11 KPIs You Must Know before Pitching Your E-Commerce Startup

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With next generation marketing, regardless of the advancement and capabilities of technologies, marketing will always be a business challenge that serves people. It is the target consumer who makes the decision to buy, places trust in your brand, or agrees to subscribe to your newsletter.

Although Technology, instead, just enables us to be smarter about our messaging, allocating our sales resources, and providing value to our prospects to build rapport but It is critically important for growth marketers and the founders to understand the business KPI’s

Why, because KPI if develop correctly gives management and team the complete analytics report which shows the growth status untainted by emotion or rhetoric, However the focus must not be limited only to KPI but also the meaning behind then and how it connects with the growth with the impact level too.

Lets go with some of the KPI which are important for growth marketers and founders to thoroughly understand for which they should have strategy or set of strategies for optimizing or take to the next level,
NOTE :- a) Some strategies might not work with some set of business that we are not going to be detail

b) Neither we are going to discuss each of the KPI in detail and the action plans to achieve that(the data can be readily available across the internet)


1. Customer Acquisition Cost :-
Cost per acquisition cost for any consumer company can be derived by calculating the cost spent on acquiring customers {Marketing Expense} by the number of customers acquired in the period the money was spent.

CAC : – Total Marketing Cost/ number of orders.

However CAC is always relates with LTV (Lifetime value) of customers, which has to be in Proportionate, the good metrics is the higher the LTV and lower CAC which is 1:3-5



2. Customer Retention Rate :-
Customers at the end the day x- New customers on day X / Customer at beginning of the day x
As the name implies, retention rate which means retaining the customer.

CRR :- No. of customers who shopped 12-24 months ago who have also shopped within the last 6 month/ No. of customer who shopped 12-24 months ago.


3. Customer Lifetime value :-
To simply understand the customer lifetime value consider the below example

Profit generated from the customer each year =$1000

No. of Years the customer is associate with brands =5 Years

Cost to Acquire customer = $2000
Customer Lifetime value will be = $1000 (Profit generated from the customer ) X No. of years the customer is associate with brand- The cost of Acquiring the customer = $3000


4. Overhead :-
Whereas CAC measures the variable expenses attributable to acquiring customers, overhead measures the company’s fixed expenses incurred irrespective of the number of customers acquired.

Overhead relative to revenue is a reflection of the capital efficiency of a company (i.e. all things being equal, a company that generates $1 million in revenue on $200,000 in overhead is twice as efficient as one that generates $1 million in revenue on $400,000 in overhead).


5. Monthly burn :-
Understanding your revenue and monthly expenses (fixed and variable) enables you to calculate the company’s monthly burn. This is simply the net amount of cash flow for a month when net cash flow is negative. If the company starts the month with $100,000 in cash and ends the month with $90,000 in cash, its burn rate is $10,000. If a company’s monthly net cash flow is positive, it is not burning cash.

6. Runway :-
A keen focus on runway is critical to the survival of any startup. Runway is the measure of the amount of time until the company runs out of cash, expressed in terms of months. Runway is computed by dividing remaining cash by monthly burn. We prefer to view a conservative estimate of runway that calculates the monthly burn utilizing current revenue and projected expenses (after accounting for the increased expenses to be incurred post-investment).


7.Profit Margin :-
Expressed as a percentage, profit margin tells us how much your product sells for above the actual cost of the product itself. Put another way, it reveals how much of the selling price is “mark-up.” This invaluable metric allows us to consider the return on investment on the cost of the product and is significant in understanding the scalability and sustainability of the company.

8. Conversion Rate :-
Conversion rate is an important KPI in a way that it reveals a combination of the company’s ability to sell its products to its customers and customers’ desire for the product. It is particularly instructive to track and review conversion rate over time and regularly run experiments to improve it.


9. Gross merchandize value:-
Gross merchandise volume (GMV) is a measure of the growth of the business, or use of the site to sell merchandise owned by others over a given period of time. It is the overall dollar value of sales of goods or services purchased through a marketplace.


10. Monthly active Users :-
Monthly active users (MAU) is the total number of users that engage in some way with a web or product over a period of one month. It reflect the most basic way of measuring user engagement.

11. AOV (Average Order Value):-
Average Order Value (AOV) is an ecommerce metric that measures the average total of every order placed with a merchant over a defined period of time.

AOV is determined using sales per order, not sales per customer. Although one customer may come back multiple times to make a purchase, each order would be factored into AOV separately.

Takeaways

Each stage that a customer goes through is preceded by a specific action.
Effectiveness of each stage needs to be tracked and optimized with conversion metrics.
For products that have free trials, it’s crucial to track ‘Activated Users’. This metric is an important checkpoint for measuring intermediate steps between the ‘prospect’ and ‘customer’ stages. Companies need to know how often customers use their product/solution and how much value they derive from it.


“The most successful founders tend to be those who have an obsessive focus on their KPIs and the drive to constantly experiment and optimize them.”
#ecommerce sites, wholesaling & drop shipping #ecommerce #kpis #pitching #startup
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