n the competitive world of e-commerce, a strong digital advertising strategy isn’t really optional. I’m guessing you’re already advertising on at least a couple of the best-known ad platforms. But do you really know what results you get from your ad spending?
Perhaps you’re wondering why you aren’t getting the increased sales results you expected from your advertisements. Or maybe you’re thinking about increasing your investment but don’t know what approach would be best?
Whichever scenario you’re in, measuring and analyzing the right metrics is always essential. I’m afraid a quick look at the ROAS metrics provided by your ad platform just isn’t going to cut it!
Tracking Key Performance Indicators (KPI’s) will help you achieve optimized and reliable revenue results from your ad spend. It’s the difference between turbocharged business growth and pouring money down the drain.
From our own experience helping clients achieve improved results, we’ve pulled together the most insightful e-commerce KPIs you should be tracking. They’re going to help you decide how much you should spend, where you should spend it, and more clearly assess the return on ad spend.
We’ll also look at creative and landing page KPIs to help you win as many lead conversions from your sales funnel as possible.
These are more advanced metrics specifically tailored for e-commerce, and I’ll provide insights about how to use them.
Bear in mind that this isn’t a passive process - just having the metrics isn’t enough. You need to sit down and look at them across time and in tandem with each other, making sure that you’re drawing the right conclusions.
You should be benchmarking your advertisements and campaigns against each other, using split testing and published industry benchmarks. This will help you improve your most important KPI’s and maximize
Skip to What You Need:
- Revenue KPIs
- Advertising KPIs
- Conversion KPIs
- Creative KPIs
- Channel KPIs
- Attribution KPIs
- Landing Page KPIs
Revenue KPIs assess the monetary return on your advertising spend, determining its effectiveness with immediate financial results.
Transactional revenue is the money you receive from your product sales. It includes the deduction of any discounts, coupons, or credits from loyalty programs that you’ve awarded.
Unlike gross revenue, net revenue, or profit, it doesn’t take into account product returns, operating costs, or tax. It also excludes non-operating revenue that doesn’t come from your core business activities (for example interest, reoccurring asset rental fees, advertising fees, or dividends).
Transactional revenue is the best metric to use when assessing the effectiveness of advertising spend. It removes the noise from returns or tax that can convolute the data and distort the true story surrounding what you really want to know…ad spend ROI.
Use transactional revenue to see the true and direct results of advertising spend on your sales performance.
Return on Ad Spend (ROAS)
Return on Ad Spend is the universal metric for measuring advertising ROI: ROAS = Resulting Revenue ÷ Ad Spend.
For example, say you spent $2,000 on an online advertising campaign, and campaign tracking showed that the campaign resulted in revenue of $10,000.
ROAS = $10,000 (revenue) ÷ $2,000 (ad spend) = $5.
You could also express that as the ratio 5:1, or 500%.
ROAS is usually assessed at all levels; the company level, the campaign level, and the ad set level. This lets you:
- Compare and optimize individual ad sets within campaigns
- Compare separate ad campaigns
- See overall performance for total ad spend on your chosen ad platforms
ROAS is typically measured in two windows:
1-Day Click ROAS
This looks at the revenue generated by an advertisement within 24 hours of customers clicking on it.
The biggest advertising platforms will optimize your ad and also provide ROAS data when you use their tracking pixel and set your conversion goals. Facebook and Google are best-known for this.
You can optimize for 1-Day Click results when setting up a campaign. Facebook would optimize the display of your advertisement according to your 1-Day click preference and selected conversion goal, such as completing a purchase. Its functionality selects specific target audience users and factors like placement and time of the day in order to achieve your goals.
1-Day Click ROAS is the best representation of how advertising platforms and adverts directly drive incremental revenue for your business.
7-Day Click + 1-Day View ROAS
This looks at the revenue generated by customers within 7 days of them clicking on an advert, or within 1 day of seeing it but without clicking.
This the best representation of how effectively advertising platforms are driving both revenue + brand awareness for your business.
Marketing Efficiency Ratio (MER)
The Marketing Efficiency Ratio is an assessment of total sales revenue against total ad spending: MER = Transactional Revenue ÷ Total Ad Spend in Period.
You’re not looking at just the revenue that can be directly attributed to specific advertisements, but all transactional revenue. It will help you get a feel for the wider impact of advertising efficiency across ALL CHANNELS. It’s most helpful for companies heavily driven by advertising and is the best representation of the overall effectiveness of advertising spend.
