10 Essential Metrics for Your eCommerce Campaigns
In the U.S. alone, it’s estimated over $1 trillion will be spent online during 2022. This is considered record sales, according to findings by Adobe’s Digital Economy Index. Meanwhile, in 2020, nationwide online sales hovered around $812 billion and in 2019 reached $586 billion.
This pace won’t be decreasing any in the near future. Shoppers have become accustomed to the simplicity and advantages of purchasing online, expecting it to continue. According to one shopper survey, 76% of those interviewed said convenience ranks among the highest of their shopping expectations. Meanwhile, another 81% felt seamless eCommerce transactions were crucial.
Small business owners are well aware that eCommerce is fundamental to a prosperous business. Whether among the ranks that adapted to eCommerce during the 2020 pandemic onset or are seasoned pros to eCommerce, successful online businesses are more than just an elaborate eCommerce site or having a large social media following. Without monitoring crucial metrics, businesses might yet be off-target.
The 10 Necessary Metrics
In contrast to traditional tracking, metrics for eCommerce allow you a larger view of data regarding your customers and how they shop. These metrics will assist you in forming choices data influenced choices regarding your online platform and what you have to offer.
Newcomers to eCommerce might be exerting more effort and time to vanity metrics, such as “likes” on social media and website page views. While these are good in their own way, these metrics won’t give you the complete story. To fully comprehend your eCommerce performance, you must delve deeper by using these metrics:
1. Average Order Value (AOV)
The average order value tracks the average dollar amount of an order through your website or app. Learning your AOV can help you in understanding your customers’ purchasing patterns and their average order size.
If you’d like to increase your AOV, consider ways to encourage customers to buy more before checking out. This might be in the form of complementary shipping with a minimum purchase amount. Or upselling through the display of additional related products based on items in their cart. Upping your AOV can help you increase revenue and profits while preventing added transaction costs.
The formula for calculating AOV for any specific time period, usually measured monthly, is to divide your revenue total by your quantity of orders.
[Revenue] ÷ [Order Quantity] = AOV
2. Conversion Rate
The conversion rate is the percentage of website visitors who have gone through the sales funnel or have completed the call-to-action. For example, they might sign up for a service or place an order.
A conversion rate can vary upon a brand’s industry, service, and product. As an illustration, while the online conversion rate in the food and beverage category is among the highest, at about 5%, the rate for online purchases of luxury handbags is under 1%.
Numerous factors affect an eCommerce conversion rate, ranging from a website’s layout to how a brand is perceived to web traffic quality. To find your conversion rate percentage, divide your total conversions by your total sum of visitors.
[Conversions] ÷ [Website Visitors] = Conversion Rate Percentage
Should you find any drastic peaks or drops in your percentage, you may want to do further research to learn the reason for this difference.
3. Customer Acquisition Cost (CAC)
The CAC is the monetary cost for acquiring a new customer. This includes the costs of marketing, advertising, and salespeople. Studying the CAC will assist in determining whether you’re paying too much or not enough to gain new customers.
There’s no definite rule, but the Small Business Administration advises setting aside approximately 8% of your profits for marketing and acquiring new customers.
For calculating your CAC, usually by month, quarter, or other specified time range, add all your costs spent for new customer acquisition, such as staff salaries, pay-per-click ads, and paid social media marketing. After totaling this amount, divide it by the number of gained customers.
[Total Costs] ÷ [Total Customers Gained] = CAC
4. Customer Lifetime Value (CLV)
CLV is how much your company earns from an average consumer over the span of their relationship with you. Raising the worth of current customers is a perfect way to increase profits and development.
CLV runs in conjunction with CAC. For instance, a new customer costing $500 to acquire with a CLV under $500 would tend to lose money for a business. However, a $500 CAC with a $1,000 CLV would bring a profit.
The CLV calculation can be complex, as there are various factors to it, among them being customer retention and average customer lifespan. However, the easiest method for calculating is to multiply the total of your average order by the average annual number of purchases. Multiply this total by the average retention time in years. The CLV will show you how much a typical customer might purchase from your business over a customer lifespan.
[Total of Average Order] x [Average Annual Number of Purchases] x [Average Retention Time in Years] = CLV
5. Customer Retention Rate and Customer Churn Rate
The customer retention rate and customer churn rate are among the top eCommerce metrics of importance and work best hand in hand.
A customer retention rate reflects the customer percentage retained or kept by your business over a stated time period. To calculate this percentage, find the total number of customers your business has at the cutoff of a certain time period. Then subtract the number of newly acquired customers during this same time period. Next, divide this sum by the number of customers your business had at the beginning of this time period. Then multiply by 100.
