: Sessions x Conversion Rate = Orders | Orders x AOV = Sales

We're trying to increase sales with this formula. Let's start by finding our current KPIs and entering them below. Next, we use those values to predict how improving each macro KPI will affect sales. Choosing which KPI to address is a combination of the easiest to achieve, the most realistic, and the least expensive. If you decide what macro KPIs need to be targeted, you know where to spend your e-commerce marketing budget.

* If your business is more complex, you can contact us to recommend micro KPIs with a free 30 minute call.

** Note that this won't apply if your goal is "leads" for example, in those cases I would alter the formula to use an alternate KPI such as number of visits or perhaps time on site. You can contact us to recommend how to do this with a free 30 minute call


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