As a retailer, the holiday season is critical to making or breaking your annual sales. Tracking the right key performance indicators (KPIs) helps retailers measure the success of their sales campaigns. Specific KPIs provide valuable insights into campaign effectiveness and help avoid repeating past unsuccessful strategies. Without monitoring the proper KPIs, retailers risk missing out on the opportunity to scale successful campaigns in the future. KPIs provide retailers with data-driven analysis of their sales performance, enabling them to identify both strengths and weaknesses.
In this blog post, we’ll explore important KPIs that analyze sales and how to make informed decisions to drive your business forward. From online conversion rates to return rates, we’ll provide a comprehensive overview of valuable KPIs.
Whether you’re a seasoned retailer or just starting out, this post will help you understand the importance of KPI monitoring after campaigns and how it can contribute to your business’s long-term success.
5 KPIs To Measure the Success of Sales Campaigns
Retailers should monitor these specific KPIs to understand their performance during sales campaigns:
- Order Return Rates (ORR)
- Average Order Value (AOV)
- Bounce Rate
- Conversion Rates (CR)
- Customer Retention Rates (CRR)
Order Return Rates
Every year retailers see a rise in returns following the holiday season. According to the predictions by NRF (the National Retail Federation), consumers were expected to return more than $816 billion worth of retail merchandise purchased in 2022. Increased returns often happen due to poor product marketing strategies or targeting the wrong audience.
Why Calculate Order Return Rates?
Tracking ecommerce return rates after the holiday season helps retailers to understand customer behavior, improve customer satisfaction, optimize operations and costs, and plan for future sales and inventory. Closely monitoring return rates helps retailers identify trends, improve offerings, and make changes to minimize returns and increase customer loyalty. In addition, tracking return rates can help businesses optimize their operations, reduce costs, and improve customer satisfaction by addressing the root causes of returns. Ultimately, tracking return rates after the holiday season is essential for retailers to succeed and thrive in a highly competitive industry.
Rate of Returns = (Order Returns / Total Orders) x 100
How To Improve Order Return Rates
Consider the following solutions when trying to reduce returned orders:
- Provide detailed product descriptions with high-quality images.
- Deliver on your claims.
- Improve packaging issues.
- Create a solid return strategy to improve customer loyalty and satisfaction.
- Exceed customer expectations when it comes to customer service.
Average Order Value
Average order value (AOV) is a key performance indicator that provides retailers with insights into customer behavior and revenue generation. Knowing the average order value helps businesses understand the average amount spent every time a customer places an order. Retailers calculate AOV by dividing the total revenue generated by the total number of orders placed. High AOV indicates that customers buy more items or more expensive items, which can lead to increased revenue and profitability.
Why Calculate Average Order Value?
Average order value (AOV) is an important KPI for retailers as it helps them understand their customers’ buying patterns during sales. Analyzing AOV data identifies trends and patterns in customer purchasing behavior. It also shows how changes in product mix, pricing, or promotions affect AOV. Then, retailers can optimize their marketing and sales strategies accordingly. This information can identify opportunities to upsell or cross-sell products and improve pricing strategies. Knowing your customer AOV helps maximize revenue and profitability while improving customer satisfaction and loyalty.
Learn more about order management in our blog Managing Order Management Systems in the Retail Industry.
How to Calculate Average Order Value (AOV)
Average Order Value = Total Revenue / Number of Orders
Solutions For Increasing Average Order Values
To increase the value of your customers’ average order:
- Improve marketing and promotional efforts to increase the next year’s sales.
- Manage your orders in an efficient manner.
- Restructure your ecommerce website to encourage upselling and cross-selling.
- Feature product bundles at reduced prices.
Bounce Rate: Website Speed and Lost Traffic
Holiday seasons come with special online sales and promotions. This results in higher traffic which sometimes causes website crashes or slow-loading webpages. Webfx suggests that 83% of people expect websites to load in less than 3 seconds. When web visitors visit a website and quickly leave without visiting additional pages, it increases a website’s bounce rate. Site speed is key to the success of any ecommerce website.
Why Calculate Bounce Rate?