[Number of Customers at End of the Timeframe] – [Number of New Customers Gained During This Timeframe] ÷ [Number of Customers at Start of the Timeframe] x 100 = Customer Retention Rate
With a high retention rate, you’ll know your business has loyal, repeat customers and you’ll usually have a low churn rate. However, a low retention rate means your customers quickly churn at a high rate.
A customer churn rate indicates the rate customers no longer buy from your business. When high, it reveals that your customers are mainly one-time purchasers. If your churn rate is constantly high, you might need to send your customers surveys to measure the satisfaction of their shopping experience.
In calculating a churn rate, subtract your total of customers at the end of a set timeframe from the number of customers at the start of this timeframe. Next, divide this total by the number of customers you had at the start of the timeframe.
[Number of Customers at Start of Timeframe] – [Number of Customers at End of Timeframe] ÷ [Number of Customers at the Beginning of Timeframe] = customer churn rate
6. Bounce Rate
A bounce rate is the percentage of visitors who land on only one page before leaving your site. If it’s high, there might be a problem with how visitors can navigate your site. Although the popular analytics tools can track this for you, it can be calculated through this formula:
[Total of One-page Visits] ÷ [Total of Website Visitors] = Bounce Rate
7. Abandoned Shopping Cart Rate
Your shopping cart abandonment rate counts the number of shoppers who leave items in their virtual cart without completing the purchase. If your abandonment rate is high, there could be a checkout or user experience problem. Shoppers might be deterred after finding limited payment methods or higher than expected shipping costs.
To calculate the rate of shopping cart abandonment, use this formula:
[Number of Successful Checkouts During a Timeframe] ÷ [Number of Carts Filled During This Timeframe] x 100 = Abandoned Shopping Cart Rate
8. Email Marketing Metrics
Email marketing is a vital player in your digital campaigns. Other than in-person interaction, emails are your foremost point of contact with customers. To be sure your communication remains effective, keep an eye on these email marketing metrics:
Open rate. This tells you how many of your sent emails are actually opened and how many are moved to the trash unopened. By monitoring and comparing your open rates for all emails, you can get an idea what email content interests your readers.
Click-through rate. Convincing your audience to open your emails is a beginning, but it’s another story to get them to click on your calls to action (CTA). The click-through rate tells you what percent of emails receive at least one click from a reader. Monitoring the click-through rate of all your campaigns and comparing them will help determine what kinds of CTAs your audience responds to best.
Unsubscribe rate. The unsubscribe rate tracks the number of your email subscribers who decide to unsubscribe. A sudden spike in the unsubscribe rate may be an indicator of too many mailings or these subscribers aren’t part of your target demographics.
You can measure and keep track of these metrics automatically with email marketing platforms, such as Constant Contact, Mailchimp, and Hubspot.
9. Return Rate
Just as in brick-and-mortar stores, returns are inevitable for eCommerce stores, as well. Returns can be a considerable drawback for online stores, as many returned items can’t be sold again. If your store has a free return policy, you’ll be paying the return shipping costs, too.
Knowing your return rate will give you insight into how often products are returned to your online business. To easily calculate your return rate, divide the number of items returned by how many were sold, then multiply by 100.
[Number of Items Returned] ÷ [Number of Items Sold] x 100 = Return Rate
To help avoid high return rates, make sure your product listing and photos are accurate. When packing and shipping the orders, ensure they are safely packaged in secure packaging to prevent damage in transit. Encourage store credit in place of cash refunds.
10. Search Traffic
Your search traffic metrics let you know the origin of your customers and how they found your business site. Were they performing a specific search term through a particular search engine? Were they seeking a specific item or service? Did they locate you through a social media presence? Observing your search traffic metrics will let you know the answers so you can respond appropriately.
By learning which types of searches your visitors made to arrive at your site, you can optimize your store to benefit potential customers. Knowing the origin of your visitors will give you an understanding of the entire customer journey. If you see the majority of leads are originating from a particular social media platform, you could conclude that platform is where you should invest the most time and effort.
For a simple way to track and learn your online store’s performance, web tools are available such as SEMrush, Adobe Analytics, and Google Analytics.
According to Quickbooks’ eCommerce report, shopowners who conduct business online are more optimistic regarding their present and future success than those who mainly run a brick-and-mortar store. It’s not hard to see why, as online stores were more resilient during the arrival of the 2020 pandemic. In 2021, many online stores even witnessed better than anticipated profits.
Ecommerce is vital to a successful business, no matter its size or type, not just for today but in the coming years. Tracking the essential metrics of your eCommerce business is the key to this success.
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