Nowadays, creating an eCommerce website is simple, just like making toast. However, operating a successful eCommerce website is an entirely different challenge. Good business owners know data. Smart business owners know how to use data to make business decisions.You need to know some important metrics to run a profitable eCommerce store that goes beyond the basics. We have compiled these metrics for you, and each one is crucial to making your store workable and as profitable as possible. Additionally, these metrics are interconnected, so it's essential to understand and monitor them all.
We'll go from simple to complicate so our beginner readers' heads don't start spinning immediately. Read on.
You need to know where you are to understand where you're headed. This saying rings true when managing and scaling an eCommerce company. Knowledge is power; information is everything, a third tired cliché. Well, they are cliché for a reason – they are true. For the best chance of success, you'll need an eCommerce platform that provides accurate feedback about your business's performance and how customers interact.
It is essential to have a comprehensive understanding of your analytics because, without a robust approach to your analytics dashboard(s), you may not be aware of various vital information, such as:
There is much more information you can gain from analyzing your analytics. Therefore, it is crucial to invest time and resources into it. Once you master eCommerce analytics, you'll know what encourages customers to click "Buy Now" and what pushes them to close the tab. We have created a comprehensive guide to assist you in becoming proficient at analyzing data. Answering these questions will help you make informed decisions about the future of your business. Find out what's working and not, and adapt your business accordingly.
Use an accurate and comprehensive product lifecycle management software solution that integrates well with your platform and offers you everything you need to get an edge. Look at the various analytic tools different platforms offer, and decide which one you'll find most useful.
As an eCommerce business, increasing visibility and brand awareness among your target customers should be a top priority. It's crucial to get people to notice your brand and click through to your website, with the expectation that they become more engaged in the future. To track the success of your efforts with first-time visitors, you must pay close attention to several key performance indicators (KPIs), including impressions.
An impression is a single instance in which your ad or content is presented to an individual on a third-party platform. It includes the number of times your link appears in search results, your ad is displayed on social media platforms, or your sponsored ad appears on a third-party site.
Tracking these impressions is essential to understanding the success of your content marketing and SEO initiatives, ensuring that you're bidding on the right keywords and that your ad bid is high enough for specific search terms. Remember that impressions and visibility are only the starting point - there's much more to consider when analyzing the success of your eCommerce business.
Click-Through Rate
It's not enough to get your brand noticed; you must also get consumers to click on your site. To measure this, you should monitor your click-through rate (CTR) for each channel where your content or ads are visible. CTR gives you a better idea of how engaging your ads or content are since it shows how many people click on them to learn more about your company.
It's also essential to track which pages on your site visitors are clicking on the most. Ideally, you want more people to check out your category and product pages than your About Us page. If you notice a discrepancy, you must investigate further to determine what's causing the issue.
Impressions and CTR are the key performance indicators (KPIs) for tracking who clicks on your site. In a later section, we'll look at other metrics related to visitors who click over to your site and stick around.
If you have a mailing list, it's a great way to keep engaging with consumers interested in your brand's offerings, even if they still need to purchase. To measure the success of your mailing list, you should monitor several different metrics.
To calculate your Click-Through Rate (CTR), you divide the number of people who clicked on your ad or link by the total number of times it was viewed. For instance, if your ad were shown to 1,000 people and only ten clicked, your CTR would be 1%. This is obtained by dividing the ten clicks by the 1,000 impressions.
Subscription Rate
Your subscription rate is the percentage of visitors who sign up for your mailing list compared to the total number of visitors to your site. If your subscription rate is lower than expected, you can implement popups, streamline the subscription process, optimize your call-to-action, and improve your newsletter's value proposition to increase it.
Email Open Rate
Your email open rate indicates how many times a particular email is opened by its recipient out of the total number of people who received it. Several factors can influence the open rate, including the email subject line, how your company or name is presented in the "From" field, and the timing of the email's delivery. If you notice a consistently low open rate, remove subscribers who haven't opened your emails in a long time and clean up your mailing list.
Email Click-Through Rate
The email click-through rate indicates how many people clicked on the links in your email compared to the total number of recipients. It is influenced by factors such as the open rate, the content of the email (text and multimedia), the value offered, and the call-to-action.
