【EC Growth Research Institute】To increase sales, start with setting KPIs and goals! Explanation from understanding the current situation to how to improve

What is EC Growth Institute?"I want to increase sales on my e-commerce site, but I don't know where to start," "I've set KPIs, but I'm worried about how to improve them."

The key to improving e-commerce sales is to first "break down the sales structure" and set the correct KPIs to clarify the points that need to be improved. Especially for e-commerce sites, it is necessary not only to take general measures such as advertising measures and UI/UX improvements, but also to prevent sales losses hidden in the "payment phase".

In this article, the author, who holds a senior web analyst qualification and has been involved in numerous e-commerce analysis ~ improvement, will explain in an easy-to-understand manner how to set key KPIs and how to improve them from the decomposition of the sales structure.

Understand the sales structure of e-commerce sites "E-commerce sales equation"

Ultimately, e-commerce site sales consist of the following three elements.

　Sales = Visits × CVR × Average purchase value

This simple equation is the starting point for setting up your KPIs. This is called the "EC sales equation".

Essentially, in order to increase sales, you need to improve one or more of the following: "Increase visits", "Improve CVR (Conversion Rate)", "Increase average purchase value", or more.

Rather than vaguely thinking "I want to increase sales", breaking it down into these three indicators and identifying "which indicators have the most room for improvement" will lead to efficient policy implementation.

First, calculate the current values of the number of visits, CVR, and average purchase value, and work backwards from the KGI (final sales target) you set to check the difference between the target value required for each KPI.

How to set KPIs for <Number of Visits> and key points

E-commerce site sales cannot start without the number of visits. The number of visits is the most basic KPI for measuring the success of customer attraction measures, and at the same time, it can be said that it is one of the results of branding as a company or product.

Depending on the business phase, it's not just about chasing numbers, it's also about how many "quality users" you bring in who are likely to make purchases and contract.

*From now on, the indicators are assumed to be measured in Google Analytics

Key indicators to follow as KPIs

Let's take a look at the following angles and indicators to understand the overall trend of the number of visits, "where and how many people are coming from" and "which page they visited from".

• Site-wide sessions, total users

• Number of inflows by inflow channel: The number of visits by channel such as search engines, paid advertisements, SNS, e-mail magazines, and affiliates.

• Inflow by landing page: The number of visits by page that became the entrance, such as the top of the site and the product list.

Think about setting a target for the number of visits from "working backwards from sales"

The annual sales target (KGI) is calculated backwards from the current average purchase amount and CVR target to calculate the minimum number of visits to be secured.

Set targets for each advertising medium and search keyword, and strengthen budget allocation to channels with particularly high CVR.

As a premise, let's assume that the sales target and the current site indicators are set as follows.

Sales target and current site metrics

Calculation of the "minimum number of visits to be secured" by calculating backwards

First, it is calculated from the number of orders in the target.

Calculate the required number of notes (number of purchases)

• Number of Orders Required = Annual Sales Target / Average Purchase Amount

• 100,000,000 yen / 10,000 yen = 10,000 items

Next, the number of visits is calculated from the number of notes and CVR. Since the number of visits × CVR = the number of notes, you can derive the number of visits by dividing the number of orders back by CVR.

Calculate the minimum number of visits (sessions) required

• Minimum required visits = required number of notes / target CVR

• 10,000 / 0.02 (2%) = 500,000 sessions

In this case, you need a minimum of 500,000 session visits per year to achieve your goal.

Then, we will break down the above 500,000 sessions per year for each customer attraction channel and keyword, and calculate the sales target for each channel based on the Actual CVR and the average purchase amount (10,000 yen).

Key points for goal setting

Set targets for the number of sessions for a single session, but also by channel, and be clear about how much sales you need to make on which channels. In addition, it is necessary to evaluate and review all the measures. Whether it's advertising or SEO, even if it seems to be fine when setting goals, it often collides with competitors' measures and fails to produce results. In such cases, it is necessary to respond flexibly, such as reviewing the allocation of channels initially decided and increasing the number of different channels.

How to set KPIs for <CVR> and key points

CVR is a metric that shows the percentage of users who actually make a purchase. CVR is calculated based on the number of purchases compared to the total number of visits to the site, but looking at that percentage alone will not lead to concrete improvements. Factors should be analyzed from multiple angles, but CVR is largely influenced by two points: "inflow path" and "conductor design".

Key indicators to follow as KPIs

CVR is an indicator that reflects user behavior since visits, so we need to check the same angle as the number of visits, but we also need to check where the percentage is declining (where the bottlenecks are).

• Site-wide CVR: The ratio of total purchases to total visits.

