When site owners review their online marketing performance, to make it manageable, they will often create impressive performance summary dashboards, either through spreadsheets or report builders within the web analytics systems.

These dashboards are often impressive, but they focus on lagging rather than leading performance indicators and using both is best.

When developing goals and measurement systems used to review and improve performance of digital channels, it also helpful to consider which are leading and lagging indicators of performance. Trends should be identified within these, for example are they increasing or decreasing year on year (often used as a good like for like comparison), or compared to the previous week, month or average for a recent period.

Leading performance indicators for E-commerce sites

A leading performance indicator is a metric which is suggestive of future performance, think of the amber preceding the green light on traffic lights on a short timescale. The benefit of leading indicators is that they enable managers to proactive action to help shape future performance. There tend to be fewer leading performance indicators, but these can be applied to E-commerce:

• Repeat sales metrics. If repeat conversion rates are falling or the average time between sales (sales latency) is falling then these are warning signs of future declining sales volume for which proactive action can be taken, for example through a customer email marketing programme.
• Customer satisfaction or advocacy ratings such as the Net Promoter Score. If these are trending downwards or return rates are increasing, this may be a sign of a future decline in repeat sales since more customers are dissatisfied.
• Sales trends compared to market audience trends. If, for example, online sales are increasing at a lower rate than overall online audiences for a product category are indicated, for example through panel data, Hitwise or searches in particular categories then this is a warning sign which needs to be acted upon.

The balanced scorecard has become a popular framework because it includes a combination of leading and lagging indicators rather than focusing on lagging indicators alone as many performance dashboards do. The balanced scorecard seeks to measure innovation and learning as leading indicators and these can be applied to E-commerce too potentially, for example, time to implement new functionality, staff recruitment and development, although it is difficult to put hard and fast measures next to these.

Lagging performance indicators for E-commerce sites

A lagging performance indicator is one where the measure indicates past performance. Lagging indicators enable corrective action to be taken. Some also identify a coincident performance indicator which is more suggestive of current performance. Lagging performance indicators for a transactional retail site include:

• Sales volume, revenue and profitability. These are typically compared against target or previous periods.
• Cost per acquisition (CPA). The cost of gaining each new customer will also be compared against target. Variations in trends in CPA for different referrers (traffic sources) and between different product categories can be potentially be used as leading indicators
• Conversion efficiency metrics. For an E-commerce site these include process efficiency metrics such as conversion rate, average order and landing page bounce rates.

These lagging indicators are used operationally on daily or weekly basis so that performance can be diagnosed and reviewed.