by Industry Leaders 16 Apr,2021
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To run a profitable online store, you need to know the key e-commerce metrics that impact your sales and revenue. With the advancement of digital selling, e-commerce platforms allow you not only to generate extra revenue but also to analyze different metrics. While you might not be able to track [...]
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To run a profitable online store, you need to know the key e-commerce metrics that impact your sales and revenue.
With the advancement of digital selling, e-commerce platforms allow you not only to generate extra revenue but also to analyze different metrics. While you might not be able to track each metric across e-commerce platforms, some third-party analytical tools can be used to track these metrics or key performance indicators.
This blog elaborates on the top 9 e-commerce metrics to help you run a more profitable online store.
Let's get started!
You don't want to build an out-of-balance business model canvas for your company in any case. While preparing your business model canvas, you focus on building blocks that represent all the important areas of a business. One of them is channels that give you an understanding of how the benefits will be communicated to the customers.
You want your clients to spend more on your shop than what you’re paying to get them (Customer Acquisition Cost) if you want to make profits.
As an owner of an online store, you understand the significance of paid acquisition channels that provide you with premium traffic. To drive quality traffic to your site, you have to invest in effective marketing mediums such as mass email services, social media, paid advertising, and referrals.
What will happen if your store generates huge traffic that barely converts?
Customer acquisition cost is an e-commerce performance metric that can help you prevent these situations.
While measuring the customer acquisition cost, you calculate the average expense you incur to gain one customer.
Here's how you can reduce your customer acquisition cost:
Forecasting the customer lifetime value (CLV) is probably the most underrated and essential e-commerce metric. It refers to the value a customer will provide during a specific time period.
Since along with its frequency and other factors, you have to estimate the lifespan of the consumer, it becomes difficult for stores to calculate the exact value. You have to analyze the purchaser’s actions and other purchasing travel habits to arrive at an accurate CLV.
Why is calculating CLV so important?
However, as important as this metric may be, according to a UK study, only over 20% of the participants stated that their company was actively monitoring the CLV.
Nevertheless, if you spend your time tracking it and taking actions to improve it, you get a huge competitive advantage.
A white paper report by Motista confirms that when brands form an emotional relationship with a customer, the customer lifetime value increases by 306%.
In an e-commerce market, a customer-oriented metric will allow you to improve the customer experience by making it more personalized.
The following methods can help improve your CLV:
Some e-commerce analytics tools like Bigcommerce help you filter your customer lifetime value scores based on your sales over time.
You must calculate the average order value (AOV) if you want to evaluate your marketing and pricing plan in order to determine the amount of money your customers spend on goods.
AOV is the average amount that a consumer spends when buying from your shop.
It is estimated by dividing the total revenue obtained by the total number of orders in that particular period of time.
These two ways can help you increase your AOV:
Companies use sales funnel tools to create a worthwhile buying experience for their customers. A sales funnel is helpful in guiding your store's visitors across the store and eventually converting them to paying customers. If you've got the right sales funnel in place, you can easily optimize AOV across all the stages.
AOV can be increased by using some strategies mentioned below:
According to Invesp, companies are continuing to focus on customer acquisition more than customer retention.
A customer journey doesn't end with the first purchase; instead, the focus should be to encourage them to buy again.
According to Thanx, a loyal and existing customer will provide over 65% more business to a brand than a new customer. This statistic can be even more alarming after it was ascertained that a new customer costs 5 times more than an old customer. (Invesp)
Here's how you can influence your customer retention rate:
Does your e-commerce store receive tons of traffic but get no sales at all?
Then, you might want to look at the sales conversion rate. This e-commerce metric gives you an insight into the number of visitors that have been converted into customers.
SCR can be obtained by dividing the total number of sales by the total number of visitors on your store.
For instance, if your store gets 1000 visitors every week and your conversion rate is 0.2%, you're getting 2 sales per week. However, if you manage to increase your conversion rate to 2%, you'll get 20 sales every week.
If you don't start optimizing your conversion rate, you might end up compromising your profits.
The performance of your conversion rate depends on your landing page, low-quality images, marketing campaign, and social media presence. To get a more detailed look at your conversion rate, you've to break it down into different segments.
For obtaining the best conversion rates:
Regardless of the incredible sales funnel you build and the enticing offers you give to your visitors, cart abandonment is fairly common when it comes to e-commerce stores.
According to Baymard Institute, the average cart abandonment rate is just less than 70%. E-commerce stores suffer a loss of over $18 billion every year due to cart abandonment, says Dynamic Yield.
There are various reasons that can lead to cart abandonment such as unexpected costs, competitive pricing, website time out, and the delay in the process. One of the main reasons for cart abandonment is the unexpected shipping costs that are shown at the time of final checkout.Â
Here are some tricks to improve your cart abandonment rate:
The more traffic on your store, the more sales you can make!
The next step is to raise the store traffic if you’ve already managed to increase your store's conversion rate.
Every e-commerce platform helps you measure website traffic easily. If you're facing any trouble, try to integrate your e-commerce platform with some web analytics tools such as Google Analytics.
You can improve store traffic with these marketing techniques:
Source: Neil Patel
For a thorough understanding of your online store, segmenting the revenue by traffic is equally important as segmenting conversions.
Revenue by traffic is a part of the total revenue that is obtained by traffic through different channels. From e-commerce sites to mobile apps, the metric includes the traffic coming through numerous sources.
For instance, if you're getting traffic from three sources, say organic traffic, paid ads on social media, and email marketing. You'll want to understand the revenue each traffic source generates. It will show you how customers behave and spend depending on their traffic source.
If you're getting the highest revenue from paid ads on social media and the lowest from the email marketing campaign, you'll adjust your next marketing campaign accordingly.
Here are some solutions to increase your revenue by traffic source:
This metric is important for you if you're dealing with a wide range of items in your online store.
You can ascertain the individual performance of your goods through this metric.
This can help you spot not only the most popular products in your store but also the products with maximum return rate.
For instance, if you're selling products on Amazon, you'll have to find profitable products to sell on Amazon. For this, you'll have to check Google and marketplaces trends and analyze various product search tools. You do this to maximize profits on the most popular products.
Similarly, your lack of knowledge about popular products in your store will force you to market the most unpopular products.
A thorough look at this metric will help you determine the value of the product's various features that the consumer is searching for. This way, you can determine which features of the product attract consumers and which features don't.
Whether you want to start an online business, big or small, pay attention to these metrics. These ecommerce metrics are essential to run a data-driven and profitable e-commerce store.
A slight glance at these and you'll be able to change your business strategies accordingly.
About the Author
Martin Luenendonk is a 3x serial entrepreneur with a deep passion in digital business models and marketing innovations. He is the Founder at cleverism.com and founderjar.com
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