Unsubscribe Rate
Your unsubscribe rate can indicate how well your audience receives your newsletters and drip campaigns. However, it's essential to consider other factors that may contribute to someone's decision to unsubscribe. For instance, they may have only subscribed to access a particular piece of content that didn't align with their interests. Therefore, a high unsubscribe rate may not necessarily reflect negatively on the value of your content. Instead, it may signal a need for more straightforward communication on your website to help potential subscribers understand who would benefit from signing up for your mailing list.
Your mailing list unsubscribe rate is calculated as follows: (Number of unsubscription requests / Number of emails sent) x 100
Spam Complaint Rate
To calculate the spam complaint rate, you replace the number of unsubscribers with the number of spam reports while using the same formula as the unsubscribe rate. It's best to keep your spam rate under 0.1%. Some people may report spam instead of unsubscribing. Still, if your spam complaint rate is higher than usual, it may indicate that your emails resemble typical spam and are considered bothersome or useless by your recipients. If this happens, you should step back and address the issue.
List Growth Rate
In essence, to simplify things, you need to compare the number of subscribers you had at the beginning of a specific time frame (such as a month, quarter, or year). If your list growth rate is lower than expected, it could be due to any of the factors we've discussed so far - such as impressions, CTR, or the value of your emails. To identify the root cause of the problem, you'll need to conduct a more thorough investigation.
The list growth rate is calculated using the following formula: ([(Number of new subscribers) - (Number of unsubscribers + spam complaints)] / Total number of mailing list subscribers]) x 100
Conversion Rate
The email conversion rate is a fundamental metric that helps determine the effectiveness of email campaigns. It represents the percentage of recipients who not only clicked through an email to your website but also completed a specific action, such as making a purchase, filling out a form, or downloading content.
For example, if an email offers a 20% discount on a particular product and includes a link to the product page, a conversion occurs when recipients purchase.
It's worth noting that open rates are also crucial, but they can be considered a vanity metric if they don't increase the conversion rate. Therefore, monitoring both metrics closely and making changes when necessary to improve your conversion rate is essential. By doing so, you can enhance the overall effectiveness of your email marketing campaigns and drive more significant results for your business.
Add to Cart Rate
The add-to-cart rate indicates the percentage of visitors who added a product to their virtual shopping cart. This rate provides valuable insights, such as whether you are attracting the right audience, whether your visitors have a specific purpose, and whether your products and prices meet your target consumers' expectations.
Time on Site and Pageviews per Visit
The metrics clearly indicate what they represent and how to compute them. However, it's important to note that having a higher-than-average time on site and pageviews per visit may only sometimes be positive. On the one hand, if visitors spend considerable time on your site and explore various pages, it shows that your site is engaging and your products may interest them. However, if they spend too much time browsing without making a purchase, it could suggest that your site is confusing or causes hesitation.
Bounce Rate
The bounce rate is a crucial metric that measures the percentage of website visitors who leave your site after only viewing one page. A high bounce rate indicates that the content on that page is not engaging or valuable to the visitor. This is often caused by a disconnect between the expected value of the site (as suggested by ads or search results) and the actual value and relevance of the website. Therefore, ensuring that your website content is informative, engaging, and relevant to your target audience is essential. Moreover, it is crucial to focus on critical metrics for customers who have purchased from your online store to identify and optimize areas of your business that can enhance customer satisfaction and retention.
Conversion Rate
When we talk about conversion rate, we're talking about the percentage of people who have bought something from your website compared to the number of people who have visited your website. It's a simple metric but very important. Your aim should be to boost your conversion rate in any way possible, as long as it's cost-effective.
Average Order Value
Average order value (AOV) is the average amount of money customers spend in a transaction. It shows how much revenue is generated through each purchase, while the conversion rate indicates the number of visitors who make a purchase. It's possible to have a high conversion rate but a low AOV or a lower conversion rate but still generates enough revenue through each transaction to offset the difference.
Revenue Per Visitor
When analyzing website performance, Revenue per Visitor (RPV) is a valuable metric to consider. Unlike Average Order Value (AOV) which only accounts for customers who make a purchase, RPV encompasses all visitors to your site. By calculating your average RPV, you can determine the approximate amount of money each visitor is worth to your business, regardless of whether they make a purchase. However, it's important to note that increasing visitor numbers doesn't necessarily guarantee an increase in revenue. RPV can provide insight into whether you are attracting the right audience through your advertising and content.