MER stands as a more reliable metric than ROAS. ROAS is reported by ad platforms using their tracking pixel. (When a user sees or clicks on an ad then makes a purchase on your website within a defined period of time, ad platforms attribute it to the ads on their platform.) Ad platforms try to maximize the ROAS they report and can double count a sale against more than one ad. They also can’t account for the impact of other ad campaigns that you may be running without their platform over the same period.
When working with brands, our team often uses this as our most important north star. It helps us understand if we should push harder with existing strategies, allocate investment elsewhere, or if we need to reel back and refocus.
Ad Spend & Revenue by Channel
Break down your revenue results and ad spend by individual marketing channels, and compare them as a ratio: Total Sales by Source Channel ÷ Total Ad Spend by Channel.
By marketing channels, I mean social media, search engine marketing (SEM) or email, etc. This information will help you see which marketing channels are most profitable to invest in.
You can also do this for your customer segments, assessing how valuable they are in terms of revenue generation. For example, is more revenue (or Average Order Value) generated from advertising that targets males or females, specific locations, or certain age groups?
These advertising KPIs will help you understand how much you can profitably spend on your paid customer acquisition.
Customer Acquisition Cost (CAC) is the average total cost you’ve spent to capture new customers: CAC = Total Marketing Spend To Acquire Customers ÷ No. of Customers Acquired in period.
For example, if your quarterly advertising spend across all channels was $200 and you acquired 100 new customers in the same quarter, your CAC is $2.00.
This lets you see the cost of gaining customers across ALL CHANNELS, and answers the question ‘How much am I actually paying to acquire a customer for my brand?’.
One of the first things we do with a new client is look at their blended CAC goals, assessing where the breakeven CAC lies. We use this to see whether their paid media channels are hitting their goals and if the business is achieving profitability in its current state.
Bear in mind that if you use this metric over early campaign stages or short-term periods, it may not take into account the result of marketing activities that you won’t see instant results from. Brand awareness takes time to grow with multiple brand touchpoints.
Average Order Value (AOV)
Average Order Value is a self-explanatory and simple calculation: AOV = Revenue ÷ No. of Orders.
It shows you how much customers spend on each order on average. This is an important metric - it drives a lot of other calculations. If your AOV is high, you can spend more on advertising to acquire each order, or visa versa.
AOV can be increased through tactics like up-selling, cross-sales, new products, more expensive products, and bundling discount options.
Depending on your specific business, you’re likely to have different AOVs for distinct customer segments.
Lifetime Value (LTV)
Lifetime Value refers to how much a customer can be expected to spend over the relationship lifespan with your business: LTV = Average Order Value x Average No. of Transactions x Average Customer Lifespan.
It can also be referred to as Customer Lifetime Value (CLV). Knowing your customers’ average number of purchases across an Average Customer Lifespan (ACL) are key components in calculating it.
When you have a reliable LTV estimate, you’ll better understand how much you can justify spending on acquiring customers based on the total value they represent - not just the first sale.
Of course, consumer behavior can be extremely variable and depend on the type of product. If applicable, you can calculate LTV for distinct customer cohorts with similar behavior to improve reliability. However, using this metric will still provide a helpful guideline when deciding how much to invest in paid customer acquisition.
Cash Multiplier is a 60-Day assessment of customer value: CM = Total 60-day Revenue ÷ Total Customers in 60-day Period.
However, you could also use 30, 90, or 120 day periods, and so on.
It’s essentially a short-term version of LTV that assesses the revenue value of your individual customer. As it’s challenging to actualize the entire ‘Lifetime Value’ of customers, using the CM is extremely valuable and necessary for generating cash flow predictions for the business, and making responsive ad spend decisions in the short term.
Understanding your Cash Multiplier will lead to better decisions surrounding budgeting, forecasting, inventory, and many other facets of operational decision-making within an organization.
It’s also advised to apply this metric to your individual customer segments if possible.
New vs. Returning Customers
Tracking new and returning customer numbers is a basic yet important audience segmentation. It lets you see the results of your new customer acquisition tactics in a given period, plus you can analyze how effectively you retain customers.
Your optimal new vs. return customer split should be part of your business objectives based on your business model, product type, and customer retention goals.
You may also be able to better estimate revenue flows based on new vs. returning customer numbers and how they behave. For example, do new customers tend to have higher AOVs, or vice versa?
A related metric is Repeat Purchase Rate (RPR), which is the percentage of customers who return to purchase from your business again. ‘Churn’, or customer attrition, is another complementary metric. It's either the number or percentage (rate) of customers who stop reordering. Churn Rate = (No. of Customers Lost ÷ Total Customers at End of Period) x 100. So if your churn rate is 50%, half of your customers don’t make another purchase.
