With hundreds of different metrics available, how can you be sure you are using the right data to make smarter decisions?
Our Board of Experts have come together to provide you with this shortlist the valuable metrics they rely upon. As we’ve said before, ‘Engagement’ is not a metric.
ABV (Average Basket Value)
Average basket value or average basket size is used by retailers for the number of items getting sold in a single purchase. It can be calculated as total units sold ÷ number of invoices.
If you are able to drive ABV from £18 to £25 whilst keeping other KPIs static you would see a significant increase in sales volume.
AHT (Average Handling Time)
Average handling time is a metric used by contact centres for average duration of a transaction.
AHT is a useful metric in monitoring the performance of call centre agents, and putting appropriate interventions in place as necessary.
“If I were to show the red card to one measure it would be Average Handle Time! I personally think it distracts the agent from giving the best quality advice and therefore reduces first call resolution which should be the ultimate goal of most contact centres.”
Chalky Langley, Director of Customer Experience, MET Office
Bounce Rate
Bounce Rate is the percentage of visitors to a website who navigate away from the site after viewing just one page.
“It can also be one of the most distracting metrics. If a visitor comes to your website to find your contact details/nearest store and they find it easily, they’ll bounce out because they have the information they came for. That’s a good thing right?
Of course, and you’ll be pleased to hear Google recognises this too.” – Relton Herron, Relton Associates
Budget
A budget is an estimate of income and expenditure for a set period of time.
So, how are you tracking against budget and forecasts? The terminology will vary from organisation to organisation, but is perhaps the most important and real of all metrics. There is always a cost challenge to be met, so tracking against that is key.
“Whatever data you are looking at, remember that it needs to be actionable. Don’t go to a lot of effort to pull numbers and create reports for the sake of numbers but can your company make real decisions, adapt and change activities based on what the numbers tell you.”
Sylvia Jensen, Senior Director of EMEA Marketing, Oracle
Metrics vs KPIs
Key Performance Indicators and metrics are terms often (incorrectly) used interchangeably, however a metric is not always a KPI. So, what makes a good KPI? You should look for the following 7 characteristics:
A true Key Performance Indicator…
…echoes organisational goals;
…is decided by management;
…provides context;
…creates meaning on all organisational levels;
…is based on legitimate data;
…is easy to understand;
…leads to action!
CAR (Checkout Abandonment Rate)
In marketing, abandonment rate is a term associated with the use of virtual shopping carts. Also known as “shopping cart abandonment”. Although shoppers in brick and mortar stores rarely abandon their carts, abandonment of virtual shopping carts is quite common.
With too many shoppers abandoning the checkout or potential leads not completing an enquiry form, this means there’s room for improvement. Large and more sudden changes in the metric means something more serious is shown.
CLV (Customer Lifetime Value)
Lifetime Value looks at, after the initial acquisition cost, how many times does a newly acquired customer re-purchase over a given time frame? Tracking your customer lifetime value helps you make better marketing decisions. See this example, courtesty of Kissmetrics:
Customer lifetime value
Conversion Rate
Conversion rates are calculated by simply taking the number of conversions (i.e. sales) and dividing that by the total number of page views or advertising clicks over the same time period.
For example, 100 ad clicks with 5 conversion would be a 5% conversion rate.
“Improving conversion rates is often more effective than simply driving more traffic. Finding where people are falling off in the purchase funnel can help you to improve the experience for all your customers by A/B testing, looking at user paths to goals, minimising dead ends and improving bounce rates. You did the really hard work of getting a potential new customer to your site – make sure that you are not ‘leaking’ them by a poorly converting site or page.”
Jake Smith, Digital Marketing and Communication Consultant, Wheel Digital
“One of the classics which is often misused is conversion rate. Conversion rate is very useful in a B2C environment with a clear goal of encouraging a customer to buy a product, but it’s not always directly comparable to situations where visitors have goals other than purchasing a product (downloading invoices, checking deliveries, managing workflows etc).”
Mark Sutherland, Digital and eCommerce Leader
Customer Experience
Customer experience, also known as CX, is the product of an interaction between an organization and a customer over the duration of their relationship.
