How do you know if you are doing good or badly in business? numbers
How do you know if your business is growing? numbers
The most successful eCommerce brands base their business decisions off of data. This Insight looks at the ten most critical metrics that your business should always be focused on.
Small, Medium or Big, the following metrics, should not be missed while running your online business.
1. Website Traffic
As silly and obvious as this may sound, many eCommerce startups do not use Google Analytics / Google Tag Manager. Understanding the audience’s footfall and demographics can give immense insights into planning your next marketing campaign.
2. Average Order Value (AOV)
The AOV is a measure of how much your customers typically spend on a single order from you. You calculate AOV by dividing total revenue for a period by the total number of orders completed during that same period. If you sell $10,000 of products today and that revenue was created by 250 orders placed by customers, then your AOV is 10,000/250 or $40 per order.
3. Customer Lifetime Value (CLV)
One of the biggest marketing mistakes you can make is to view your customer base through the lens of one sale only. The CLV metric takes a big-picture approach. It views customers through the lens of how much revenue they will produce for your company over the entire course of your relationship with them.
To find the CLV, multiply the average order value by the average purchase frequency rate and the average customer lifespan. If your customers spend an average of $40 per order, place 100 orders per year, and continue to order from you for 5 years, then your average CLV is $40 x 10 times x 5 years = $2,000. Remember, you’re seeking an average number, not an exact number.
4. Customer Retention Rate (CRR)
If you’re losing customers almost as quickly as you’re acquiring them, you know something is seriously wrong with your products or customer relationship strategy. Repeat customers are the life-blood of eCommerce businesses because it costs much less to retain happy customers than it is to bring new ones in.
The CRR tracks your ability to hold on to customers once you gain them. To find CRR, subtract the number of new customers gained during a period from the number of customers at the end of that period. Divide the result by the number of customers you had at the beginning of the period, then multiply by 100. This metric is directly correlated to customer satisfaction and customer loyalty, so its value should not be underestimated.
5. Onsite Activity Metrics
Pay close attention to what visitors do after coming to your website. If they drop off quickly, you should look for problems with page load speed, page usability, or incongruence between what visitors are looking for and what you offer (make sure your ads are congruent with their landing pages, for instance). How many pages do visitors view? How long do they stay on those pages? Where do they go when they leave. By observing visitor actions, you can discover where they’re leaving you and begin to work on correcting the issues causing them to exit your site without placing an order.
6. Customer Acquisition Cost (CAC)
Customer Acquisition Cost is the total amount you typically spend in order to bring in a new customer. Some also call this metric the “startup killer” because many new companies start with high sales/marketing spending to attract new leads, with a relatively low number of leads that will convert which results in a very high CAC. This metric is calculated by dividing your total sales and marketing costs for a given period by the number of new customers acquired during that period. Which sales and marketing costs do you consider? All of them.
If you start to see this metric gradually increase over time, this should be a warning sign that something is either wrong with your product, or your user experience.
7. Shopping Cart Abandonment Rate
It hurts to see potential buyers load up a shopping cart, and then abandon it before finalizing a purchase. There are a variety of possible reasons for why this could be happening, this article has listed down 9 Reasons Why Your Customers are Abandoning Cart
This is an essential metric for eCommerce business owners to track and can point to greater problems that are occurring on your site. To calculate cart abandonment, divide the number of completed cart checkouts during a given period by the total number of carts initiated during that same period, then multiply the result by 100.
Related resources: Intelligent Ways to Recover Abandoned Cart
8. Bounce Rate
Closely related to cart abandonment rate, a site's bounce rate is the percentage of visitors to a particular website who navigate away from the site—or “bounce”—after viewing only one page. The average bounce rate for eCommerce is relatively high, at 45.7 per cent. If your website has an unusually high bounce rate, this could indicate a variety of serious problems occurring with your user experience.
The bounce rate is calculated by the total number of one-page visits divided by the total number of entries to a website. Google Analytics makes it easy for you to track the bounce rate, so there’s no excuse why you shouldn’t be paying close attention to this key metric.
9. Email Marketing Metrics
While many digital marketers and eCommerce managers alike are saying that “Email is dead”, we believe that email marketing will carry into next year as one of the most effective methods of communicating with customers, especially for eCommerce businesses. Despite more dynamic and personal methods of marketing emerging in recent years, email remains to be an effective channel in terms of visibility and efficiency. Here are a few key email metrics you should be tracking:
Email Open Rate: Email marketing can be a major factor in your eCommerce success. Before your emails can persuade a prospect to take action, though, they must be opened. Your email service provider or CRM tracks this statistic for you automatically, but it’s up to you to monitor the data and take the necessary steps to improve it. Compare open rates for each email you send. Which ones draw the best response? Which get the worst? What does that tell you about your audience? Compare all the variables to look for clues in how you can improve your next email campaign. This is a key marketing metric if your organization relies on a content marketing strategy to bring in new customers.
Email Click-through Rate: Each email should contain a call to action (CTA) and a tracking link that monitors responses. The click-through rate (CTR) measures the percentage of emails sent that register at least one click. There are two ways to measure click-through: One is to compare unique clicks to the total number of emails sent. The other is to compare unique clicks to the number of emails that were opened, not to the total number sent. The CTR can vary considerably, depending on the method used. As with open rates, your email service provider tracks this for you, so make sure you are clear on how they calculate the result.
Email Subscribe and Unsubscribe Rates: Your email list changes over time. New prospects want you to include their email addresses in your list, others lose interest and opt-out. You want to track and monitor both metrics. The data will be included in the reports you pull from your email service provider. Look for correlations. Which campaigns or pages are sending you the most and least subscribers? Which emails sent are getting the most unsubscribes … and why? You can glean critical information about your audience by watching what they do and when they do it.
10. Conversion Rate (CR)
It’s very likely that your eCommerce business is already tracking some form of conversion rate on its site. Still, it’s important to stress the value of tracking CR and how it ultimately relates to the other metrics on this list. The conversion rate is determined by simply dividing the number of conversions (those who took the action you wanted them to take) by the total number of visitors who were given the opportunity to take the action.
While the average sales conversion rate for eCommerce businesses hovers between 1.5 - 2.5 per cent, it’s important to note that average conversion rates can vary based drastically by industry. The conversion rate for a website selling luxury collectables will certainly not have the same conversion rate as a low-priced clothing store.
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