• CVR by inflow route and landing page: The key point is the same as the number of visits.

• Transition rate of each page: The transition rate between pages that many users pass through, such as TOP→ product list→ product details→ cart→ purchase completion. Use it to identify bottlenecks that are common across all pathways.

Think about CVR target setting from "1% or more"

E-commerce business customers sometimes ask questions such as "What is the industry average CVR?" and "What percentage should I set?" In such a case, it is a little abrupt, but I tell you, "Let's set the target value at 1% (or more) first."​

The reason for setting "1%" is that the average is actually 1%~ even if you look at it statistically, but we recommend setting 1% (more) because it is easier to start as a goal.​

Suppose your CVR is below 1%. If you replace the CVR with a store, it is the same as buying only one person if 100 people visit the store. Of course, factors such as products and prices are involved, so it is not possible to say the high or low CVR in general, but at least it can be said that it is not high. From this point of view, we suggest that we should start by creating a state where "if 100 people come, buy one."​

Of course, if it is already above 1%, you will aim even higher. In this case, check the CVR by route and the transition rate of each page to see if there is room to increase and set a target value.

Key points for goal setting

Once you have set your first target value, check "what and how can you increase your CVR" and "whether there is room for growth".

For example, if you look at CVR by inflow channel and the overall average is 0.8% and the search engine with the best results is 1.2%, analyze why CVR via search engines is high and see if it can be expanded horizontally to other channels. It is a good idea to hypothesize whether it is due to the conductor or whether high-quality users happen to gather there.

You may also want to look at the transition rate of each page to see where the bottlenecks are. In particular, the departure of points close to the completion of the purchase, such as the screen for entering information such as the address after the cart screen → the confirmation screen before purchase, is a very regrettable departure, such as "I wanted to buy but stopped for some reason", "I couldn't buy it due to login/membership registration or payment error", so it is necessary to prioritize investigating the cause and thinking about improvement plans.

POINT: About payment Errors

Credit card payment may be causing churn due to reasons other than the functionality/UX of the e-commerce site, such as exceeding the usage limit, failing to authenticate (EMV 3-D Secure 2.0), or misjudging fraud prevention logic, which is causing sales to be damaged. In such cases, it is difficult for the business to determine the cause, so you need to contact your payment processing company company or credit card company (acquirer).

How to set a KPI for <Average Purchase Amount> and key points

Improving the number of visits and CVR often takes time and money, but I think improving the average purchase price is a KPI that can create changes in the existing e-commerce product mix through combinations and presentations.

Depending on the product, e-commerce tends to converge on the average number of product purchases to "1". In other words, it is difficult to purchase a set in most e-commerce. However, if this average value increases by 1% or 2%, sales will also increase as it is, so it can be said that it is a KPI that should be improved at least once.

Key indicators to follow as KPIs

The average purchase amount is an indicator that shows the "quality" of the total sales divided by the number of orders, so check the trend.

・Average purchase amount

・Set purchase rate: The percentage of people who purchase multiple products at the same time

Think about setting a goal for the average purchase amount with "What can be added to it?"

For example, let's say the current average purchase price is about 8,000 yen. It would be difficult to bring this to 16,000 yen, which is twice as much, as you would have to buy two of the same ones. On the other hand, don't you feel that raising the bottom to 8,800 yen with a 10% option is "not impossible"? Many of you may have had the experience of being offered a 300 yen nugget for a 900 yen set at a fast food. Let's rethink our products as an extension of that.

As a specific "plus 1" idea, I thought about it for each product as follows.

Specific examples of measures to improve average purchase price

Key points for goal setting

By analyzing the average purchase amount by product category and campaign, you can expect growth as much as you work on it, such as guiding you to high-priced products and strengthening set sales. It is not a difficult indicator to change, but what is needed is the finesse of "customer service" on the site. Let's maintain it patiently and regularly.

Examples of specific actions toward the goals of each KPI

Based on the KPIs and goals set so far, we have summarized what specific measures should be taken and what should be done in response to the results.

Conclusion

To improve sales on your e-commerce site, a PDCA cycle based on the KPI settings and data described in this article is essential. However, it is not easy to solve multifaceted problems on your own, including payment 's areas of expertise.

GMO-PG's marketing support service analyzes data from your company's e-commerce site and provides support for improving sales, such as attracting customers and improving CVR. In addition, through the acceleration program that we are developing in this media, we will provide optimal solutions and know-how tailored to the growth phase to accelerate the growth of e-commerce businesses.

If you are having trouble setting KPIs, especially if you want to prevent lost sales with payment field, please contact us.