Tracking in E-commerce Part 1 – the Most Important KPIs

24.08.2020

Henry Ford once said: “Half the money I spend on advertising is wasted, the problem is, I never know which half.” Those who still identify with this quotation today, however, have so far neglected the subject of tracking. There’s no need to worry, though! In this three-part series, we tell you how you can get the most out of your media budget with good tracking.

What is tracking?

The word “tracking” has already become firmly established in marketing jargon and basically means “to follow”. And that is exactly the point behind tracking in the area of e-commerce: to follow the user’s path. Or, expressed more appealingly: understanding user behaviour so you can optimise your offer to the user. To this end, so-called key performance indicators (KPIs for short) are collected with the use of tracking tools such as Google Analytics and the Google Tag Manager. With these key figures, weak points can be identified and areas of progress logged. In general, tracking is the basis for a consistent, goal-oriented optimisation process. Only those who continuously improve will be able to prevail against the competition in the long term. Tracking is also essential in order to evaluate what is known as the return on investment (ROI).

How is a user tracked?

Different methods are available for tracking a user on your own website. The most widespread is the use of what are called “cookies”. In terms of data protection law, however, cookies aren’t entirely harmless. If you use cookies, you aren’t only required to make reference to them in your privacy policy, you also have to obtain the consent of the user when they visit your website for the first time. Apart from cookies, tracking is also possible with the use of what is known as a tracking URL or by integrating a tracking pixel on your website. In this respect, it is important that your website is connected to a tracking tool such as Google Analytics or the Google Search Console. These tools allow you to find out the most important KPIs, such as the length of stay and bounce rate, for each individual product page.

What makes for successful tracking?

There is more to good tracking than simply integrating cookies, tracking URLs or pixels. Good tracking is based on a clear marketing strategy with overarching corporate goals. After all, tracking can only identify the weak points that stand in the way of your success when you know which specific goals you want to achieve. And without specific goals, your general business figures have little meaning. Here is a small example from business life:

it is generally considered negative if the amount of time a visitor spends on your website is very short and the bounce rate (when the user closes the browser window and therefore ends their visit to the website) is very high. However, if the website in question is offering different product manuals to download, and the goal is for the customer to find the product manual they want as quickly as possible, a short dwell time and a high bounce rate are positive. This means that there is a high probability that the user found the product manual that they were looking for. You would then, of course, measure the number of downloads to be 100 percent certain. As you can see, the goal determines the way in which the key figures are evaluated.

Define SMART goals for your online shop

A well-formulated goal is one that fulfils the criteria of the SMART principle:

Specific
A specific goal means that you define a goal that allows the current state to be compared with the target state. An example for your online shop might be: “In 2019, product X generated sales of 300,000 euros. In 2020, I want sales of product X to increase 10 percent compared with the previous year.”

Measurable
To make a goal measurable, you require a specific target figure – for example, the 10 percent from the previous example. At the end of 2020, by comparing the sales figures, you can accurately measure whether the increase of 10 percent that you wanted has been achieved. Another important measurable goal might be a budget limit.

“In 2019, product X generated sales of 300,000 euros. In 2020, I want sales of product X to increase by 10 percent compared with the previous year, and that with the same marketing budget.”

Achievable
Make sure you are realistic about your goals. Otherwise, you will frustrate your employees or invest time and money in optimisation processes that are doomed to failure, right from the start. Always pay attention to which resources are available to you compared to your competitors. If your competitor has a stronger position than you both financially and in terms of personnel, you should focus on the niche products that they don’t stock – or advertise on a channel that the competitor doesn’t use.

Relevant
This point may sound obvious, but so-called sham goals can creep up on you more rapidly than expected. Measures are often defined as goals, for example, “To rank among the first 10 search results for the keyword summer dresses.” Your actual goal, however, is “to increase sales of a summer clothing product without investing more of your media budget in ad campaigns.” Producing content in order to rank well for the keyword of summer dresses and therefore generate organic leads is a measure, and not a goal.

Time-bound
Every project requires a clear deadline. You can only measure the success or failure of a project and draw conclusions for future projects if you set a deadline. In our initial example, to draw a representative comparison with 2019, the deadline is the end of 2020.

The most important KPIs in e-commerce

Only after you have set your goals, does defining the relevant KPIs for measuring the achievement of those goals make sense. As mentioned above, some standard key figures are available to you from tracking tools such as Google Analytics and the Google Search console:

1. User / click rate
This value tells you how many users have visited your online shop over a specific time frame. This time frame can be selected freely in Google Analytics and is shown on the overview page. If you want to dig deeper, go to Audience > Behaviour > New and Returning. Here, you can see how many users have visited your website for the first time in period X, and how many users have visited your site again. If you sell expensive products that have a long life cycle, it will be more important for you to achieve a pretty high number of new users each month. Very few people buy another washing machine, for example, within a short period of time. If you sell cheap lifestyle products, it will be more important for your number of returning users to be high.

2. Sessions
In contrast to the users, this value shows you how often your website has been accessed. It is important to distinguish between users and sessions. This is because the same user can access your website at different times on the same day. The user value always means what are referred to “unique visitors”, while the sessions provide information on how frequently the users have visited your website, on average. For example, if you have 10,000 users and 20,000 sessions a day, that means the users have accessed your website twice a day, on average. If you want to know exactly how many users have accessed your website and how frequently, take a look at the table under Target group > Behaviour > Frequency and Recency.