“We should be looking at the customer experience from an outside-in perspective more than we do now in the industry. Do we make our customers smile when they use all our channels, and can we verify that with a measure? Some very simple quality monitoring can make a huge difference to ensure we are getting the opening greeting right, empathy, minimising dead air, personalising the contact. All basics but are we measuring them?” – Chalky Langley, MET Office
Customer Satisfaction
This is a measure of how products and services supplied by a company meet or surpass customer expectation.
“Customer satisfaction can be suspect without some context. For example, if the contact centre goes through heroics to save the day for customers reflected in a survey sample, you could be missing problems impacting the larger customer base.” – Brad Cleveland, ICMI
“However, this is one type of metric which can resonate at board-room level as it looks at how customer satisfaction translates to loyalty. This is second nature to larger businesses, but can be missed by smaller businesses in my experience.” – Dave Chaffey, Smart Insights
Customer Service
“This can vary with the best known example being Amazon/eBay. Not only do they use a star system, they also look at KPI’s such as ‘despatched on-time’.”
Relton Herron, Digital Strategist and Implementation Consultant, Relton Associates
Defects/errors per million
“From a fulfilment perspective, one of the most useful metrics that can be examined is the number of defects/errors per million (using Six Sigma methodology). Continually monitoring this ensures we are able to detect even the smallest of problems and can prioritise both product development and team performance around them.”
James Hyde, Operations Director and James Strachan,Technical Director, James and James Fulfilment
Engaged Traffic
“This looks at whether the right people are coming to see you and are they getting what they need? This is an early indicator rather than a critical money metric. But if the traffic dries up, so will the leads and if the traffic is bouncing away like a rubber ball… you’re not bringing in the right people (or your site sucks). Both would be good to know about so you can fix them.” – Doug Kessler, Velocity
FCR (First Call Resolution)
“FCR is a metric that is both quantitative and qualitative. Providing accurate answers and being able to resolve a query on the first call indicates that customers are being served well. Information is being provided accurately and proper assistance results in a happier customer.” – Carolyn Blunt, Real Results Training
“There’s been many cases where organisations with high FCR rates (e.g., in the mid-to upper-90 percent range) are resolving contacts they shouldn’t be handling in the first place. Common examples include: Contacts that should be automated, or repeat contacts that could be prevented with product or communication improvements.” – Brad Cleveland, ICMI
Guiding principles for better metrics
“It’s difficult to define one set of metrics that will work across all teams and businesses. However, I would say there are a set of guiding principles when creating metrics that result in focus and performance improvements. These are:
Where possible involve the team in the creation of the metric – people truly own what is measured when they’ve had input on it;
Ensure there is clarity on the metric and why it is being measured – it’s very difficult to see value without this;
Understand the behaviour the metric will drive – for example measuring finance will result in a different behaviour than measuring happiness or satisfaction;
For almost EVERY organisation today focus and performance improvements are directly linked to culture and growth. How are the metrics you create helping drive a better working environment where your team can learn and improve within their role;
Finally start SIMPLE and build from there!”
Tom Head, Director, Lab
FTE (Full-time Equivalent)
An FTE is the hours worked by one employee on a full-time basis. This is a key metric focused on cost management, which can be useful in the boardroom. You should ask yourself: How many FTE are being used and where are they located and what are the future forecasts?
MQLs (Marketing Qualified Leads) and SQLs (Sales Qualified Leads)
A marketing qualified lead is a prospect that has come through marketing channels (download forms, for example) to express interest in a product. This lead must then meet the qualification criteria that marketing have set, for example, an MQL for a product may be a budget holder in a certain size of organisation.
Marketing qualified leads are typically passed over to sales for further qualification as SQLs (Sales Qualified Leads).
“The metrics that help teams to focus and improve performance are MQLs, SQLs and revenue – shared across sales and marketing. We have finally managed to tie up lead generation, scoring and sales outcome together. Nobody can hide anymore… but it is not really about catching people out! It is all about shared goals and co-operation.
All metrics are useful – and they change, depending where you are along the food chain. However, time is everything and if a person’s working life is solely focused on reporting and not doing stuff, then we’ve got a problem!”