Organic vs. Paid Customers
Track the ratio of your sales conversions by organic traffic vs. paid traffic sources to see how your investments in those channels contribute to overall revenue. In essence, in order to maximize growth, it’s critical to ensure organic or non-paid traffic is continuing to grow alongside paid traffic to meet your profitability goals.
It’s also valuable to analyze the conversion rates associated with each segment. Organic traffic tends to bring in higher-quality leads since people are searching by specific keywords with intent. Paid traffic sources can generate higher volumes of leads, but compare the paid conversion rates against organic conversion rates to sense check traffic quality.
You’re likely to see a correlation between your new vs. return customer ratios against organic vs. paid customer ratios. Repeat customers are more likely to have organic or non-paid entry points onto your website. However, successful paid acquisition tactics will also boost brand awareness and organic performance over time.
The rate that customers convert, aka make purchases on your website, can tell you about the effectiveness of your ad targeting, sales funnel design, and elements in your marketing mix (products, pricing, etc.). Split testing will help you narrow down variables for optimization.
Website Conversion Rates
Your website conversion rate is No. of Website Sessions with an Order ÷ Total Sessions x 100.
This shows you the percentage of website sessions where a purchase is made. You could also have other desired actions that you class as a conversion, such as signing up for your newsletter.
This isn’t tied to ad spending or specific campaigns - this looks at the total conversion rates for your website from all sources.
Low website conversion rates would indicate that there is friction on your website, sales funnel, or marketing mix that needs to be improved in order to drive more conversions.
Campaign Conversion Rate
Campaign conversion rate is the number of website visitors who make a purchase after clicking on all ads within a campaign: CR = No. of Ad Clicks ÷ No. of Conversions.
If 100 people clicked on your ad and 10 of those users converted, your campaign’s conversion rate would be 10%.
Compare your conversion rates at the ad set, campaign, and channel level to see which generates the most sales. You should also compare campaign conversion rates to your overall website conversion rates as a traffic quality sense check.
Low campaign conversion rates against overall website conversion rates could indicate that you have ad content, audience targeting or sales funnel elements that need to be adjusted.
Cost Per Add to Cart
Cost Per Add to Cart is a sales funnel metric: Total Ad Cost ÷ Adds to Cart.
This metric assesses adds to cart rather than the number of individual customers, giving you the average ad cost you’re paying per intended product purchase.
A similar metric is Cost Per Action (CPA), which will tell you the average cost of each desired action that you wish your customers to take. It could be watching a video, subscribing to your newsletter, downloading an ebook, etc.
Using metrics like CPATC or CPA offer early indicators of demand that allow you to understand if your strategy heading in the right direction.
Cost Per Unique Checkout Initiated
Cost Per Unique Checkout Initiated is another sales funnel metric: Total Ad Cost ÷ Unique Checkouts Initiated.
Unique checkouts initiated count the ad cost you’ve paid on average to acquire each customer with high intent to purchase.
It avoids double-counting people who initiate more than one checkout during their session and doesn’t indicate the volume or value of products that customers intend to purchase. If you have a smooth and easy checkout process, this cost should be close to the cost per purchase.
Reasons people drop out of completing purchases include high shipping costs, long delivery times, or lack of a preferred payment method.
Cost Per Purchase
At the endpoint of the sales funnel, Cost Per Purchase looks at the average ad cost you’ve paid to acquire a customer who completed a sale: Total Ad Cost ÷ Completed Purchases.
This excludes data from abandoned carts where the payment wasn’t completed, showing you how much you spent on average for each order. Unlike CAC, this metric assesses individual ads or campaigns, rather than total ad spend against all acquired customers in a period.
If you only pay on the basis of customers acquired, it’s called a Cost Per Acquisition pricing model.
You’re not looking at the value or volume of the sales here, but just the effectiveness of an ad at generating volumes of converting traffic for the price you paid for it. You can compare it to the Cost Per Unique Checkout Initiated to see if you’re losing customers and ROAS at the final stage of the sales funnel.
A low Cost Per Purchase indicates an ad that generates high-quality, converting traffic for the price you’re paying. That could be because the price of the ad is low, or because a high proportion of people who are shown the ad click on it and make a purchase. You can clarify which with Cost-Per-Click and Conversion Rate metrics.
There’s a similar metric called Advertising Cost of Spend: ACoS = (Total Ad Spend ÷ Total Ad Revenue) x 100. It shows you what percentage of every dollar earned by an ad/campaign was spent on the fees, e.g. 25% of each dollar generated went into paying for the ad.
Assess the creative effectiveness of your ads with these KPIs and use them to optimize ad conversion rates. Creative elements include imagery, color, font, messaging and wording, placement of call to action buttons, sizing and placement, etc.
