Defining KPIs for Your Website

Metaphor of KPIs usefulness: fuel level indicator

Once you have defined your goals for your online business and scheduled all the activities that need to be carried out for reaching these goals, you have to identify some parameters for monitoring the performance of your activities, in order to understand if you are walking on the right path to the goal.

These parameters are known as Key Performance Indicators, or KPIs.

KPIs for an online business are like a compass for a ship: if we don’t have them, we’ll sail in sight!

Moreover, defining KPIs is necessary to make our data analysis structured and effective: how many times we open Google Analytics, we look at the visits (+5%, good!), the keywords (great! they have found me searching “usain bolt shoes”!) , etc. and then we close it, without understanding if we are getting closer to our goal or having taken any useful decision?

The output of the KPIs definition is a list of parameters to be periodically monitored. Some KPIs will allow us to evaluate the overall performance of a group of aspects of our online business, while some others will be focused on a more specific area.

Every time we open Google Analytics, we’ll check the values of the KPIs and try to understand if everything is on track or if there are areas who need corrective actions to be taken in order to navigate our business toward its goals.

Let’s go back to the example of our previous post. The goal 1 of our running shoes online store was to realize 30.000 sales the first year.

So, The KPI 1 could be defined as:

KPI 1 = Number_of_sales / month

This KPI, perhaps the most significant one for measuring the performance of our online business, is strictly related to goal 1: the larger the KPI 1, the closer we are getting to goal 1.

Suppose that, thanks to our promotional activities, word of mouth and traffic from search engines, our website is visited every month by a certain number of visitors potentially interested in buying running shoes.

Of course, we want this number to be as large as possibile: the more potentially interested visitors come to our site, the higher is the probability to sell our shoes.

Therefore, a second KPI could be defined as:

KPI 2: number_of_visitors / month

This KPI is correlated to the amount of visibility our website has and could be influenced both by the popularity of our brand and/or by the promotional activities we are carrying out.

In general, we can assume that the number of sales per month are (more or less) proportional to this KPI.

One other interesting question is: on average, how many people do I need to bring to my website to generate one sale?

This data could be monitored via a third KPI, that could be defined as:

KPI 3: number_of_sales / number_of_visitors

The KPI 3 reflects our overall efficiency to convert visitors into customers. This depends on several factors, including the efficiency of our promotional activities and the efficiency of our website.

In other words, the KPI 3 gets larger if all the following events take place often:

  • our promotional activities bring to our website people potentially interested in buying running shoes
  • these people like the shoes we sell on our website
  • these people trust our brand, the website and the payment methods; accept the purchase and shipping terms; etc.
  • these people take the decision to buy the shoes and complete the buying process on the website

Each of these bullets is related to a specific aspect of our business and influences its overall efficiency in converting visitors into customers: this efficiency is indicated by KPI 3.

Let’s have a look at the three KPIs we defined so far. KPI 1 allows us evaluating the overall business performance with respect to our goal 1, while KPI 2 and KPI 3 provide us with indications on two more specific aspects: the visibility of our website and the efficiency of our business in converting visitors into customers.

Note that:

KPI 1 = Number_of_sales / month =

= (Number_of_visitors / month) * (Number_of_sales / Number_of_visitors) =

= KPI 2 * KPI 3

KPI 1 equals the multiplication between KPI2 and KPI3: this means that if we want to sell a lot of shoes per month, we need to bring traffic to the website and make our online business an efficient “converting machine”, that turns into customers as many visitors as possible. If one of the two KPIs is small, we will have difficult times to reach our sales goal.

However, if we want to understand deeper which aspect of our business is successfully working and which not, we need to define some indicators even more specific about our activities.

For example, number_of_sales / number_of_visitors_from_Facebook, will be and indicator about the efficiency of our promotional activities on Facebook with respect to the sales. It give us clues for answering questions like the followings:

  • The number of sales generated by visitors from Facebook is adequate to the money I’m spending to carry out these promotional activities?
  • These Facebook promotional activities are more or less efficient than those I’m carrying out on other social networks, e.g. on Twitter?
  • Should I move my budget from promoting on Facebook to some other more efficient activities?

The output of our KPI definition is a list of parameters along with a description of what they indicate:

KPI Definition What it indicates
1 Number_of_sales / month Overall performance with respect to goal 1
2 Number_of_visitors / month Visibility level of the website (brand popularity, promotional activities, SEO, etc.)
3 Number_of_sales / Number_of_visitors Overall efficiency in converting visitors into customers

To summarize, for all those people whose work is understanding the health status of an online business and taking corrective actions to drive the business toward its goals, it’s crucial to define, from the beginning, all the KPIs that need be monitored for evaluating the performance of the business’s key activities.

From the next post, we will start to talk about the most popular tool for collecting and analyzing many website data: Google Analytics.


  • Have you defined and written down all relevant KPIs for your online business?
  • Near every KPI, have you written down which aspect of your online business it reflects?
0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *