5 eCommerce Metrics Online Businesses Must Analyze & Optimize
Metrics are essential tools marketers use on a daily basis to analyze and improve the performance of campaigns. eCommerce metrics are important for online businesses as they help keep track of their performance.
Marketing strategies are likely to stop giving results in some time if they are not monitored and improved.
However, it can be difficult to determine what eCommerce metrics you should monitor, particularly if you are just starting out in the area.
In this article, we highlight 5 of the most important metrics eCommerce businesses should monitor and optimize.
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Customer Acquisition Cost (CAC)
Customer acquisition cost or average acquisition cost is the measure of the budget spent on acquiring new customers. This cost includes everything from marketing and sales to website hosting and staff salaries. To achieve financial stability for your eCommerce business, you must keep this cost as low as possible.
This eCommerce metric is important because it helps track the cost-efficiency of different marketing activities. Most businesses use multiple marketing media and distribution channels like paid ads, social media, PPC, email, etc.
While some of these may be cheap and effective, others could be draining the budget without much return. This metric helps adjust the marketing strategies to improve profitability.
Customer acquisition cost should be viewed as a measure of how effectively you use the budget to attract new customers.
One of the best ways to keep this cost low is to identify the most efficient marketing channels and focus on leveraging their potential. You should stop putting into promotional activities that fail to deliver a consistent stream of high-quality leads.
Customer Retention Rate (CRR)
Customer retention rate is the percentage of shoppers who come back to your store for repeated orders. This metric is quite useful because retaining customers is more affordable than attracting new ones.
A low value of this metric suggests that your customers are not happy, either because of the poor quality of products or customer service.
A low customer retention rate means you are failing to retain customers and losing the opportunity to build a loyal audience base that helps grow your business. CRR is calculated as follows:
CRR = (Customers with more than 1 order / Total number of customers) * 100
Fortunately, you can improve your customer retention rate by asking the customers where the problem lies. Ask for reviews and surveys post sales and let them rate their satisfaction level with your business.
Encourage repeated orders with a loyalty program, discounts, or offers. Consider sending customers reminder emails when it is time to restock.
Cart Abandonment Rate
This eCommerce metric represents what percentage of visitors leave the store without completing the purchase. These are the people who want to buy a product but are not so confident about it.
The cart abandonment rate is a measure of the sales you lose.
A high rate of cart abandonment is a red flag that suggests a need to optimize your website and processes. Some top reasons shoppers abandon their carts include the registration process, high shipping costs, complicated checkout process, long estimated delivery time, insufficient payment options, and others.
Solving these problems with the help of some effective tactics will help you bring down the cart abandonment rate and improve profitability.
Customer Lifetime Value
One of the most significant metrics for eCommerce businesses, Customer Lifetime Value, is a measure of the total amount you earn from a customer over their lifetime.
For example, if a shopper orders six times from your store, each worth $30, over time, the CLV is $180.
This eCommerce metric is an excellent way to gauge the profitability of your acquisition efforts. Tracking this metric also lets you figure out how much you can afford to spend on acquiring new customers.
If this value is lower than the customer acquisition cost, the business has a problem. However, it is possible to improve customer lifetime value. You can try the following tactics:
- Create social media and email campaigns to increase the number of visitors
- Improve customer retention by offering cheap products with the main line
- Give out samples or freebies with big orders
- Suggest related products
- Give detailed product descriptions to lower return rates
- Introduce loyalty programs
Lastly, the most important among eCommerce metrics is the Conversion Rate which represents the number of visitors converting into customers.
It shows what percentage of people visiting your site buy a product. The sales conversion rate is calculated as follows:
Conversion Rate = (Total number of sales / Total number of unique visitors * 100
This means if 1000 people visited your online store in a week and 10 out of them completed a purchase, the weekly conversion rate is 1%. Every business would want to achieve the highest possible conversion rate.
However, eCommerce businesses often face the problem of getting a lot of traffic and no sales. The industry has a low conversion rate at an average of only 2.27%.
Conversion is essentially a measure of how successfully you can convert visitors into customers. Driving traffic is not enough; you need to convince people to place an order once they land.
Everything from the offerings, the prices, the experience, the return policy, the payment options, and the quality should feel right.
The process of optimizing this measure is known as conversion rate optimization. It involves checking the behavior of visitors on the website, your sales funnel, page views, and exit pages to find out where the problem lies and try to fix it.
Here are some quick fixes that should help you elevate your sales conversion rate.
- Optimize the experience for mobile and tablet devices
- Attract high-quality traffic with social media ads
- Test the checkout process
- Perform an SEO audit to see that your product pages contain the right keywords
- Utilize remarketing to persuade people who left the site without buying
Monitoring and analyzing eCommerce metrics is a great way to stay focused on your marketing strategies and goals.
However, it is important that you focus on only what matters the most for your business and not waste time and resources trying to track irrelevant metrics.
Consider measuring the most relevant metrics, use the results to optimize your marketing campaigns, and deliver the best value to your customers while growing your business.