Cart Abandonment Rate
At times, individuals who place items into their virtual shopping carts ultimately don't follow through with making a purchase. The cart abandonment rate pertains to the proportion of people who added items to their carts but didn't ultimately make a purchase, compared to the number of individuals who made a purchase and those who added items but eventually didn't buy anything. To compute this rate, one would divide the number of cart abandoners by the number of individuals who placed items into their cart. For instance, if ten people added items to their cart but only three ended up making a purchase, then the cart abandonment rate would equate to 70%.
It is not uncommon for cart abandonment rates to be high. However, the reasons for abandonment can vary from logistical concerns to distractions. If your cart abandonment rate exceeds 70-80%, it is crucial to investigate the possible reasons for the high rate.
Customer Acquisition Cost
The customer acquisition cost (CAC) measures how much money your company spent on marketing during a specific period and how many customers you gained during that time. Although CAC can help you evaluate the success of your marketing efforts compared to previous periods, it may provide a partial picture of the situation.
For example, a CAC of 250kr can be incredible if your AOV is 5000kr; but if your AOV is 300kr, this CAC would be considered way too high.
In the next section, we will explore several other metrics that are important to consider when determining a "good" CAC for your company. To simplify the process, we have developed a free eCommerce Tracking Dashboard to calculate these metrics. You can access the dashboard here. Additionally, monitoring specific metrics for your repeat customers is crucial and vital to driving revenue. These metrics include: [list the metrics].
Retention Rate
Customer retention rate is the percentage of customers you manage to keep over a specific period. When calculating this rate, it's important to exclude new customers because they haven't been around long enough to be considered "retained." As you may know, acquiring new customers can be costly, but retaining existing ones is much cheaper. Therefore, it's crucial to prioritize keeping your retention rate high at all times.
The formula for calculating the retention rate is as follows:
eCommerce metrics #18: Retention rate - [(Number of customers at the end of period) - (New customers acquired during that period)] / (Number of customers at the beginning of period)
Customer Lifetime Value (CLV)
Understanding the concept of "customer lifetime value" is crucial in the world of e-commerce. This term refers to the anticipated revenue that a typical customer will generate throughout their entire relationship with your company. In order to calculate this metric, you must consider factors such as the average order value, the frequency of your customers' purchases, and the length of their relationship with your business. Keeping track of CLV is essential because the more your customers spend and the more often they make a purchase, the more successful your company will ultimately become. If you need assistance with calculating your CLV, there is an informative infographic by Neil Patel that can provide you with valuable insight.
Early Repeat Rate
The early repeat rate is a fundamental metric that refers to the proportion of consumers who make a repeat purchase within a brief time frame after their initial purchase, compared to the total number of first-time customers. The duration of this period may differ depending on the goods or services a business offers. For instance, a sneaker retailer might consider three months as the appropriate period, while a consumables seller might opt for two to three weeks as the definition of "early." Identifying your early repeat customers can provide you with valuable insights into the preferences and needs of your most valuable consumers, which can be used to fine-tune your marketing strategies and create personalized campaigns that cater to their unique requirements.
Repeat Customer Rate
The repeat customer rate is the percentage of your customer base who have made more than one purchase from your store. A "good" repeat customer rate varies depending on the industry. For instance, a company that sells wine glasses will likely have more repeat customers than a company selling engagement rings.
It's crucial for your business to retain first-time and long-time customers, as discussed when talking about CLV.
Your loyal customers, also known as raving fans, contribute significantly to your revenues and promote your brand to others in their network. It's essential to keep track of metrics related to these customers.
To calculate the repeat customer rate, you need to divide the number of customers who have made two or more purchases by the total number of customers who have made at least one purchase.
Net Promoter Score
Net Promoter Score (NPS) is a metric that measures the likelihood of customers recommending your brand to others within their network. To arrive at your NPS, you ask customers to rate on a scale of 0-10 how probable they are to recommend your brand.
The respondents who rate 0-6 are considered "Detractors," those who rate 7-8 are "Passives," and those who rate 9-10 are "Promoters."