Retailers measure their bounce rate during holiday sales to understand the effectiveness of their website in engaging visitors and converting them into customers, and to identify opportunities to improve their website and increase sales. High bounce rates can indicate a need for improvement in website design, content, or user experience to better engage visitors and encourage them to explore the website further.
How to Calculate Bounce Rate
Bounce Rate= (Total Single-Page Sessions / Total Number of Entrances) x 100
Improving Bounce Rates
Here are four ways an ecommerce website can improve its bounce rate during a sale campaign:
- Test your website for heavy traffic before the holiday season begins. If your website faced speed issues during the previous holiday season, consider upgrading the platform to an API-first and microservices-based application.
- Use data and analytics to provide personalized product recommendations based on recent browsing and purchasing history to increase the likelihood of a purchase.
- Improve your site navigation by adding clear and intuitive menus, search functionality, and product categories.
- Ensure that the website content is relevant and engaging to visitors, highlights customer reviews, and has clear call-to-action buttons.
Social media is now an essential pillar in digital marketing. Social media campaign conversion rates tell retailers the percentage of users who took a desired action after interacting with the campaign, such as making a purchase, adding items to their cart, or signing up for a newsletter. According to Hootsuite, TikTok advertisements reach nearly 18% of the global population over 18 years old.
Retailers can use this KPI to assess the effectiveness of their social media campaigns in driving customer engagement and sales, and also identify opportunities for improvement. A high conversion rate indicates that the campaign successfully converts social media users into customers, while a lower conversion rate can identify the need for adjustments in the campaign strategy, targeting, or messaging.
Social Media Conversion Rate= (Ad Conversions / Total Ad Audience) x 100
To improve social media conversion rates, use the following tips:
- Ensure that the ad’s landing pages are optimized for conversion with clear calls-to-action, simple and intuitive forms, and relevant product or service information.
- Perform A/B testing on your social campaigns to identify the ad variations that perform best and optimize social media campaigns accordingly.
- Use social proof, such as customer reviews and ratings, to build trust and credibility with social media users. Relevant reviews will increase their confidence when making a purchase.
- Provide exclusive discounts or free shipping that encourage customers to make a purchase with a sense of urgency.
Customer Retention Rate (CRR)
Customer retention rate tells a retailer about the loyalty of their customers and the effectiveness of their ecommerce website. CRR measures the number of customers who make additional purchases or engage with the website after their initial purchase. Some people believe that retaining loyal customers is 5x cheaper than acquiring new ones. Additionally, KlipFolio found that increasing CRR by 5% can boost profits by an average of 25%.
Benefits of Knowing Customer Retention Rates
Knowing that an ecommerce website has a high retention rate indicates that the retailer has been successful in providing positive online experiences and offering high-quality products. Meanwhile, a low customer retention rate can indicate that improvements need to be made to drive repeat purchases. This KPI gives retailers insights into customer behavior during sales campaigns to make data-driven decisions that optimize their websites for scalable success.
CRR = ((E-N) / S) x 100
E = Total customers in a specified time period
N = New customers acquired in a specified time period
S = Starting number of customers
Improving Customer Retention Rates
To increase customer retention rate, consider the following suggestions:
- Set up a loyalty program that offers discounts, free shipping, or exclusive access to new products or services to loyal customers.
- Respond quickly to customer questions, resolve any issues promptly, and make sure to create a positive experience at every touchpoint.
- Use customer data to offer personalized recommendations, promotions, and content to make customers feel valued.
- Keep your brand top-of-mind and encourage repeat business by offering future promotions and other news that they may be interested in.
Conclusion
As a retailer with an ecommerce website, it is important to track key performance indicators (KPIs) to measure the success of sales. These KPIs provide valuable insights into the effectiveness of holiday campaigns and identify past campaigns to scale. Retailers should track specific KPIs such as order return rates, average order value, bounce rate, conversion rates, and customer retention rates to understand their performance during holiday sales. This monitoring helps retailers to understand customer behavior, improve customer satisfaction, optimize operations and costs, and plan for future sales and inventory. By making data-driven decisions based on KPIs, ecommerce retailers can identify both strengths and weaknesses, maximize revenue and profitability, and ultimately succeed and thrive in a highly competitive industry.
Check out UpStart Commerce’s blogs for more information on measuring your ecommerce platform’s success.
