Metrics matter. What you focus on will expand or contract depending on the desired result. Are you looking to increase revenue? Then track it daily and watch it grow. Are you hoping to reduce costs? Then track that daily as well and become intimately aware of each expenditure in your business and watch your expenses subsequently decrease. Ignore these metrics and the opposite will likely occur.
Here are a few key metrics that are crucial:
1. Total Revenue: Basically any money that comes into your business. In a consumer products business you will have product revenue and shipping revenue at a minimum and in my experience it is worth breaking these down as well. How much money are you making for each product sold? How much revenue is from shipping? Track this number closely, especially if you are looking for rapid growth month after month. Some companies make the bulk of their money on the product side and offer free shipping to drive product revenue. Others sell at cost or at razor thin margins but make a killing on shipping. Know which kind of company you are and optimize your strategy accordingly.
2. Total Expenses: Closely watch expenses in your business. Your total revenue may be growing, but if your expenses are climbing higher than your revenue then this could be a no win situation. For sustained profitability your revenue will need to consistently exceed your expenses. This sounds simple, but it can be quite challenging especially as a business is experiencing a high rate of growth.
3. Orders: How many products are you shipping? Is there a direct correlation between orders shipped and increasing revenue and expenses? What is the correlation? Is there anything meaningful to be found in the data? Closely coupled with this metric is unique items, especially if you are in a commodity based business. For each unique item that you place within your Web store is there a direct correlation between unique items and number of orders and revenue? What is it in terms of percentage? These questions should get you thinking about the type of analysis that should be conducted on collected data. Data for data’s sake isn’t nearly as valuable as the ability to analyze and act on said data.
In my opinion, these are the metrics that matter most for a consumer products business, or for any business for that matter. Think of the business as a black box. How much is coming in and how much is going out. The number of orders driving the input and output is of value as well. It’s really that simple.
There are a few other metrics that are of value, especially for Web based businesses. These are less important than the preceding and are more feel good type metrics. Although not as critical, these metrics will likely drive revenue and fuel the motivation required to get your first customers and sales, especially if you are starting and promoting your business via a blog or online retail platform:
1. Page Views/Item Views: How many times is each product page or item being viewed? Are some products being viewed more than others?
2. Unique Visitors: How many of the page views are from unique visitors? Are all the page views being generated by a handful of visitors viewing all of your product pages, or a large number of visitors viewing one or two pages? Are these unique visitors being converted to paying customers (i.e., orders and revenue)?
3. Favorites: Are any items being favorited by visitors more often than others? Is there a correlation between favorited items and orders and revenue?
These are a handful of metrics that will get you started on becoming a metrics driven business. The first three are most important, the second three less so but nice to track. Although it’s nice to collect data, be careful not to collect so much that you become overwhelmed as to not analyze it or take action.