Use split testing to narrow down the performance of creative design elements.
Click-Through Rate (CTR)
Click Through Rate is the ratio of ad clicks against how many times your ad was shown (impressions): CTR = No. of Ad Clicks ÷ No. of Impressions.
A high Click Through Rate indicates a well-designed and well-targeted ad - a high proportion of your targeted audience are clicking on the ad when they’re shown it; which proves critical in driving traffic to your website.
3-Second View Through Rate
The 3-Second View Through Rate tells you what percentage of people were shown an ad and viewed it for at least 3 seconds: 3-Sec VTR = (No. of 3-Sec Ad Views ÷ No. of Impressions) x 100.
A high 3-Sec VTR indicates an ad that’s interesting/engaging for the target audience - they aren’t immediately scrolling past it without stopping to look.
Average Watch Time
The Average Watch Time tells you how long people watched your video on average: It shows the average second mark at which viewers stopped watching.
Needless to say, the longer the Average Watch Time is, the more engaging and well-targeted your video content is. This can also provide helpful information in understanding what part of a video ad needs to be iterated on to engage prospects better.
Ad Conversion Rates
The Ad Conversion Rate looks at how many people who clicked on an ad made a purchase: Conversion Rate = No. of Conversions ÷ Total Clicks (in the same period).
You could also look at this metric with View-Through Attribution in addition to clicks, or include other desired conversion actions such as signing up to a newsletter or adding items to the cart.
Higher ad conversion rates indicate an ad that’s successfully attracting high-quality traffic and driving them to take the desire action.
Understand how your chosen ad channels and platforms drive value with these KPIs.
Some platforms have bigger audiences than others. And each platform tends to attract specific audience demographics, offering better reach within the population of that demographic group.
The more of your target audience that a platform reaches, the more ad placements will be available, and the easier it is to ramp up ad frequency.
Frequency is the average number of times your ad is served to each person in your target audience within a relevant time period. As your campaign spends more money, it serves more impressions, and the frequency increases.
Read our guide to where to advertise online and learn more about ad platform audience sizes and demographics.
Revenue by Traffic Source
Track the revenue generated through ads by individual platforms in order to understand how they are contributing to overall revenue. You can also analyze by channels, such as social media or search engine marketing.
Compare average ROAS, which is revenue generated ÷ ad spend, to see which ad platforms are overall most profitable to continue investing in.
Search Impression Share
Search Impression Share refers to the percentage of relevant keyword searches that your ad appeared on.
This can be an important factor in determining whether to spend more money on a search campaign.
For example, if you are only showing up on 10% of searches, you’ll need to increase your budget and potentially the maximum price you’re willing to pay per click or impression in order to become more discoverable.
Cost Per Click (CPC)
The Cost Per Click is the actual price you pay for each click in your Pay Per Click (PPC) ad campaigns. That means you only pay each time someone clicks on your advertisement.
This incentivizes ad platforms to only show your ad to people whose data says are most likely to click on your ad. The higher the price you are willing to pay per click, the more times your advertisement is likely to be shown. This pricing model is best for generating sales leads.
If one ad platform has a higher CPC than another, how does it correspond to the revenue that it’s creating? Consider the audience reach, engagement metrics, and KPIs such as ROAS to help you decide how much to spend on platforms with higher CPC prices.
Cost Per Mille (CPM)
Cost Per Mille means cost per thousand impressions (views). If you choose a CPM pricing model for your advert then you’ll pay for every thousand people it’s shown to, whether they click on it or not.
CPM pricing models are best used for brand awareness campaigns and cost less than CPC adverts. They are optimized to get your ads in front of as many people in your target audience as possible.
They usually achieve a higher share of available impressions since the ad platform is guaranteed revenue each time they show the ad.
Attribution reporting helps you understand how your individual advertisements are performing in terms of driving sales. Users are tracked after clicking or viewing an ad, so any purchases made within set time periods can be ‘attributed’ to your adverts.
View-Through Attribution occurs when a purchase is made by a customer who saw one of your advertisements within a specified time period.
It’s based on the premise of brand awareness, where the advertisment has influenced them into making a purchase.
It is typically tracked by ad platforms within 1, 7, and 28-day time periods. (Facebook no longer offers 28-day attribution reporting.)
The higher the View-Through Attribution, the more effective ads are at increasing brand awareness that drives sales within a short time period, but also may indicate that the specific channel is not the main contributor to the purchase. This important to watch when optimizing ad campaigns towards better ROAS.
Click-Through Attribution refers to when a purchase is made by a customer who clicked on one of your adverts within a specified time period.
