Defining a new KPI #1 – New Customer on First Visit IndexMetrics understanding June 9th, 2007
Some background information…
Often web analytics data can be extremely revealing – I have seen conversion rates increase ten fold as a result of web site changes brought about by such data. However as the analyst, you will know that interpreting the data is only half the story. You also need to communicate this story effectively across your organisation in order to get the buy-in required for the wholesale changes you may be proposing. You do this by creating internal “stakeholder” reports. The report is a very abridged version of your web analytics reports, usually summarised in Powerpoint and/or Excel and known as a Key Performance Indicator report (KPI Report).
There are literally dozens (if not tens of dozens) of possible KPI values to include in such reports and Eric T. Peterson’s The Big Book of KPIs lists just about all of them. The trick is to only select a handful relevant to each of your particular stakeholders i .e. don’t show all stakholders, all the KPIs – its too much information that will result in a loss of impact.
An example KPI report may include:
• Average conversion rate
• Average order value
• Average per visit value
• Average ROI
• Percentage revenue from new visitors
Note there are only 5 KPIs in this report, which is entirely acceptable and even desirable.
New Customer on First Visit Index KPI
Definition: What is the likelihood of a new visitor becoming a new customer on their first visit?
This is a key question many Marketers and E-commerce Managers (usually the same person!) are asking themselves. For example, should they be investing their time and effort in attempting to get their new visitors to convert first time i.e. emphasizing calls to action in their marketing efforts and page content? Or should more engagement and relationship building methods be employed?
Figure 1 – revenue by visitor type
Figure 1 is an example web site that shows a high proportion of its revenue is generated by first time visitors. But how does that relate to the number of first time visitors to the web site? The New Customer on First Visit Index KPI can tell us this:
New Customer on First Visit Index =
%transactions from new visitors
|Figure 2 – %transactions from new visitors
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|Figure 3 – %visits from new visitors
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For this web site, the numerator is taken from Figure 2 and denominator from Figure 3, the value is calculated as:
New Customer on First Visit Index = 62.50 / 77.20
New Customer on First Visit Index = 0.81
Interpretation for the New Customer Index KPI
- A value of 1.0 tells us that a new visitor is equally likely to become a customer as a returning visitor.
- A value of less than 1.0 indicates a new visitor is less likely to become a customer than a returning visitor.
- A value of greater than 1.0 indicates a new visitor is more likely to become a customer than a returning visitor.
For the example web site (New Customer on First Visit Index = 0.81), a new visitor is less likely to purchase than a returning visitor. This is not surprising as the average order value KPI is high (£1,315.99). Considering this, it is therefore surprising is that the New Customer on First Visit Index is so high. This indicates that the value proposition and other on-site factors such as trust, page content quality etc. is very high for this web site.
Q: What is the likelihood of a new visitor becoming a new customer on their first visit?
A: For this example web site, a visitor is slightly less likely to purchase on their first visit.
However, the emphasis is on slightly. Conventional thought would be that such a high value item would require multiple visits for the potential customer to be convinced to purchase. In this example, it appears the visitor has already made up their mind they are ready to purchase (perhaps there is a strong brand influence) – they just need a quick, easy and trustful source to purchase from.
So the Marketers and E-commerce Managers should indeed invest their time and efforts in emphasizing calls to action in their marketing efforts and page content.
What do you think? Do you have a KPI for your organisation that has not been documented elsewhere? Please share your thoughts via comments.