7 Steps for Choosing Ecommerce Metrics That Matter
If you run an ecommerce business or work for one, you know that there’s no shortage of data to watch. Stats, analytics, metrics, and dashboards are all readily available in today’s ecommerce world. And these numbers are important if you’re going to run a data-driven company.
However, there are often problems with the way most ecommerce brands track metrics.
For one, the data they’re watching may not even be accurate. Also, people focus on the wrong metrics, or they’re just not sure which ones are important and which they should ignore. This leads to distracted leaders and companies meandering through the year without hitting the right goals.
Sound familiar?
What your ecommerce business needs is an understanding of what metrics matter to you based on your particular role and what goals the company has set. Too often, business leaders get caught up in recording, which leads them down a long path of focusing on the wrong things. Let’s learn how to avoid that!
In this post, we’re going to walk through a seven-step process you can use to choose the correct metrics that matter for your ecommerce business based on your role and the goal you’re trying to achieve. This will help clarify and simplify your day-to-day so you can focus your time on actions that get you the results you’re looking for.
Before You Shift Your Ecommerce Metrics, Shift Your Mindset
Before we get any further down the road, there are two mindset shifts that need to take place.
The first shift is realizing that the metrics that you “should” care about can be different for every business. There are some basic health metrics that every ecommerce brand pays attention to, but the metrics that really matter to you are dependent on:
- Your unique business
- Your brand’s short- and long-term goals
- The role you play in achieving that goal
The second mindset shift when choosing metrics that matter is to not start with data. Although that may seem counterintuitive now, you’ll soon see why. (Keep reading!)
The Two Types of Metrics That Matter
Another thing to keep in mind when it comes to tracking data is that there are two types of metrics that matter.
Health Metrics
Health metrics are data points that indicate the basic health of the business — similar to a human’s heart rate or blood pressure. For an ecommerce business, health metrics might include revenue, profit margin, AOV, cost per acquisition, etc. While these metrics are helpful for gauging the overall wellness of your ecommerce business, they aren’t always going to be the ones that’ll matter most for achieving your unique goals.
Goal Metrics
Sticking with the human health analogy, human goals could include losing weight or achieving a certain race time on your next marathon. What you use to gauge your progress toward those goals is very different from basic health metrics. It varies based on the goal.
If you’re trying to lose weight, watching your heart rate won’t help. Instead, you’ll look at pounds lost per week or body fat percentage. If you’re training for a marathon, you might measure how many miles you run each day or how quickly you’re able to improve your time.
In a business, you’ll have to identify and watch micro-level metrics in order to progress toward your goals. This is where people often get off track. In fact, we find ecommerce businesses often don’t measure goal metrics or set ecommerce goals at all.
7 Steps for Choosing Metrics That Matter to Your Ecommerce Business
Now that we understand the difference between health-based and goal-based metrics, let’s walk through the seven steps for choosing metrics that actually matter to your ecommerce business.
1. Set the Data Aside
For the moment, put those dashboards away! You might be tempted to start diving into Shopify or Google Analytics data right now, but doing that at the beginning will only make things complicated. We know it’s tough, but tuck those away and move on to Step 2.
2. Start With a Goal
Your goal will dictate which metrics you choose to focus on because you’ll be choosing metrics that indicate specific progress toward those goals.
You’ll likely need to set both short-term and long-term goals with different metrics that indicate progress. A long-term goal for your business could be to build a worldwide brand, become a brand that matters 50 years from now, or achieve enough success to be sold in five years. Short-term, you might want to reach $1 million in sales, double your revenue in two years, or increase your net profit by a certain amount in a year.
Action item: List three long-term and short-term goals for your business. For each, be very specific, define a time frame for achieving the goal, and determine how you’ll measure the completion of the goal.
3. Identify Your Part in Achieving the Goal
The CEO, ecommerce director, marketing manager, and others all have different roles to play in achieving business goals. Each person cares about a different element of the scoreboard day to day. That’s why you’ll need to identify not only what metrics matter in terms of your goal but also what metrics matter in relation to your specific role.
Action item: For each goal listed in Step 2, list the part you play in achieving that goal. Then list the actions you’ll take to hit the goal along with the desired results.
4. Decide on Your Scoreboard
Next, you’ll need to translate your actions into indicators that’ll help you gauge the progress of the role you’re playing in your business goal.
This step isn’t about digging up that data just yet. Instead, the goal here is to determine what numbers you can use as your measuring stick. For example, if you’re a marketing manager and the goal is to increase profit, decreasing the cost per acquisition would be one way to gauge progress toward the goal.
Action item: Determine what specific ways you’ll measure the progress of your actions in achieving your goal using data points. Pick up to five data points. Just list them out — don’t worry about how you’ll track those yet.
5. Track the Data
At this point, you’ll have your goals and a list of the metrics you need to watch to measure your progress. Now it’s time to determine how you’ll track those metrics.
Tracking will most likely happen in Google Analytics, but there are other tools to monitor what GA can’t track. Some metrics may need to be manually calculated based on data you gather in GA, and that’s perfectly okay. Don’t limit yourself to what analytics tools give you.
For example, we’ve talked before about the ad spend to revenue ratio. This doesn’t exist anywhere, so it needs to be manually calculated. But it’s worth taking the time to calculate — that ratio is necessary for steering large, complicated marketing budgets.
Action item: For each metric that matters to you, identify where you’ll track it. You may already know where to find it in Google Analytics, or you might need to bring in an expert. Whatever you do, make sure it’s being tracked accurately.
6. Create Your Dashboard
The next step is to create your dashboard. It doesn’t have to be complex or fancy; a simple spreadsheet will work. In fact, we recommend starting with a manual spreadsheet — this’ll force you to focus only on the metrics you already decided matter to your business and its goals, and it’ll give you time to validate those metrics before building them into a dashboard.
Action item: Open Google Sheets and create a spreadsheet to monitor the metrics you chose, either daily or weekly. Doing this manually will help make sure you don’t pick too many metrics and that you’re able to track them efficiently and accurately. After refining this process, you can find a way to automate this tracking.
7. Focus
The biggest challenge with choosing metrics and using them to achieve goals is avoiding all the potential distractions involved. There’s so much data available, and most people try to sort through that first and get distracted. The truth is, data is useless without having context for how it relates to your specific goal and the part you play in achieving it.
Action item: Use only your dashboard for tracking metrics that matter on a daily or weekly basis, and stay focused on executing tasks that help improve those metrics. The only time you should be digging into extra data is if something looks off on your primary metrics data. Think of Google Analytics as being there to answer specific questions, not to take you down a black hole of information.
Identify Your Ecommerce Metrics, Stay Focused, and Get Ready for Growth
Sadly, we find that many businesses work harder than they need to without getting far, all because they haven’t chosen the metrics that matter and stayed focused on them. If you want to grow your ecommerce business, establishing goals, paying attention to the right metrics, and tracking those metrics efficiently is the best path forward.
Remember: You don’t need to make getting started too hard on yourself. Begin wherever you are right now, and let these seven steps direct your path toward the results you want.
Want to expedite the process of achieving your business goals? Sign up for coaching, or contact us to let our team give you the support you need along the way.