James Farmer, Founder and Publisher, B2B Marketing Magazine
Marketing Sourced Pipeline
“This looks at how much of the company’s revenue has been created or influenced by marketing. Marketing Sourced Pipeline is the bottom line of marketing. You need to know yours and make sure it’s trending up! To do that, you need to link your marketing programs to your CRM and track them through to revenue. If you can’t do that, it should be your first priority!” – Doug Kessler, Velocity
“Customer related metrics are the ones that have previously often been ignored, but which are becoming more and more vital for retailers today. Making sure that senior management has a solid understanding of Customer Lifetime Value and Customer Acquisition Cost, and the metrics that influence each of these, such as Repeat Purchase Rate or Number of Active Subscribers, is core to building a business which is successful in the long term.”
Ivan Mazour, CEO, Ometria
NPS
Net Promoter Score measures the willingness of customers to recommend a company’s products or services to others.
It is used to gauge a the customer’s overall satisfaction and loyalty to a product or service.
You calculate NPS by taking the % promoters (anyone who rates you between 9-10 out of 10) – % detractors (people who rate you between 0-6).
Net Promoter Score gives us the voice of the customers lens, through scores and verbatim comments.
Open Rate
Open Rate is used email marketing as measure how many people on an email list open an email campaign.
If 10,000 emails are sent and 1,000 emails are opened, this would be a 10% open rate.
“I’m really not a fan of open rates as there’s too much room for error. People tend to “open” emails just so they can get them out of their unread queue. Open rates may be somewhat of an indicator of subject line effectiveness, but click thru rates tell a much clearer story.”
Sam Laber, Director of Marketing, Datanyze
Pipeline
“Holding marketing accountable for revenue is still a little bit difficult, so it’s good to use “pipeline”. This refers to the monetary value of all current sales opportunities driven by inbound marketing. It’s a fairly simple metric to track and it is often predictive of revenue if you have a good grasp of your close rates.” – Sam Laber, Datanyze
QA (Quality Assurance)
“QA monitoring makes sure that agents are following the right process for the customer, giving the right outcome whilst adhering to the required regulations.”
Marianne Chapman, Vice President of Customer Service, Barclaycard
Quantitative and Qualitative Metrics
“Quantitative metrics have their place as they can provide you with very valuable information. But qualitative metrics really shift the focus towards the heart of the business, the customer. It’s no longer just about answering their call, but rather how well their queries are being resolved.”
Carolyn Blunt, Managing Director, Real Results Training
Race Planning Framework
“We recommend our RACE Planning framework to help teams focus. Measures can then be developed across the whole customer lifecycle. Here they are simplified to those that can be assessed in analytics:”
Dave Chaffey, Publisher, Smart Insights
ROI (Return on Investment)
“In the boardroom, proof of Return On Investment is simply unbeatable. It shows the big players in the room the real financial value they’re getting out of your activity and demonstrates how it supports the businesses value proposition.” – Chalky Langley, MET Office
ROI can be simply calculated as Net income / Investment.
Session Duration
“All metrics can be of use but there are some that have a waning level of importance… Bounce Rate and Session Duration can both be misleading and unhelpful if misinterpreted or given too much attention.”
Neil Tunbridge, Director, PIVOT
Subscribers
Subscribers are a great indicator that you’re serving your audience well. (We’re assuming that you’re targeting the right people). – Doug Kessler, Velocity
Total Traffic
This looks at new visitors vs. repeat, with new visitors being measured via inbound marketing channels, covering the likes of email, PPC, Social, etc.More traffic equals more sales & brand exposure (it’s a numbers game).
Vanity Metrics
“‘Vanity metrics’ tend to be good indicators of success (as long as you’re not doing stupid things such as buying likes). Pure traffic can be misleading. If it’s not engaged, it’s not very valuable, but it can turn heads and stroke egos.”
Doug Kessler, Creative Director and Co-Founder, Velocity
This infographic highlights some popular ‘vanity metrics’ and provides more useful alternatives:
Want to hear more from our experts? They’ll be speaking at eCommerce Expo on the 28th-29th September 2016. Reserve your free ticket here!
The post Finding the metrics that really matter: Gold-plated KPIs or vanity fluff appeared first on eCommerce Insights.