7 Best Ecommerce Metrics to Improve Your Business
Ecommerce metrics are sources of rich insights that make you realize how well or poorly your business is performing as well as trends in user behavior. These are trends that could present new growth opportunities. However, you must pay keen attention to the right metrics forming the basis for sales and marketing KPIs.
E-commerce metrics help online businesses grow and develop better marketing skills. The most successful e-commerce brands base their business decisions on data. The ability to organize and analyze e-commerce metrics is an essential part of managing a successful online store.
Some examples of e-commerce metrics are;
- Average Order Value (AOV)
- Customer Lifetime Value (CLV)
- Customer Retention Rate (CRR)
- Onsite activity metrics, and a few more.
Best Ecommerce Metrics that Improve your Business
With how desperate online businesses have grown to improve their business, they sometimes track vanity metrics. Online businesses only want to track or focus on e-commerce metrics that are highly beneficial to the business.
That said, seven important e-commerce metrics that can improve your business are stated below.
1. Average Order Value (AOV)
The AOV stands for the measurement of the regularity of spending on a single order from you. To calculate AOV, you divide the total revenue by the total of all completed orders within that same period.
For example, suppose you sell products worth $50,000 in a day and that revenue was created by 250 customer orders. In such a case, your AOV is 50,000/250 or $200 per order.
2. Customer Lifetime Value (CLV)
The CLV metric takes a bigger approach. It operates from the perspective of the amount of revenue your company will get from customers while working with them.
CLV is found by multiplying the average order value by the average purchase frequency rate and the average customer lifespan.
On average, your customers might spend $200 for every order and end up placing five of these orders in a single year. Additionally, this could happen for ten years. Here, your average CLV is 200 x 5 x 10 = $10,000.
Note: Remember, you’re not seeking a specific number. Instead, you’re looking for an average number.
3. Customer Retention Rate (CRR)
In some cases, you might be drastically losing customers. It might even be at the same rate as you’re acquiring them. In such a case, it’s obvious there’s a fault with your products. However, the fault might also be coming from your customer relationship strategy.
Repeating customers is a critical strategy here. The reason is that you’ll spend much less to maintain happy customers than to convince new ones.
The CRR e-commerce metric operates by tracking your customer holding ability, specifically after you gain them. To find the CRR of a period, the rate of new customers gained is first determined. Afterward, the result gotten is multiplied by 100.
This metric accurately defines customer satisfaction and loyalty. As a result, you should never underestimate it.
4. Onsite Activity Metrics
It’d be of great help to take note of visitors’ activities after coming to your website. If you notice they exit almost immediately, there’s definitely a fault somewhere.
This fault can be either with the page’s load speed or usability. You may not have what the visitor is searching for, or maybe your offer is poor. Therefore, always end your ads with matching landing pages.
Furthermore, there are several specific factors you must pay attention to. They are:
- Number of pages visitors view
- Amount of time spent on these pages
- Their next destination after leaving
If you can carefully study their actions and monitor all these factors, you can understand why you’re losing visitors and potential customers. Hence, you can take the proper steps towards a solution.
5. Customer Acquisition Cost (CAC)
Customer Acquisition Cost refers to the overall amount spent in gaining new customers. Many people refer to it as the “startup killer.” The reason is that many new companies come into the market with high sales spending but end up with a relatively low amount of leads. This results in a very high CAC which is detrimental to businesses.
To calculate this metric first a given period, you divide your total sales and marketing cost by the number of new customers you acquired. Note that you’re to consider all the sales and marketing costs.
If you notice a gradual increase in this metric over time, you should be cautious. It’s most probably a fault with your product or user experience.
6. Conversion Rate (CR)
Likely, your e-commerce business is already tracking some form of the conversion rate on its site. Nevertheless, it’s important to stress the value of tracking CR and how it ultimately relates to the other metrics on this list.
Conversion rate is determined by simply dividing the number of conversions by the total number of visitors allowed to take action. This number also includes those who took the action you wanted them to take.
While the average sales conversion rate for U.S. e-commerce businesses hovers at around 2.6 percent, it’s important to note that average conversion rates can vary based drastically by industry. The conversion rate for a website selling luxury watches will certainly not have the same conversion rate as a low-priced clothing retailer.
7. Email Marketing Metrics
You must have seen multiple people, especially digital marketers and e-commerce managers, criticize email, calling it “dead.” However, email marketing is believed to continue into more years to come.
Also, it will continue to be one of the most effective ways to communicate with a customer. It’ll be most beneficial for e-commerce businesses.
Interestingly, email has always been beaten in terms of visibility and efficiency in recent years. Therefore, it has more dynamic and personal marketing methods.
With that established, it is essential to know that you use email marketing to improve your business in several ways. Most importantly, you’re able to build credibility. This is possible since you’re always in contact with your customers. As a result, they’re always up to date about your business, making them trust your business better.