Why are some ecommerce businesses so incredibly successful and others aren’t? What’s the secret that the successful businesses know?
Information? Yes, that’s correct. Knowing what’s working and what isn’t when it comes to the marketing and promotional decisions made for a business is crucial. Without that knowledge, a business is likely wasting a good deal of time and money because they have no idea if their efforts are beneficial or not. Without that knowledge, there’s no chance that the success of that business can be improved upon.
And just having the data isn’t sufficient. Wise marketers must know what to look for and how to use it. There are thousands of metrics available out there yet only a few present the true state of a business’s success and the insights needed to make changes that lead to real growth.
The cycle for the successful ecommerce business follows this path:
• Set strategic goals (KPIs) for their business.
• Target the metrics needed to track those goals.
• Monitor progress towards the goals making adjustments whenever needed.
So What Are KPIs?
Key performance indicators (KPIs) are the measures that allow you to determine whether your business is reaching any of your set strategic goals or not. Even if you think you’re tracking the correct ecommerce KPIs like client numbers, expenses, revenue, and more, take another, closer look. Are those goals specific and meaningful?
Every business likely has a goal to see long-term revenue increases, right? Yet, without a specific target, how do you know if you’re doing enough to get there when you want to get there?
There’s not a great sense of urgency in setting a goal of increasing revenue in the next five years. There’s a great sense of urgency in stating a goal of increasing revenue by 25% by the end of the fiscal year in 2023.
Understanding Ecommerce Metrics
It’s very important when looking at metrics to understand the significance of the data. How confident are you in a given result?
Suppose, for example, you conducted an A/B experiment where sales of an ebook increased because of the addition of a testimonial box on the landing page. If ebook sales increased a massive 40% after the addition, you might be pretty confident that the testimonial box was a contributing factor. If sales increased 2%, it would be difficult to say that the added information had an impact at all.
Much would also depend on how much data was received in the experiment. The more data you receive, the better your ability to make decisions based on KPIs to grow your business.
7 Top Ecommerce Metrics to Track for Success
Now let’s look at the exact metrics we need to study. These are the top metrics owners and marketers need to track closely.
Sales Conversion Rate
Your sales conversion rate is the percentage of visitors who buy from you. The sales conversion rate is the most significant metric to track. You don’t need a tool to determine your rate. You can find it by dividing the number of people who bought a product by the total number of website visitors. An average rate for most ecommerce stores is between one and five percent.
Increasing your conversion rate is a sizable topic on its own. Many make it a lot less intimidating by breaking it down into segments like the conversion rate from a given source (Google, Bing, Facebook, etc.), device type (mobile or desktop), and new or returning customers. When you study your conversion rate broken down into categories like that, it becomes much easier to find a starting place and work towards boosting the rate within each segment.
Average Order Value
If you divide your total sales by the number of carts, you’ll get your average order value. In knowing your average order value, you devise ways to improve it.
Just a few examples of how you can boost this metric:
• Offer free shipping when your customer’s purchase total reaches a certain amount. If your average order value is $45, offer free shipping when the customers spends at least $50.
• Offering product discounts can also help increase average order value.
• Recommending products that naturally go along with items they are buying can be an effective way to boost sales.
• Upgrades and add-ons to your products or services can be an incentive for customers to spend more.
• When groups or bundles of products are purchased together, offer a modest discount so they pay less than they would had they bought the items separately.
Customer Acquisition Cost & Lifetime Value
It does cost to gain new customers. It’s just important, for obvious reasons, to ensure that the acquisition cost be less than the customer lifetime value.
The acquisition cost is found by dividing your total marketing costs to date by your total number of customers. Breaking that down into specific segments will provide an even better view on which sources you should invest in and which can be eliminated.
Calculating your customer lifetime value is figuring out how much you earn from a typical customer over their life and there a few ways to calculate this number. The higher that amount, the more you’ll consider investing to retain them.
One of the best marketing tools available, email marketing has a lot to offer. Email marketing has a 122% ROI and doesn’t require another venue like social media or Google to bring in targeted traffic.
You want as many emails as you can get on your list so it’s important to track the total number of emails and to know how many you get from each source. How many opt-ins do you get from each page of your website?
Many email marketing services and tools offer good onboard metrics and many offer Google Analytics integration. If not, you can use GA to track opt-ins from a given page.
Customer Satisfaction Score
When you stop and consider that this is the measure of your customers’ satisfaction with your products and services, you’ll realize you see this very often. You’ll be sent a survey via email asking how you would rate the product and why you gave that rating.
There are many tools that can assist in tracking your customer satisfaction like Customer.guru, Promoter.io, Wootric and more. In using your results, learn to segment the respondents according to their scores. Reach out to the ones who didn’t respond favorably. Consider rewarding or supporting your fans.
Revenue by Traffic Source
Not all traffic is created equal. It’s important to understand which sources of traffic are most beneficial to us and focus on them. It may take a little research to determine which sources send you real customers as opposed to those who send you visitors who don’t buy. The time and effort will be worth it in determining which sources to invest in and which you no longer need.
Shopping Cart Abandonment Rate
We’ve all done this one. You’ll add things to the shopping cart of online store to buy later — if at all. Almost 70% of shoppers abandon the carts they filled which seems like a discouraging statistic. However, some of that can be recovered so it’s important to know that there are tools available to help track cart abandonment. A funnel can also be set up in Google Analytics for this purpose.
How to reduce your cart abandonment rate?
• Keep your checkout process as simple and easy as possible.
• Putting remarketing techniques to use can lure potential customers back to your store.
• Send emails to remind the shopper that the cart is waiting for them and offer help if needed.
Using Ecommerce KPIs for Success
Regardless of the size of the store, its metrics should be monitored and studied carefully. Even shops with small data samples can use their information with the goal of growing their metrics to begin with. Once the size of their data samples grow, they can focus on the key metrics covered above. Once you’re receiving good amounts of data, you’ll be able to make strong, authoritative marketing and promotional decisions that will keep your business’s growth steady and dependable.