eCommerce metrics essentially serve as a guide to making informed and data-backed decisions. Selling online without tracking your performance is akin to shooting in the dark. The most successful online stores are thriving because they are analyzing their metrics and using them to their benefit. Every marketing or promotional decision of your company should be data-backed to yield maximum results. But not all metrics are valuable and identifying the key metrics will help you in improving the performance of your online store.
While all KPIs are metrics, not all metrics are KPIs.
Key Performance Indicators (KPIs) measure the performance of business processes by tracking and analyzing them regularly to improve the product and services. Your metrics need to be relevant to your business for it to generate impact.
Get started with these metrics to track for your eCommerce business:
Conversion Rate (CR)
Getting tons of traffic but close to no conversions? Conversion rate is one of the most important eCommerce metrics and is calculated by CR = (Total number of customers / Total Unique Visitors) * 100. It is the number of customers that complete a sale after visiting your site and reviewing the product. Once visitors land on your page, it takes a lot of sustained efforts to turn them into customers. Driving traffic to your site isn’t everything. The process of improving this metric is known as Conversion Rate Optimization and is basically how you convert visitors to customers.
Average Order Value (AOV)
The Average Order Value (AOV) is the measure of how much your customers spend on a single order from your store. Even with no new traffic, you can increase revenue by increasing the average order value. It provides an important insight into how your products are faring with the consumers. It is calculated by, AOV = Total Sales / Total Orders. In the end, a higher average order value equals more profit. You can employ various strategies to increase the average order value by implementing loyalty programs, free shipping orders above AOV, selling add-on services, etc.
Customer Lifetime Value (CLV)
One of the biggest mistakes an eCommerce retailer can make is to cater to a customer for a single sale only and not nurture them for a lifetime. Customer Lifetime Value, on the contrary, takes a big-picture approach and focuses on how much any given customer spends with your online store throughout their customer lifecycle. This is an important metric as it shows customer loyalty. Focusing on driving the CLV instead of the acquisition cost will significantly save the marketing budget and make your eCommerce store more viable in the long run.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is how much it acquires to cost new customers and includes advertising costs, email campaigns, marketing budget, discount coupons, etc. This metric is calculated by, CAC = Total costs associated with acquisition / Total new customers. For budding eCommerce companies, this metric can act like a killer as they spend heavily on attracting new customers, with a relatively low number of converts thereby leading to a high CAC. If you witness a sharp rise in CAC, then it’s a warning sign to review your products, services, or user experience.
Cart Abandonment Rate
It is disheartening to see potential customers abandoning their shopping carts without completing the purchase. A variety of potential reasons can contribute to this factor like high shipping costs and unexpected additional fees, no guest checkout option, long registration or checkout process, poorly structured checkout options, etc. It is the percentage of customers that add an item to the cart and then abandon the purchase. It is an important metric to track as it provides an insight into how many customers are interested in your product but do not proceed to complete the purchase. It further helps in creating strategies to tackle the problem and reduce the rate of cart abandonment.
Customer Retention Rate
Retention Rate is classified as the percentage of customers you maintain as customers over some time. A higher number for this metric signifies that you’re doing a good job of keeping your customers satisfied. Many eCommerce platforms provide a report on returning customers that gives you a fair idea of new customers vs. returning customers to your site. While new customers are important, this metric provides a glance into how well you’re retaining existing customers. This is a profitable proposition as you don’t have to pay high acquisition costs to get them back.
These KPIs provide a meaningful approach to track the performance of your website and improve and enhance the customer experience. Choosing the specific KPIs will depend on your business, industry, niche, and other factors but we recommend using the SMART (Specific, Measurable, Actionable, Relevant, and Time-specific) approach. eCommerce metrics largely help in optimizing your website and providing a seamless experience to your customers. Armed with this critical data, you can create strategies aimed at the improvement of your eCommerce store.
If you’re looking to optimize your website, then get in touch with our Consultants today!