Keeping track of key metrics is crucial for any business to grow and succeed. With all the data at your fingertips, it's important to zero in on the most important numbers to give you a real insight into how you’re doing.
This article breaks down the must-know ecommerce metrics, explains why they're important, and shows you how to put them to use for the biggest impact on your online store's success.
- Conversion rate: The percentage of website visitors who make a purchase on your website.
- Average order value: The average value of an order placed on your website.
- Website traffic: The number of visitors to your website.
- Bounce rate: The percentage of visitors who leave your website after only viewing one page.
- Cart abandonment rate: The percentage of shopping carts that are abandoned before checkout.
- Customer lifetime value: The estimated revenue a customer will generate for your business throughout their lifetime.
- Gross margin: The difference between the cost of goods sold and the revenue generated from those goods.
- Net promoter score: A measure of customer satisfaction and loyalty, based on the likelihood of a customer recommending your business to others.
- Repeat purchase rate: The percentage of customers who make more than one purchase from your business.
- Acquisition cost per customer: The cost to acquire a new customer, including advertising, promotions and other marketing expenses.
Let’s take a look at these in some more detail.
Conversion Rate
You need conversion rate metrics if you want to know how many of your website visitors are making a purchase. A high conversion rate means your website is working well, with a user-friendly design, appealing products and a smooth checkout process. On the other hand, a low conversion rate could mean there's room for improvement, like changing up the website design or product presentation. By keeping track of conversion rates, you can learn about your customers and make informed decisions to boost sales. Plus, a higher conversion rate means more money from the same amount of website traffic.
Average Order Value
Average order value (AOV) is also important for your business because this metric gives you an idea of how much customers are spending per transaction. A high AOV is usually a good sign, indicating that customers are buying more expensive items or adding more items to their cart. A low AOV, on the other hand, could mean customers are only buying cheaper items or not buying enough items per transaction. By tracking AOV, ( which can be done by calculating the total order value divided by the number of orders ) you can understand your customer's spending habits and make changes to your pricing strategy, product offerings or promotions to increase AOV and overall revenue. Additionally, a higher AOV can also help offset the cost of acquiring new customers or other business expenses.
Website Traffic
While website traffic is an important metric, it's important to remember that the quantity of traffic alone doesn't guarantee success. It's also vital that you focus on the quality of traffic, meaning the visitors who are most likely to make a purchase. High-quality traffic includes visitors who are in your target audience, have a high level of interest in your products and are engaged with your website. By focusing on both the quantity and quality of your website traffic, you can create a sustainable and profitable online presence. So while tracking website traffic is important, it's just as important to analyse where that traffic is coming from and whether it's high-quality traffic that is likely to convert into customers.
Bounce Rate
Bounce rate measures the percentage of visitors who leave your website after only viewing one page. A high bounce rate means that many visitors are quickly leaving your website, which could indicate a problem with the user experience or the content on the landing page. On the other hand, a low bounce rate means that visitors are engaging with your website and exploring other pages, which is a positive sign. By tracking bounce rates, you can identify areas for improvement and make changes to keep visitors engaged and interested in your website.
Bounce rate benchmarks will vary depending on the nature of your business, for example, if you have a single-page application or a one-page website, it won’t benefit you to focus on this metric.
As a rule, 25% to 40% is seen as a healthy bounce rate, but you can monitor this depending on your company's objectives.
Cart Abandonment Rate
The cart abandonment rate measures the percentage of visitors who add items to their cart but do not complete the checkout process. A high cart abandonment rate could indicate issues with your checkout process, such as a complicated or lengthy process, high shipping costs or a lack of payment options. By tracking this metric, you can identify the reasons why customers are not completing the checkout process and make changes to improve their user experience and increase conversion rates.
This could include simplifying the checkout process, offering free shipping or returns, or providing more payment options. A low cart abandonment rate is important because it means that you have a high amount of customers completing their purchases and generating revenue.
Also, don’t forget to utilise a cart abandonment email, while discounts are no longer the common practice this can bring what was once lost revenue back to you with little effort.
Customer Lifetime Value
Customer lifetime value (CLV) is an essential metric because it measures the total value a customer will bring to your business over the entire course of your relationship. CLV takes into account the amount a customer spends per transaction, the frequency of their purchases and the length of your customer relationship.
By tracking CLV, you can understand the value of your customers and make data-driven decisions to retain them and increase their spending over time. This could include personalising their customer experience, offering loyalty programs or creating targeted marketing campaigns.
Gross Margin
Gross margin metrics matter because this measures the profit made on each product after accounting for the cost of goods sold (COGS). Gross margin is calculated by subtracting COGS from the selling price of a product and expressing the result as a percentage of the selling price.
A high gross margin indicates that you’re making a large profit on each product sold, while a low gross margin could indicate that you’re struggling to make a profit or that prices need to be adjusted. By tracking gross margin, you can understand your profitability and make decisions to improve it, such as reducing the cost of goods sold, increasing prices or offering higher-margin products.
Net Promoter Score
To measure customer satisfaction and loyalty, you’ll need to be aware of your net promoter score (NPS). This is calculated by asking customers to rate the likelihood of recommending your business to others on a scale of 0-10. Customers who give a score of 9 or 10 are considered "promoters," while those who give a score of 0-6 are considered "detractors." ( 7 and 8 ratings are neutral).
The NPS is then calculated by subtracting the percentage of detractors from the percentage of promoters. A high NPS indicates that customers are highly satisfied with your business and are likely to recommend it to others, while a low NPS could indicate that improvements are needed in your customer experience. By tracking NPS, whether you do this through surveys, focus groups or emails, you can understand your customers' opinions and make changes to improve your customer satisfaction and loyalty.
Repeat Purchase Rate
Repeat purchase rate measures the percentage of customers who make a second purchase from your business. This metric is important to track because repeat customers are more valuable to your business rather than new customers. Repeat customers are more likely to make larger purchases, refer others to the business and have a longer customer lifetime value.
By tracking repeat purchase rates, you can understand the success of your customer retention strategies and make changes to improve them. This could include offering loyalty programs, providing excellent customer service or creating targeted email campaigns.
Cost per Acquisition
Cost per acquisition (CPA) is a crucial metric for your business because it measures the cost of acquiring a new customer. CPA is calculated by dividing the total cost of marketing and advertising efforts by the number of new customers acquired during that period. By tracking CPA, you can understand the effectiveness of your marketing and advertising efforts and make changes to improve them.
This could include adjusting your marketing budget, changing the channels you use to reach customers or refining your marketing message. A low CPA is important because it means that you are acquiring new customers at a lower cost, which can increase your profitability.
In Conclusion
By monitoring these foundational metrics we’ve discussed above, you can further understand customers' behaviour, marketing results, profits and much more. If you continuously track these metrics and make changes when needed, you can boost your sales, make customers happy and set yourself up for long-term success.
Once you have nailed these numbers it is time to move on to more detailed metrics and KPIs.