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How do you measure success in B2B e-commerce? The 3 KPIs to watch out for!
What are KPIs and why are they important?
Understanding customer behavior and data is essential for dynamic business development and increased sales in your company. After all, without a proper analysis, one cannot get a complete picture of the effectiveness of one's work.
KPIs (Key Performance Indicators) are simple and understandable performance indicators that can be measured and displayed in the form of a key figure. They are essential to the progress and success of an online business. With them you can define further sales strategies and evaluate the actual effects of e-commerce on your own company. However, it is recommended that you select a limited number of B2B sales metrics that will have the greatest impact on sales performance.
There are some KPIs that you should monitor monthly or quarterly as they are directly related to the financial performance of your company. Let's look at them:
The order value
One of the most important metrics that you can use to answer the question: "How much did I make this month?" This is the total amount generated from the sales of the B2B platform over a certain period of time (it is often added monthly). In most cases, other B2B sales metrics will be calculated based on this metric.
AOV (Average Order Value)
You can use this KPI to measure whether the average value of orders from your business customers has increased over time. The formula for calculating this indicator in a given period is:
AOV = total value of orders / total number of orders
The interpretation is simple: the larger the AOV, the better it is for your company. The AOV can be calculated for all orders or orders from individual customers. In this way, you can determine which of your customers is the most valuable and generates the most revenue.
CLV (Customer Lifetime Value)
It represents the total amount of revenue your new customer will generate for the entire duration of the collaboration. It is an indicator based on your company's sales experience with existing customers. The method for calculating a customer's lifetime value is:
CLV = average order value x average number of orders x average duration of the business relationship
You sell packaging material. You know that e-commerce retailers order mailing bags from you twice a year and spend an average of 800 euros per order. One of your customers has been with you for 6 years, the second - 3 years, the third - 1 year. Average customer lifespan is therefore (average number of periods - years, months) = (6 + 3 + 1) / 3 = 3 years and 3 months. In this case, you can assume that every new customer (e-commerce retailer) generates at least the following:
CLV = 800 × 2 × 3.3 = € 5,280.00
This is an important indicator, especially in the B2B space, that you need to know. It will help you decide how much money you should invest in attracting new customers and retaining existing ones. You can also determine who your most profitable customers are. You can calculate the CLV for an average customer, but also for segments - as in our case for e-commerce retailers.
In summary, KPIs are reliable guides for your online B2B sales. They should be used to compare results and set sales goals. By tracking B2B ecommerce metrics, you can not only see ROI but also see trends. Trends that can then be used to attract more customers to order online.
For ambitious companies, monitoring relevant metrics is critical to achieving scalable sales growth. However, the sales KPIs themselves are just numbers on your dashboard. They don't make sense until you dig deeper into the data, look for key trends, and use those insights to take the next step toward faster business growth.