After collecting enough responses, you calculate the percentage of Promoters and Detractors and subtract the latter from the former to arrive at your NPS. For instance, if 60% of your respondents are Promoters and 20% are Detractors, your NPS is 40. At this point, you can compare your score to industry benchmarks to assess your performance. Moreover, you can ask follow-up questions to obtain qualitative data on why customers rated your brand as they did.
Average Referral Rate
It's important to keep in mind that the following three metrics are based on the assumption that you have a referral program in place. The first metric, known as the average referral rate, is a way to measure the percentage of purchases made as a result of referrals in comparison to the total number of purchases within a given time period. This metric provides you with valuable insight into the impact of word-of-mouth referrals on your business. However, it's crucial to track the future purchases of referred customers and trace them back to their original referrer. By doing so, you'll be able to accurately calculate your true average referral rate by keeping track of the source of all your customers.
Program Participation Rate and Share Rate
To calculate the program participation rate, you need to determine the percentage of customers who have signed up for your referral program out of the total number of customers who have been informed about it. On the other hand, the program share rate is the percentage of advocates who share information about your company compared to the total number of people who signed up. This metric helps you determine how many people who signed up actually make a referral. By tracking these metrics, you can gauge whether your referral program is valuable and engaging to your loyal customers and whether they feel your brand is worth recommending to others.
Referral Conversion Rate
The referral conversion rate is a crucial metric that indicates the percentage of individuals referred to your business who take the desired action, such as purchasing from your store. It is calculated by comparing the number of successful referrals to the total number of attempted referrals. This metric is essential in determining the effectiveness of your referral program in generating new business.
If the referral conversion rate is lower than expected, it is imperative to consider several factors. Firstly, analyze if you are making it easy for referrers and their friends to engage with the program. Secondly, ensure that you have clearly communicated the type of individuals to refer. Thirdly, provide proper incentives for participation.
It is also important to consider the return on investment (ROI) of the program, especially if the conversion rate is high. In this case, you may need to reassess and find more cost-effective ways to offer the program without compromising its effectiveness. In conclusion, the referral conversion rate is a crucial metric that requires close attention to ensure that your referral program generates new business effectively.
Do you know the difference between metrics and KPIs?
In order to gain a comprehensive understanding of the crucial indicators for your eCommerce venture, it is imperative to delve into the fundamental query of how we distinguish between a metric and a key performance indicator (KPI). In essence, all KPIs are metrics, but not all metrics hold the same level of significance as KPIs.
Every KPI is a metric, but not every metric is a KPI.
To truly understand the difference between metrics and key performance indicators (KPIs), it is important to break them down. Metrics are objective data points, while KPIs are metrics that hold subjective value to your company and provide insight into your business's performance in a specific area.
Metrics in themselves have no value and cannot be used to determine whether your business is performing well. Problems can arise when a company puts too much weight on so-called "vanity metrics" that do not impact the bottom line, such as a sharp increase in pageviews without a corresponding increase in sales.
KPIs, on the other hand, are measured objectively but assessed subjectively. They answer the question of whether a particular initiative or venture has been successful by comparing it to your company's goals related to that KPI.
To better understand the relationship between basic metrics and KPIs, it can be helpful to view them as having a degree of separation, with your company acting as a filter between the two. For example, if an increase in pageviews correlates with an increase in sales, you might define "X sales per Y page views" as a KPI worth tracking.
It is important to note that while KPIs indicate a company's level of performance in a specific initiative, the metrics associated with a given KPI provide the evidence needed to come to a conclusion regarding this level of performance.
Conclusion
eCommerce metrics are essential for store owners to track to run a successful eCommerce website. These metrics include the number of visitors to the store, the origin of these visitors, which categories and products are popular among them, the average buyer's journey, the effectiveness of your paid ads, the items that customers are purchasing, the amount of money they are spending, the payment methods they are using, and how they discovered your store.
To ensure success, it is essential to have a comprehensive understanding of your analytics, such as the number of visitors to your store, the origin of these visitors, which categories and products are popular among them, the average buyer's journey, the effectiveness of your paid ads, the items that customers are purchasing, the amount of money they are spending, the payment methods they are using, and how they discovered your store.
By mastering eCommerce analytics, you can make informed decisions about the future of your business and adapt your business accordingly. Use an accurate and comprehensive product lifecycle management software solution that integrates well with your platform and offers you everything you need to get an edge.