Is conversion really the most important metric?

When we at Commerce Mind meet e-commerce operators we always start with the fundamental question: what is your strategy? Grow fast, be profitable, reach new markets, and so on. It is easy to get swept up and just run, and that can absolutely work if you find a niche that explodes, but with a plan you can go further and more efficiently.

The strategy then has to be turned into concrete goals: exactly which markets, what revenue by which year, which products and so on. If you do not have clear goals it is hard to know what to do, or whether you are doing the right or the wrong things.

This does not mean, of course, that you should not be opportunistic and grab a chance when you see it, or that you should not revisit your strategies and goals. But better to pick something than nothing. A lesson from life is that it is always better to have a goal and make decisions. Reality tends to shape itself around those who are driven, rather than those who trust that "it will work out".

We also break revenue down in different ways, and one way to break it down is to look at average order value times traffic times conversion rate. And that is where conversion finally comes in. So it is one of several KPIs you should keep track of to see whether you are reaching the revenue you want.

Can you say it is the most important one? No, because it does not live on its own. But it is one of the fundamental data points you rely on. You should absolutely measure it and verify that it is actually accurate. It is easy to measure incorrectly, so double-check by, for example, reconciling your GA data with orders in your ERP.

Conversion rate is also easy to become blinded by. You have to think about where it is coming from. If it is low, is it because you have bought the wrong traffic? Or because your offer to the market is too weak, or is it a UX or technical issue on the site? If it is high, maybe you have too little traffic to the site?

Conversion rate can of course be used for many things. By tracking it over time you can see whether campaigns, changes to the user experience or changes to the assortment are having an effect. If you make many changes all the time it is of course hard to know what explains the shift, but if you are systematic and take a data-driven approach you can extract invaluable insight.

"No man is an island", and the same applies to your KPIs. They interact with each other and are not individually unimportant or extra important. We tend to call them "KPI buddies" that affect one another. KPIs are tools for seeing whether and how you are on your way to reaching the goals of your strategy. They help you adjust what you do and plan your activities. Nothing more mysterious than that.