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February 8, 2006

Avoiding the Little Leaks that Keep Websites Poor - A Review of The Big Book of Key Performance Indicators

I do a lot of SEO consulting work, and I meet with many new clients who are hyper-focused on their search rank and the customer traffic that search engines drive to their site. However, a surprising number of these clients are paying little to no attention to what those customers do on their site once they actually get there.

So I ask: Are you tracking what your customers are doing on your website?

If not, your site could be leaking serious money. That's because you're not paying attention to your customer's behavior, and thus not optimizing your web site and marketing to best capitalize on that behavior in a way that drives profits.

It's really no surprise that more businesses aren't implementing customer tracking effectively. It can be hard and confusing work. It's not enough just to "track everything", because the biggest problem with most website tracking is too much information.

It's typical for a business to get fired up about tracking, install a software package, and end up with a mountain of data that no one has any idea how to interpret, much less act upon.

That's why it's so important for businesses to identify the most critical data, or indicators, that are going to be the key to improving their web site's performance. For tracking professionals, this critical data is referred to as your "Key Performance Indicators."

I just finished reading Eric Peterson's new ebook, "The Big Book of Key Performance Indicators." It's a great deal at $19.99 USD, and I enjoyed it immensely because it addressed these issues specifically:

  • What are the most important performance indicators to track.
  • Who in the company should be getting the tracking reports on those indicators (not everyone needs the same reports).
  • What action should be taken based on the information in those reports.

As Eric states in his book:

All good key performance indicators drive action. This is the polite way of saying, "Any KPI that, when it changes suddenly and unexpectedly does not inspire someone to send an email, pick up the phone or take a quick walk to find help, is not a KPI worth reporting."

Eric covers a comprehensive list of performance indicators, although most businesses could likely make significant gains just by effectively tracking and acting on the top 7 or so, including:

  • Order Conversion Rate
  • Average Order Value
  • Average Revenue per Visitor
  • Average Cost per Visitor
  • Average Cost per Conversion
  • Checkout Completion Rate
  • Landing Page "Stickiness"

For each performance indicator discussed, Eric defines what that indicator means, how you should expect your site to perform for that indicator, and what action you should take to maximize the results from that indicator, as well as what you should do in case you see it suddenly drop.

Eric also gives the precise formula you can use to calculate each of these performance indicators. For example, when measuring Average Order Value, use the following:

Sum of Revenue Generated / Number of Orders Taken = Average Order Value

This is hugely helpful for the typical, non-math-oriented user. The formulas are spelled out in clearly spoken language, and the book is accompanied by Eric's own Excel spreadsheets to help jump-start your tracking campaign.

If I had any complaint about the book, it would be that it's still aimed a bit more towards the web analytics professional. What I'd really like to see is a book like this pared down to about 40 pages and laser-targeted to the small online business person with a do-it-yourself mentality.

That's a huge market, many of whom have been frustrated with their past attempts at customer tracking, and who are hungry for information that gets straight to the nuts-and-bolts essentials.

Still, this book comes very close to that, and is an excellent resource to help you zero-in on the tracking numbers that really matter so you can take real action.

You can pick it up over on Eric's web site:

http://www.webanalyticsdemystified.com/buy/buy_kpi_book.asp

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