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Becoming a successful business is a lot about tracking metrics and making sure that you learn from your mistakes as fast as possible to make the required changes so that you are not left behind in the mad race. Being one of the biggest business sectors of our times, eCommerce is no different. In fact, being a completely technology-driven business, tracking metrics is easier and important for all e-commerce companies who want to make sure that they outlive their competition.
Here are fifteen key metrics that we think are essential to be tracked by every e-commerce company:
1. Sales conversion rate:
If a thousand people visit your website per month, but only 1 among them makes a purchase, then your sales conversion rate is 0.001 (1/1000), which is alarmingly low. Tracking sales conversion rate is one of the most important factors because even if you are having enough sales, and customer visits are rising, a really low conversion rate would mean you are doing several things wrong, the most important among them being that you are driving away a huge percentage of all visitors. Tracking sales conversion has become simpler with tools such as Google Analytics.
2. Customer acquisition cost:
Another key metric that is usually overlooked but is of immense value to both the stakeholders and internal marketing team, is the customer acquisition cost or the CAC. CAC can be calculated just by dividing the total spending on marketing and advertisement over a period of time by the number of customers acquired during that period. Say, if you spent $10000 over a period of six months, and were able to acquire 100000 customers, then your CAC would be $0.1 (10000/100000), that is you spent $0.1 per customer. The problems with calculating CAC is that often results of marketing campaigns take time to show. Advertisements running in a particular month might draw more customers in the following months. This may be due to word of mouth, late customer reaction, the upcoming holiday season, etc.
3. Revenue by traffic source:
Marketing efforts can go to waste if you do not know where to spend your marketing dollars, and what would be a better way to analyze that than getting your revenue by traffic source metrics. The benefits of these metrics are that you would not only know which sources are bringing in more hits, but also that which sources are seeing higher conversion rates. For example, it could happen that 1000 people visit your website via affiliate marketing websites daily, of which only 90 make a purchase, whereas, almost 90 of the 100 visitors from Google ads make a purchase on your website daily. Such numbers would help you understand which clicks are more valuable and which ones you should pay more for. The downside with these metrics is that certain sources like referrals and organic hits might be difficult to track.
4. Conversion of New vs Returning Customers:
Getting a new customer is important, but retaining your older ones is even more. This is because when more old customers keep using your website, they are bound to spread the word, and in a way, this would also mean that whoever uses your website, is happy with how it works. Also, customer retention increases the lifetime value of customers. Only focusing on getting new customers would increase customer acquisition costs and shift focus from quality to quantity. Conversion figures of new vs returning customers need to be tracked to make sure that existing customers are happy.
5. Conversion by device type:
Browsing the internet no more means bulky laptops, and people are browsing the internet from a variety of devices today. Among them, mobile devices are the single fastest growing means to access the internet. Low cost and more accessible mobile data are bringing about this change. Conversion rates by device type would help you understand whether your site needs to be optimized for a particular type of device, or devices with smaller screen size, or places with a slower internet connection, etc.
6. Track cart abandonment:
Cart abandonment is the biggest nightmare of all eCommerce companies. But the figures can be brought down if you can figure out that at which stages maximum cart abandonment occurs. This way, you can focus on improving the customer experience at that particular stage and see if cart abandonment at that stage goes down. For example, having a location tracking service, instead of making a customer type his/her entire address may lower cart abandonment at the stage of address fill-up. But for such decisions to be made, stage-wise metrics on cart abandonment are vital.
7. Track Percentage of Returning Customers:
Returning customers are a boon for the eCommerce sector. This is because you do not have to spend extra to re-acquire them, and also because you have become their Google search for products – their default eCommerce website. Tracking the number of customers who return to make more purchases would help you understand how many customers plan to use your website in the long run – and did not use it only for a one time order.
8. Average Order Value:
The average order value is another metric that can help in several decision-making procedures. It is calculated simply by dividing your total revenue by the number of orders. For example, whether you want to bear the shipping cost, or pass it on to customers might depend on your average order value. If your AOV is $100, then you might be fine with bearing the shipping cost, but if your AOV is $5, you might want to pass on the shipping costs to avoid running a loss. AOV also helps in deciding on your future marketing strategies and how to focus on increasing per order value.
9. Lifetime Value of the Customer:
Also called CLV or customer lifetime value, this is a complex metric that helps compute the revenue brought in by a customer, after subtracting acquisition costs. It also takes into account, the number of visits by a customer and his/her average spends per visit. This metric is used mainly for targeted marketing to increase CLV for existing customers.
10. Customer Retention Rates:
Another metric which deals with the importance of existing customers, customer retention rate helps companies understand that what percentage of users on a website, are regular users, and what percentage is a one-time user. The higher the percentage of the former, the better.
11. Average order size:
While average order value deals with the price associated with every order, average order size deals with the number of items customers buy together in a single order. A higher figure would mean that cross-selling efforts and recommendation engine results are paying off, and people are adding more items to a single order. A higher average order size reduces shipping costs and increases profitability.
12. Email engagement metrics:
Email engagement still remains one of the cheapest and best ways to engage more customers. Sending regular emails of new and upcoming products or emails for abandoned carts are not new. But tracking how many of these emails actually bear fruit is important to analyze which type of emails are working, and which ones aren’t, whether to change the tone of emails, whether to include images in emails, etc.
13. Google Search Performance:
Your performance on Google Search reflects how SEO optimized your website is, and whether you are able to drive organic hits to your website. Certain terms are important in this metric. The number of impressions stands for the number of times your website URLs were shown as a result of something being searched. On the other hand, clicks refer to the number of people who actually clicked on the links to your website, that appeared in search results. Both of the metrics are valuable parameters for your marketing team to compute your website’s Google Search Performance.
14. Social Media conversion rate:
A rather new metric, but one that is very important in the modern era, Social Media Conversion rate measures the number of customers who have ended up from your social media advertisements, or posts to your website, and have ended up making a sale. What’s the use of having 10000 followers on your Instagram page, if none of them ever visit your website or make a purchase?
15. Number of Transactions:
The daily, hourly, weekly, monthly and yearly transaction records can show trends in the data that are invisible to the human eye. Trends like what time of the day is traffic the highest or which months usually see slumped sales, etc can be understood with this metric.
Starting a company is a mammoth task in itself, but keeping it running efficiently is even harder. If you are working for an e-commerce site, or are thinking of starting one, these metrics would help you keep track on your performance as you scale.