Modern-day technology has made data the biggest asset for every business that wants to succeed. Long gone are the days when a business would make decisions based on assumptions or wishful future projections. Today, smart retailers are driven by data, and the odds are raised if you are running an eCommerce store. The ability to measure critical aspects of your online store is the holding pillar that determines whether you will be successful or not.
However, the primary concern is not about whether you need data insights or not. The hurdle to be tackled is – which ecommerce metrics should you pay closer attention to?
Why do you need to know the right ecommerce metrics to track?
As an online retailer, there are thousands of metrics that you can track at any given moment. Unfortunately, doing this will see you deal with a huge chunk of information, with most of it having little to no impact on your store’s performance. To avoid wasting a lot of time collecting and assessing ‘vanity metrics,’ there is a need to focus on rich and valuable data. This way, you will get to have a solid data-based foundation that allows you to shape your store’s future.
Before we look at the Ecommerce metrics that matter, let us first address a major question that always has online retailers confused. What is the difference between a metric and a key performance indicator?
Anytime there are talks about Ecommerce data, you will always hear about metrics and key performance indicators (KPI). The simplest difference would be that:
- Metrics are measurements of business processes. They merely show what ‘exists’, for example, a web site’s page views or the number of likes on a social media post.
- On the other hand, key performance indicators are measurements of the performance of specific business processes. They answer the ‘so what?’ question after you have attained your metric. For KPI, it is all about looking at the impact of those numbers and how they have helped achieve your goals.
The six most important eCommerce metrics for your online store
There are a number of Ecommerce metrics that matter for every online retailer, but here we look at the five most important ones. If you want to rise above the basics and be able to run a successful store, you need to keep good track of the following:
1. Sales conversion rate
Since the aim of running advertisements and engaging in marketing campaigns as an online retailer is to gain more sales, this is the most important metric. It is a reflection of how effective your campaigns are, and a higher score always represents a fruitful conversion process. This metric is calculated by dividing the number of clients who made a purchase by the number of potential customers that you reached out to.
It is vital to compare your sales conversion rates against your industry’s average rate, as these figures greatly vary. Most importantly, you need to know that the secret to having better sales conversion rates is to run targeted, high-quality ads that prompt viewers to take action.
2. Customer acquisition costs
In Ecommerce, the underlying rule is that no customer will randomly pick your store. Rather, you will have to acquire each client and to do this, you will have to spend on marketing. The total amount that it takes to acquire a new customer from a specific traffic channel is your customer acquisition cost. To attain this figure, you need to determine how much you spent on your marketing ad advertisements against the number of customers acquired.
Note: This figure will always be high for new retail stores as you need to spend much more to attract a new customer than an established brand. However, this metric should gradually fall, and failure to do this will reflect an underlying problem, which necessitates an overview of your approach to marketing and user experience.
3. Customer retention rate
It is not enough to attract a new customer as you need to retain every new shopper for long-term success. This is why you need to know your customer retention rate (CRR), as repeat clients are the life-blood of any business. By looking at this metric, you will easily determine if you are losing customers as fast as you are gaining them or if your customer base is growing by the day. In case you notice this metric is low, then it is time to audit your products, services, and customer relationship strategy.
4. Customer lifetime value
Do you have repeat customers? Good, but what value do they offer to your business over their lifetime? Customer lifetime value is the breakeven metric that clarifies how much is earned from a client over the length of their relationship with your business. It is a vital metric that is analyzed alongside your customer acquisition cost to know your breakeven point and the efficiency of your retention activities.
5. Bounce rate and shopping cart abandonment rate
A big problem that online stores are facing is that a significant percentage of target customers click on a page but instantly navigate away from the site (bounce rate). Other potential clients go to the extent of shopping for products but abandon the cart before finalizing their payments. While these two metrics are different, they need to be analyzed side by side as they show the potential market your business is losing. Typically, when these metrics are too high, they reflect an underlying problem with user experience, payment security concerns, long checkout process, product pricing changes, and high shipping costs, among others.
6. Revenue by traffic source
What is your best source of quality traffic? Revenue by traffic source enables you to know the performance of your different marketing and advertising channels. Not all traffic is equal, and by looking at the revenue generated from each source, it becomes easier to spend wisely on your marketing. The general rule of thumb is to take better care of your golden eggs (high-performing traffic sources) and neglect or restructure your approach to the other sources.
Rise above the average
As the traditional market is redefined with ever-growing eCommerce, you need to step up your game as an online retailer. It is one thing to set up an online store and an entirely different gameplay to run it successfully. Luckily, by knowing the right Ecommerce metrics to pay attention to, you can outshine your competition and attain those sales goals.