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Defining Key Performance Indicators for E-commerce Health

#analytics #kpi #metrics

Identify and explain the critical theoretical metrics used to assess the long-term viability and health of an online business.

List and define the fundamental Key Performance Indicators (KPIs) for a theoretical e-commerce business. Go beyond simple sales volume to include metrics such as Customer Acquisition Cost (CAC), Lifetime Value (LTV or CLV), Churn Rate, Average Order Value (AOV), and Net Promoter Score (NPS). Explain the mathematical relationships between these metrics (e.g., the ratio of LTV to CAC) and discuss what optimal ranges theoretically indicate about the stability and growth potential of the business.