3. Duration of visit / dwell time
Another important metric is the time spent on your website. A short dwell time doesn’t necessarily have to be negative. In the case of a crisp and short landing page, a short dwell time, which correlates with a high rate of sales, can be positive: the customer has been convinced directly with the limited information available. The situation is different if the length of time spent on a page providing detailed advice or blog articles is very short, however. Under Behaviour > Site Content > All Pages, you can enter the URL of a specific product website in the search screen to view the length of stay, visits and bounce rate for this page only.

4. Bounce rate
The bounce rate provides information about how many visitors visit a website, look at a single page and leave the website again. A high bounce rate is usually associated with a low conversion rate – but it doesn’t always have to be negative, as the above example shows. With landing pages that are detached from the company’s other web presence in particular, a high bounce rate isn’t bad – as long as a large number of users have carried out the action required by the landing page (downloading a white paper, filling out a form, purchasing an item, for instance).

5. Access from different end devices
It is always important to keep an eye on which devices are used for the most access. Under Audience > Mobile > Overview you can find a detailed breakdown of how many of your monthly visitors have visited via a mobile phone, a desktop PC or a tablet. If you have an extremely high bounce rate and a lot of access from mobile devices, this can be an indicator that your online shop isn’t responsive.

6. Access via organic SERPs
If you want to become more independent from paid channels such as Google and Facebook ads, you should track how many people visit your website from organic search results. You can find this value under Acquisition > Overview. Here, you can compare the relationship between the traffic that arrives via your paid channels with the traffic that arrives via organic search queries, internal email marketing and external publishers. If you also want to identify which search queries make up the organic traffic, go to Acquisition > Campaigns > Organic Keywords. If no relevant keyword is shown here, you should urgently optimise your content in accordance with the known SEO guidelines.

Define relevant KPIs for your online shop

In addition to the standard KPIs, you can also specify your own KPIs or conversions in Google Analytics. To do this, go to the Manage > Data View > Goals > Create Goals area.

It goes without saying that some important conversion goals and KPIs for your online shop are as follows:

1. Favouring a product / placing a product in the shopping cart / completing the purchase

If several of your products are favoured but few purchases are actually made, you can use a discount campaign to entice people to buy the favoured items. Or, if the key figures for “placement of a product in the shopping cart” and “complete purchase” differ significantly, this can indicate a bug or an unsatisfactory range of possible payment methods.

2. Average shopping cart value
This is the result of dividing your sales by the number of purchases. If you find that you have a lot of purchases but a very low average shopping cart value, you can try and improve this by bundling products or making product recommendations.

3. Cancellations
In addition to the sales transactions, it is also important for you to track the number of cancellations. Too many cancellations mean customers are dissatisfied with your product. This, of course, has a negative long-term impact on sales.

4. Cost per order (CPO)
To determine whether a campaign is profitable you can calculate the cost per order, i.e. how much of your marketing budget you spent, on average, for each purchase. To calculate the CPO, you need to know the cost of the specific campaign. You then divide this by the sales that you achieved during the campaign. You can find these key figures for your Google Ads campaigns in Google Analytics under Acquisition > Google Ads > Campaigns. For social media ads, you can find these key figures in the relevant social media account. For example, if you invested a budget of 4,000 euros for a campaign in July and made 230 sales, your cost per order would have been roughly 17 euros. Things become critical if the CPO is close to the average shopping cart value – or even exceeds it.

5. Click-through-rate (CTR)
Another indicator that makes the success of your campaigns measurable is the click-through rate. This is calculated from the number of clicks that your ad receives divided by the impressions, multiplied by 100 percent. This shows, as a percentage, how many people saw your ad but didn’t interact with it. If the term “impression” doesn’t mean anything to you: whenever an ad is shown to a user, it counts as an impression. For example, if an ad appears 350 times in the Facebook feed of different users, these are 350 impressions. It is unclear as to whether the user saw the advertisement or simply continued to scroll. That is why the CTR value is important. After all, if an ad has a very low CTR value, i.e. a lot of impressions but very few clicks, the cost per click (CPC) increases. To give you a feel for what is considered a good CTR: for Google Ads, any CTR over 2 percent is considered above average.

You ultimately determine which values are of interest to you. Be certain not to define too many conversion goals and KPIs, however. Otherwise, you will fail to gain an effective overview. Only log those metrics that are actually important to your long-term business goals. In addition, it is always important to link the KPIs in the tracking tools with each other. Contexts can only be adduced from clear correlations, and the appropriate optimisation measures then determined.

Did you find this article helpful? Then look forward to “Tracking in E-Commerce Part 2: Google Analytics & Co” and “Tracking in E-Commerce Part 3: Evaluation & Optimisation”. Learn how to set up Google Analytics and Google Tag Manager for your online shop. Evaluate the most important KPIs and define effective optimisation measures. The best thing to do: register for the IAW newsletter now. You will receive regular articles on the topics of online marketing and e-commerce, as well as relevant updates about the International Trade Fair for Retail Promotions and Imports.

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