It’s also typically tracked by ad platforms within 1, 7, and 28-day time periods.
The higher the Click-Through Attribution, the more effective an advert is at directly driving sales revenue.
Landing Page KPIs
Once your adverts have gotten potential customers onto your linked landing pages, these KPIs will help you understand how effective the webpages are in driving conversion rates.
The quality of your landing pages is assessed by ad platforms like Google, and it will drive up your CPC or CPM prices if they’re low quality.
Page Load Speed
Page Load Speed refers to how many seconds a webpage takes to load on the screen.
Although not all factors affecting load speed for individual customers are under your control, lots of high-resolution images that take up internet bandwidth are one of the biggest avoidable causes of slow loading speeds.
How fast a page loads is directly correlated with the conversion rate. Online users have short attention spans and high expectations for website performance, so if your pages are frustratingly slow to load, your customers will quickly navigate away.
Conversion Rate (Lead Generation)
The conversion rate of your landing pages is the percentage of visitors who make a purchase: (No. of Orders in Period ÷ Unique Visitors in Period) x 100.
Here, you’re assessing the conversion rates of individual lead gen landing pages linked from adverts, rather than the conversion rates for your website as a whole.
Understanding the conversion rates of landing pages is important to optimize their effectiveness for driving sales conversion. Use split testing on your landing pages to optimize variable elements and increase conversion performance.
Form-Fills Started to Form-Fills Completed
Look at the number of form-fills started vs the number of forms that are completed to understand how many sales leads are dropping out of your funnel.
If the drop-out rate is high, it’s likely you’re asking too many questions or making the process too laborious for users.
Online users are increasingly unwilling to share their personal data, with privacy and data security front of mind. You may need to build the relationship and level of trust with your customers first and provide better justification as to why you are asking for data and how you will use it.
Adds to Cart
How many adds to cart do your landing pages generate? You can look at total adds to cart, adds to cart divided by total sessions, and adds to cart divided by unique users to see how many items each visitor wants to purchase on average.
A low number of ads to cart could mean people aren’t seeing what they expect to when they reach your landing page, the product price may be higher than they’re willing to pay, not enough information is provided (e.g. poor product descriptions & imagery), or the page isn’t visually well-designed and user-friendly for making quick purchases.
Checkout Initiated (E-commmerce)
From your landing pages, how many checkouts are initiated in total? You can either measure this by checkouts initiated directly from the landing page or when the landing page was a customer’s entry point but they navigated to other pages before checking out.
To assess sales funnel retention, compare how many checkouts are initiated vs. total carts created, and checkouts initiated vs. checkouts completed.
Higher checkout rates indicate higher quality traffic and also tell about the ease of your checkout process.
If you want to easily compare your chosen ad platforms in terms of their traffic quality and sales conversion rates (assuming you use more than one ad platform at a time), create separate landing pages for each one.
Cost Per Land
Cost Per Land looks at the average cost for each person who came to your landing page: CPL = No. of Unique Page Visitors ÷ Total Ad Cost.
It can also be called Cost Per Lead. This tells you how much you’re spending for each sales lead.
An engagement metric, scroll depth tells you how far down your landing page your users scroll on average.
The higher the scroll depth metric, the further down the page your users are going. This indicates that users are engaged with the content. A low scroll depth means people are leaving the page before seeing most of the content on it.
If you have low scroll depths, assess how your content could be improved to meet the needs and interests of your audience, made more user-friendly and readable, or, consider if the linked advert copy is potentially misleading.
An engagement metric, bounce rate looks at how many people navigate away from your landing page without clicking on anything on the page.
High bounce rates means users aren’t interested in the content on the page, and they don’t navigate any further within your website.
Time on Page
Also, an engagement metric, time on page tells you how many seconds your visitors spend on average on each webpage.
You can assume that the higher the time on page, the more engaging your visitors find your content, whether it’s reading information or viewing products.
If you have a handle on these KPIs across each of the areas we’ve listed, you’ll feel confident in spending your advertising budget knowing what you’re getting in return. It’ll take the guesswork and stress out of it, giving you more peace of mind as well as revenue growth.
A key part of the process is being able to easily extract and analyze data so you can produce regular KPI reports without much effort, freeing up your time for the all-important analysis. if you want to learn more, remember to check out our other insights articles, including setting up a customer acquisition machine and capturing digital marketing data.
If you think you might need some support setting up KPI data capture, producing dashboard reports, and creating an overall ad strategy, we’d be delighted to hear from you. Get in touch anytime and we’ll be very happy to discuss what you need and if we’re the right fit for you.