Key performance indicators (KPIs) are quantifiable measures tied to specific business objectives, like growing repeat purchases or improving profit margins. They guide you toward informed decisions about your business. The KPIs you track depend on what you’re trying to achieve. Choosing well keeps your attention on the numbers that move the business, while choosing poorly means optimizing for something that appears productive but doesn’t change the outcome.
Here’s how KPI metrics differ from ordinary metrics; how tracking sales, marketing, customer, operational, and financial KPIs can help you measure your business’s progress; and which Shopify tools can help you get started with measurement.
What are KPI metrics?
KPIs, or key performance indicators, are values that help businesses evaluate progress toward specific business goals. While people often use the terms metrics and KPI metrics interchangeably, not all metrics are KPI metrics. KPIs are the specific measures you’ve chosen to judge your progress, while metrics are the data points that provide context. Say your goal is to reduce post-purchase complaints. Customer satisfaction score is the KPI, while support tickets opened and average resolution time are metrics.
KPIs should be quantifiable, actionable, and reviewed consistently over time. For instance, tracking a social media ad campaign’s return on ad spend (ROAS) can tell you whether it’s worth continuing your investment.
KPIs are often divided into leading and lagging indicators. Leading KPIs help predict future performance, while lagging KPIs track what has already happened. KPI strategies typically use both; leading indicators help you adjust course, and lagging indicators confirm results.
How to start using key performance indicators
When you initially open an online store, you’re at the very beginning of building the data you’ll need to drive your KPI strategy. For example, if your sales graph moves sharply when a handful of orders come in, you don’t yet have enough volume for that metric to be telling you something useful.
As Amy Liu, founder and CEO of the beauty brand Tower 28, says on an episode of the Shopify Masters podcast, “I remember early on I had a mentor who was a super successful tech founder, and I said, ’How do I know if I’m doing a good job? What are my KPIs, what should I be paying attention to?’ I thought he was going to say, ’This is what your CAC should be, and this is what your LTV should be.’”
His answer pointed in another direction. “He was like, ’Honestly, throw all that out the window,’” Amy says. “’You just need to pay attention in the beginning to momentum. You need to be able to feel it … because it is so hard to continue investing not just the money, but your energy and time.’” Once you have enough history to measure patterns month over month, use the following types of KPIs to track your progress.
Sales KPIs
Sales metrics track your store’s conversions and sales revenue. If your goal is to increase sales over time, use these KPIs to track the financial outlook of your business:
Revenue
Revenue, often synonymous with sales, is the money your business earns from selling goods or services. Tracking revenue is the first step toward using the following sales KPIs to increase your profits.
Average order value
Average order value (AOV) is the average amount your customers spend on each transaction. It’s a common starting point for businesses beginning to use KPIs. To calculate AOV, divide your total revenue by the number of orders. For instance, if your store generated $2,500 from 50 orders, your AOV is $50.
Using AOV as a KPI can help you spot opportunities to increase it. For example, if your AOV stagnates around a certain value, you could offer free shipping or special gifts on orders that reach a higher spending threshold.
Conversion rate
Conversion rate represents how frequently a visit to your webstore results in a desired outcome, such as a purchase. Calculate it by dividing your total number of conversions by your total number of visitors, and then multiplying by 100. So, if your store hosted 1,200 visitors last month and received 60 sales, your conversion rate is 5%. Conversion rate is useful to track in concert with other KPIs, like AOV. Say you set a free shipping threshold above your current AOV. Your conversion rate might dip while your AOV rises. Tracking both metrics tells you whether the tradeoff is worth it—like whether the larger orders, incentivized by free shipping, make up for the customers who didn’t buy.
Sales growth
Sales growth is the percentage increase in your business’s total sales over a specific period, such as a month or a year. As a KPI, it shows whether you’re hitting targets and reveals your revenue growth trajectory.
Marketing KPIs
Marketing metrics show how customers find your store—through search, ads, and social—and which channels earn back your marketing spend. Below are four marketing KPIs to consider:
Customer acquisition cost
Customer acquisition cost (CAC) tells you how much you’re spending on acquiring each new customer. To calculate CAC, divide your marketing spend in a given period by the number of new customers.
CAC is intertwined with sales; a business looking to increase profits could observe CAC trends over time, using the metric as a KPI to help set its sales goals and adjust its marketing budget accordingly.
Return on ad spend
Return on ad spend (ROAS) tells you how much money you’re making for every dollar you spend on ads—for instance, on a Google Ads campaign. To calculate ROAS, divide the revenue attributed to a campaign by what you spent on it.
Ryan Bartlett, cofounder of the T-shirt brand True Classic, says on an episode of Shopify Masters that starting small and focusing on ad spend helped the brand scale profitably. “Staying really honed in on ROAS on Facebook was the whole game in the beginning,” Ryan says.
True Classic started by spending $25 to $50 at a time on Facebook ads. “Very quickly, within a few weeks, I was spending $150 a day and then $200 a day. And as long as the ROAS was somewhere between two to three to one on what I was spending, we were profitable,” Ryan says. After a few years, the clothing brand grew to approach $1 billion in revenue. “Even today, [ROAS] drives a significant amount of our profitability,” says Ryan, who now pays particular attention to new customer ROAS as a KPI.
Average click-through rate
Average click-through rate (CTR) measures how often users click on your online ad, social media post, or other call to action (CTA). CTR is expressed as a percentage, representing how often an impression (or view) results in a click.
Using CTR as a KPI means understanding that a good CTR depends on the type of ad, the platform, your industry, and other factors. Because published averages vary widely by how they’re measured, the more useful comparison is against your own baseline. Branded ads generally outperform unbranded ones, because the audience already recognizes the name.
