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How to Measure the Performance of an Online Service Business?

Key Takeaways;

·       Check the performance of your online business frequently

·       Specific metrics and KPIs can help you determine the success of your business

·       KPIs are aimed to measure a specific part of your business, such as sales, marketing, and customer service

·       Service-related businesses have diverse KPIs than product-related businesses


As a traditional business owner, you can understand the performance of your business visually. Brick-and-mortar business allows you to see how many clients come to your office and purchase your service.

Put simply; everything can be analyzed visually. However, everything is different in virtual businesses. The digital world is data-driven. No visual evaluation is possible.

To measure your service business's performance, you need to collect data from every aspect of your business. Hopefully, there are so many great tools to help you in the process.

Now that you face a large amount of data that don’t make any sense to you. Luckily, you don’t need to track them all.

There are a few key performance indicators (KPI) for online business models that are important to keep an eye on to understand how your business has been working.


What is Key performance indicator?

A Key Performance Indicator(KPI) is a measurable value that shows how effectively your business achieves its objectives and progress toward an intended result.

Since we have many KPIs in the digital world, you don’t have to analyze them thoroughly at first. Just some major KPIs which define the amount of growth you are making is enough. As your business scales, you can track more KPIs.

In this section, we will discuss the most important KPIs that are vital to the longevity of your service business.


KPIs for sales:

  1. Total sales

The value of all the products you have sold in a specific period.You can measure total sales weekly, monthly, or yearly.

  1. Gross profit

Subtract the total cost of services sold from total sales

The primary purpose of doing business is to make money. You want to know how much money you are making, and this KPI will tell you that.

  1. Sales conversion rates

The total number of sales divided by the total number of sessions to your online business

This KPI shows how much traffic is needed to hit your sales targets.

  1. Customer lifetime value

Calculate average purchase value, and then multiply that number by the average purchase frequency rate

CLV shows how much a customer is worth to your business throughout their relationship with your business. Put simply, a total amount of money a customer is expected to spend on your products during their lifetime.  

  1. Customer acquisition cost

Divide all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent

It tells you how much you spend on acquiring new customers.

6.    Cost per conversation

It shows how much customer support costs your business compared to total revenue. As a service-related business, you need to focus on delivering high-quality customer service at a low cost.

Divide total support costs by the number of issues

KPIs for marketing:

1.    Site traffic

It shows how many users are visiting your online service business.The higher the number, the better. It means more visitors are hitting your website.

2.    New visitors vs. returning visitors

You can see how many new visitors have explored your website,along with users who have checked your website for the second time.

3.    Time on site

It examines how much time visitors are spending on your website.If the number is high, it means visitors are more engaged with your service business.

4.    Email open rate

This KPI shows how many of your subscribers have opened your email. If the number is low, you need to work on the subject line and the content provided in your email.

5.    Email click-through rate

Besides email rate open, CTR is important too. You can see how many of your subscribers opened the email and clicked on the link after opening it.

6.    Subscription rate

If email marketing is one of your primary marketing channels, make sure you keep your eyes on the subscription rate. It means how your promotional efforts have been successful in converting your visitors into subscribers. You should set a goal to increase that number monthly.

7.    Social media engagement

It tells you how actively your followers are interacting with your brand. You can measure engagement through likes, shares, comments, and clicks per post.  

8.  Average acquisition cost

Total amount spent on acquiring customers/ Total number of customers acquired

You spend money across different platforms to acquire new customers. This KPI shows which marketing channel works and brings new customers to your business.

9.        Net promoter score

% of Promoters — % of Detractors

By measuring this KPI, you can gauge how strong your relationship with your customers is.  

10. First Response Time

Subtract time of first response by the time of customer request

It refers to the time between the customer's request, especially through chat or other channels, and the response from your business. If you delay responding,you are going to lose your potential customers.

You need to be enthusiastic about attending to your customers. That is your competitive advantage.

KPIs for labor:

1.    Billable utilization

Total number of hours billed in a given period for an employee/team/ company working on a service divided by total hours worked in that same given period

2.    Realization rate

The amount of revenue each employee earns per hour

3.    Service renewal rate

The amount of service or revenue that are retained

Now that you know there is a number for everything and you can see the progress you are making, another issue arises.

4.    Customer complaints

Divide the number of complaints by the number of transactions

This is one of the main KPIs in service-related areas. The lesser, the better. It would help if you made your customers satisfied as the market is competitive and they can change you with no effort. As we discussed in what are the challenges of starting an online service business, customer satisfaction is one of the most common obstacles that virtual firms face.

5.    Customer Retention Rate

At first, subtract the number of customers at the end of the process from the number of new customers acquired during the process. Then divide this number by the number of customers at the beginning of the process.

The greater your customer service, the higher customer retention.

It’s important to know that the average global value of a lost customer is $243.

6.    Customer satisfaction score

You can directly ask your customers how much they are happy to use your services.They can rate the level of their satisfaction through social channels.

Divide the number of customers who responded satisfied by the total number of customers surveyed.

7.    Customer effort score

It shows how easy it is for customers to work with your business. Like customer satisfaction score, this KPI can be measured by asking directly from social channels. For example, you can ask your customers to evaluate their experience with your service from very difficult to very easy.

In the table below, you can see the key performance indicators for an online service business.

How often should I check my service business metrics?

Some metrics play an important role in the effectiveness of your business. So, you need to check them more frequently compared to strategic metrics showing your business is growing.

-     Weekly

Key metrics for marketing, including website traffic, social media and website engagement, conversion rates, and new vs. returning customers, should be analyzed weekly. By measuring marketing KPIs more often, you can check where your business is going.  

-     Every two weeks

Some metrics such as average acquisition cost, email click-through rate, and cost per acquisition should be checked every two weeks. These metrics take more time to analyze since you need to gather more accurate and reliable information.

-     Monthly

Monthly metrics require more extended periods to measure. When you implement your marketing and sales plan, you need to be patient. Monthly metrics include email open rate, total sales, average acquisition cost, repeat purchase ratio, and product return rate.

-     Quarterly

These metrics prove that your business is on the right path, so you need to track them now and then. They include some strategic metrics like utilization rate, customer lifetime value, and subscription rate.

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