ca. 30 Minuten
nach Wunsch auch mit VideocallBusiness Intelligence... what are we actually talking about!?
A Quick Guide in 6 episodes
Today's topic – episode 2: What is a metric? And what is a KPI? In the field of reporting and analysis, both terms are frequently used, but where is the difference? We provide you with some basic definitions.
About this blog series
Business Intelligence. Is it baloney or a term that matters? Does it even concern me or will I have deleted the word from my vocabulary by tomorrow anyway? You’ve probably heard about it and read about it, but you may not have ever quite understood exactly what it means? Anyway – Business Intelligence surely is a term that leaves many people in a quandary. Maybe this is you? Then maybe we’ve got something for you: This Blog Series offers you some help by providing six successive blog articles about what we are actually talking about when we use the term Business Intelligence – based on our extensive BI-centered work in consulting and development for the online sector. For everyone who wants to know more, and in particular, for online retailers.
INDEX OF EPISODES
- Episode 1: What’s the use of Business Intelligence? Do I need that, too?
- Episode 2: BI Fundamentals – Metrics and KPIs
- Episode 3: Important Metrics for Successful eCommerce (I): Traffic, Average Session Duration, Conversion Rate, Average Order Value
- Episode 4: Important Metrics for Successful eCommerce (II): Sales Metrics, Cost-turnover Ratio, Return Rate, Customer Metrics, Repurchase Rate
- Episode 5: Important Metrics for Successful eCommerce (III): The Customer Lifetime Value Special
- Episode 6: 5 Golden Rules for your BI project – Drawing a Bottom line
BI Fundamentals – metrics and KPIs
The basis of Business Intelligence is data. And then, first of all, the metrics that are generated from this data. But metrics, as well as KPIs, are voluminous – and they are becoming more and more so! Catalogue retailers become online retailers. Online retailers become chain store owners. Multichannel here, agile commerce there. As a result, the action alternatives for retailers increase rapidly – but which of them will actually turn out to be sustainably profitable? And which metrics are still the critical ones for eCommerce – despite new trends and technologies? These questions are being considered by many companies and their answers are as multifaceted as the products on Amazon.
With this second episode of our BI blog series, we want to share some of our experience with you that we gained implementing BI projects at several different customers (including frontlineshop, mirapodo, Kickz, Mister Spex and s. Oliver).
Definition: metric
Firstly, a metric is a figure that is directly measurable. But it can also be the combination of multiple figures, known as a calculated variable (as in the examples listed below). There are several kinds of BI metrics that are important for eCommerce:
- Quantities e.g. stock per storage, ordered items, unique visitors
- Calculated values e.g. sales, return rate, contribution margin
- Discrepancies e.g. compared to the day before, the week before, the average
Definition: KPI (Key Performance Indicator)
The term KPI is often confused with the term metric. Rather, a Key Performance Indicator is not a value that is directly measurable, but one that is showing the degree of fulfillment related to a certain objective. Accordingly, for the calculation of a KPI there has to be concretely worded and measureable objectives, such as: “Three months from now, we want to gain 250 new customers per day via online channel X.” The KPI should then show the discrepancy between the actual and target value.
Where do metrics actually come from?
There are many paths that lead to a purchase – and online, unfortunately, to returns as well. And every single one of the paving stones of every single one of those paths and return paths is generating – what? Metrics. Exactly.
Starting with the buying inducement of a TV spot or a display banner across Google search followed by a click into the paid search results which then leads right into the web shop. Then leave the shop and quickly step in again via retargeting at my favorite news page. First item in the shopping cart. Via recommendation engine, a second one is also coming. The bill, please! And namely as quickly and simply as possible. Item in stock? Fine! From the pick list into a package and to the post office and then to the doorstep – and sometimes the whole way back again. Some multichannel vendors, such as Zara, also offer the possibility to get articles delivered to the next store or to hand in return packages there. A classic Customer Journey – not only online, but offline as well.
Nearly all of these movements and conversions can be directly measured and linked to each other. So just a single online purchase (including all its offline backgrounds and proceedings) generates a multitude of metrics.
A problem that often occurs here for chain store owners and catalogue retailers is that they are only able to analyze their sales channels separately, if at all. This doesn’t necessarily have to, but clearly is likely to, lead to flawed analyses and thus misjudgments, as well as bad decisions. The really great potential for effectively added value lies in holistic and comprehensive channel analysis – that is to say: BI.
So – where to start looking at those countless metrics and their even more countless combinations?
Learn more in episode 3 of our BI blog series: Important Metrics for Successful eCommerce (I): Traffic, Average Session Duration, Conversion Rate, Average Order Value.
Don't feel like reading more? You might be interested in the Talk round with bike manufacturer ROSE Bikes and technology partner ROQQIO: KPI-driven e-commerce - the key to success. There you will learn how to recognize the value of your data and optimize your e-commerce business on this basis. (In German only)