CTR varies by platform, so track it per channel rather than as a single blended number. A CTR that falls after a creative change tells you more than the same figure measured against an industry average. CTR also varies by industry, sometimes significantly. Impulse-driven industries with shorter, simpler ad cycles (like clothing) tend to have higher CTRs than industries whose products carry more complex order consideration (like software).
Earned media value
Earned media value (EMV) quantifies the worth of organic media coverage, such as customer reviews and press coverage, that your brand receives without direct payment.
Earned media value is a useful KPI when your objective is reach or credibility. A brand investing in influencer marketing or PR might track EMV to measure the impact of their content partnerships or earned media coverage. It’s meaningful when measured over time—rising EMV suggests that your organic presence is growing.
Customer KPIs
Customer KPIs tell you how much revenue you can expect to earn from each customer, the average length of your relationship with your customers, and what your customers think of your business.
These KPIs reveal themselves over substantial timeframes and are best evaluated on a monthly or quarterly basis:
Customer lifetime value
Customer lifetime value (CLV) measures how much a customer will spend over the course of their relationship with your business. To calculate CLV, multiply your AOV by average order frequency, and then multiply that number by the average length of time a customer spends with your business.
If you’re starting a business, CLV is one of the most useful KPIs to track early on. It gives you a balanced view of customer behavior and insight on who your most valuable customers are. From there, you can work to increase CLV by catering to customer segments via loyalty programs, upselling, and special offers.
Customer retention rate
Customer retention rate measures the percentage of customers your business retains for a certain period. It’s a KPI of customer loyalty and satisfaction: How competitive are your prices? How satisfied are your customers with your product? How good is your customer service?
Excelling in these areas helps to turn first-time customers into repeat customers, making your business more sustainable over time. Benchmarks for customer retention rate vary by industry. Industries that incentivize long-term commitments (such as beauty and skin care) tend to have higher customer retention rates than industries whose products are bought less frequently (such as furniture).
Customer satisfaction
You can track customer satisfaction by asking customers to rate their experiences on a numbered scale (such as 1 through 5) at the end of each transaction. By asking customers how likely they are to recommend your business to a friend, you can calculate your Net Promoter Score (NPS).
Knowing how likely a customer is to recommend your business to someone in their network is an excellent KPI for measuring customer loyalty. “Referrals in the first four weeks [is a thing we’ve found] to be a killer metric,” says Divy Ojha, founder of the produce delivery service Odd Bunch, on Shopify Masters. “It’s a predictive metric of retention.”
Beyond NPS and referral rates, you can track customer satisfaction by monitoring KPIs like first contact resolution rate (the percentage of support issues resolved during the first interaction with customer service), average order fulfillment time, and shipping accuracy.
Operational KPIs
Operational KPIs measure how reliably your business delivers after a customer converts. They’re mostly lagging indicators in that they report what already happened, but they feed directly into customer satisfaction and retention. Keep an eye on these two operational metrics:
Order fulfillment time
Order fulfillment time measures how long it takes your business to ship an order after the customer places it. To calculate it, average the time between every order and its dispatch across a period.
Tracking the average alongside your slowest orders is more useful than the average alone, since the slowest deliveries generate the complaints. A rising fulfillment time can signal a bottleneck in your warehouse or supplier chain; tracking this as a KPI may enable you to catch and correct the issue before it shows up in customer reviews.
Shipping accuracy
Shipping accuracy is the percentage of orders your business delivered that were complete and correct. To calculate it, divide your error-free orders by your total orders, then multiply by 100.
When your business makes a shipping error, it can double your fulfillment cost because there’s the additional cost for the replacement item and the support time to fix it. Even small improvements compound. Reviewing shipping accuracy against your customer satisfaction scores shows whether fulfillment problems are driving customer dissatisfaction.
Financial KPIs
The following two profitability ratios are KPIs of financial health:
Gross profit margin
Gross profit margin expresses your gross profit (total sales minus the cost of goods sold) as a percentage of total sales. As a KPI, it measures your business’s efficiency at controlling costs. It helps you notice when your production expenses are eating into your profits. If that’s the case, it could mean it’s time to negotiate a better deal with a supplier or raise your prices.
Net profit margin
Whereas gross profit margin stops at the cost of goods, net profit margin accounts for all of your expenses. It’s the percentage of revenue your business keeps as profit after deducting taxes, operating costs, rent, depreciation, and other costs. It’s a valuable KPI because it shows what your business actually keeps over a period of time.
Shopify tools for measuring KPIs
Once you’ve chosen your KPIs, the right tools help you track progress against your strategic goals and turn scattered data into data-driven decisions.
Shopify Analytics is a strong starting point. Begin with one business objective, pick a set of supporting KPI metrics, and monitor them all in one place on the Shopify ecommerce platform. Put KPIs like sales, conversion rate, and average order value at the top of your customizable dashboard for frequent monitoring.
KPI metrics FAQ
What is the difference between KPIs and metrics?
KPIs, or key performance indicators, quantify specific business objectives. They measure and represent key business goals; metrics track the business activities that provide context about progress toward those goals. All KPIs are metrics, but not all metrics are KPIs. When you’re weighing KPIs versus metrics, the test is whether a decision depends on the number.
What are the most important business KPIs?
There is no standard set of most important or most meaningful KPIs; your own key performance indicators will depend on unique factors like your business goals, business size, and industry. Common, relevant KPIs include conversion rate, average order value, and customer lifetime value.
How often should key performance indicators (KPIs) be reviewed?
How often you review a KPI depends on how quickly the data changes. Sales, conversion rate, and ad performance data can shift day to day, so many businesses check them weekly. Customer lifetime value, retention, and profit margins develop over longer periods and are typically reviewed monthly or quarterly.
