Figure out what’s holding back your online sales success and reach your financial goals with the help of KPIs.
One of the most exciting parts of the year is drawing the line and summing up online sales results. It’s thrilling because it reflects a year worth of hard work and dedication, but also nerve-racking because of the two questions that linger in your mind: ‘Did we accomplish our financial goal or not? What will our management board say if we didn’t hit the expected mark?’
A wise management board knows that only one weak chain portion can lead to a domino effect that influences business results. In order to avoid that, detect that critical spot using the essential KPI (Key performance indicators) in the online sales process.
Once you figure out who or what is holding back your sales success, you’ll be able start the process of improving your business.
Find the following data for the past business year:
- Budget invested in online marketing
- Visitors on your website
- Inquiry (in case you don’t have this step in your process, you can skip it)
- Number of transactions
- Total income
The example is a fictional online travel agency:
Calculate your KPI!
Don’t worry, these formulas are very simple.
- COST PER CUSTOMER = Budget invested in online marketing / Visitors on your website
- WEB EFFICIENCY = Inquiry / Visitors on your website
- CUSTOMER CARE EFFICIENCY = Number of transactions / Inquiry
- AVERAGE VALUE OF RESERVATIONS = Total income / Number of transactions
- PERCENTAGE OF MARKETING IN TOTAL INCOME = Budget invested in online marketing / Total income
Done? Great, now you know the results of your last year’s marketing efforts.
Your management board was very pleased with the past year’s results and thanked everyone with Christmas presents. Their only New Year’s wish was to have the same result next year.
Let’s say that the marketing department (or an advertising agency) has exactly the same budget as last year. Your website and call center performed the same as the previous year and the product had the same price, but the final income is somehow lower. Everything seems to be performing well, so how did this happen?
You can try to find someone to blame, but it’s more productive to analyse the data and uncover the true culprit behind your disappointing results.
Let’s take a look at KPIs:
Seems that everyone was doing their best, but for some reason the cost per visitor has risen. You’ve found your spot that set the domino effect in motion and produced poorer results.
Not only is there less income money this year, but the percentage of marketing vs. income is higher than last year, so you can expect that there will be no budget left for planned annual awards (Sorry, no Christmas presents).
So, what should you do?
First, go talk to the marketing department. You might have slipped from your SEO positions or maybe you have a new competitor on the market who is bidding higher than you, or both! It’s also possible that some of the media in your media portfolio was not as popular as last year. In any case, discovering your weak link should not be hard because now you know where to dig deeper and find out what to do to improve your marketing performance.
Our goal is to repeat last year’s results. The marketing department successfully brought the same number of users to the website within the same budget, but it turned out that the whole income is more than one million Euros less than the last year and marketing vs. income is higher than it was last year.
In this case the weak link is the web.
It didn’t have the same efficiency as last year and that started the domino effect.
What went wrong on the web?
It might be a new design that wasn’t good or the existing design became outdated. It also might be the bad weather effecting the reservation. Now that you have detected a weak link, you can focus your energy on improving it and let all the other teams know they did a great job.
In this scenario, our goal is to repeat last year’s results.
With the same investment as last year, the marketing department attracted the same number of users on the website, the web efficiency stayed very good as well and product price did not change. Sounds like pretty good team work, don’t you think? Unfortunately, the annual report shows that the marketing investment vs. income is higher than last year and you are missing over 0.5 million Euro of income!
This time we see that the weak link was the Call center, but what could’ve gone so wrong there?
Maybe the sales star was ill, maybe there is problem with the telephone infrastructure or there can be a problem with CRM application. Stop guessing! Talk to your Call center and figure out what should be improved.
Marketing was doing great as last year, the website was performing as well, Call service was excellent as last year, but you’re still missing 0.5 million Euro of income and the marketing investment vs. income is higher than last year.
You almost did it, but the average value of the reservation went down and affected the final income. Deeper investigation might reveal that the product portfolio had a cheaper product or the last and first minute incentive lasted too long.
This was a laboratory situation, very plastic. In real life those values should be monitored on a weekly basis, so you can detect the weak link on time and have a quick reaction so it wouldn’t seriously affect the final outcome.