Ecommerce metrics you should be tracking no matter what

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Understanding the pulse of your e-commerce business begins with tracking the right metrics. Let’s discuss the crucial significance of e-commerce metrics and how they shape the pathway to success! 📈

Most brands tend to focus on metrics but aren’t focusing on the right ones. Certainly, prioritising metrics with a significant influence on your profitability is crucial. However, it's common to get caught up in tracking "vanity metrics" that offer little insight into your business's overall performance.

For instance, while time on page provides some value, metrics like return on ad spend (ROAS), average order value (AOV), and conversion rate (CR) offer far more meaningful insights for e-commerce success.

Monitoring shifts in these key metrics can promptly signal areas that require immediate attention and action.

Having said that, let’s look into some of the crucial metrics one by one.

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Average Order Value

Average Order Value (AOV) signifies the typical amount customers spend per transaction on your platform.

Efforts should be directed towards extracting more value from your website traffic. Particularly in the initial stages, when traffic may be limited, emphasis is often placed on cross-selling, upselling, and bundling to ensure customers find all they need while maximizing revenue potential. Without tracking AOV, you lack insight into the effectiveness of these strategies.

AOV is calculated by dividing total revenue for a specific period by the total number of completed orders within that time frame. For instance, if today's sales amount to $50,000 generated from 200 orders, the AOV would be calculated as $50,000/200, resulting in an AOV of $250 per order.

Customer Lifetime Value

The higher your Customer Lifetime Value, the less you'll need to invest in acquiring new customers. As your e-commerce venture expands, nurturing enduring customer relationships becomes paramount to avoid unnecessary spending on acquisition efforts.

A critical marketing pitfall is solely viewing your customer base in terms of individual transactions. Contrastingly, the Customer Lifetime Value (CLV) metric adopts a holistic perspective, assessing the revenue potential of customers throughout their entire relationship with your brand.

To determine CLV, multiply the average order value by the average purchase frequency rate and the average customer lifespan. For example, if customers typically spend $300 per order, make four purchases annually, and remain loyal for ten years, the CLV would be calculated as 300 x 4 x 10 = $12,000. It's important to note that CLV represents an average figure rather than an exact value.

Customer Retention Rate

If you find yourself losing customers nearly as quickly as you're gaining them, it's a clear indicator of underlying issues in your product or customer relationship strategy.

In e-commerce, repeat customers play a vital role as they significantly reduce acquisition costs. The Customer Retention Rate (CRR) metric measures your ability to maintain customers once acquired.

To calculate CRR, subtract the number of new customers gained during a specific period from the total number of customers at the period's end. Divide this by the number of customers you had at the beginning of the period, then multiply by 100. This metric is directly linked to customer satisfaction and loyalty, underscoring its importance in evaluating business performance.

Customer Acquisition Cost

Customer Acquisition Cost (CAC) represents the total expenditure typically required to acquire a new customer. Often dubbed the "startup killer," this metric highlights the challenge new companies face when investing heavily in marketing efforts to attract leads, with only a fraction converting, resulting in a high CAC.

To calculate CAC, divide the total sales and marketing expenses incurred during a specified period by the number of new customers acquired within that time frame. All sales and marketing costs should be considered in this calculation.

A gradual increase in CAC over time serves as a red flag, indicating potential issues with either your product or user experience that warrant immediate attention.

Return On Ad Spend

If you lack insight into your expenditure for generating new revenue, you risk outspending your earnings— a recipe for disaster.

To track this, use the formula: ROAS = Revenue From Advertising / Cost of Advertising. For instance, if you invest $3,000 in a PPC campaign and it yields $12,000 in revenue, your ROAS would be 4. This means for every dollar spent on advertising, you're generating $4.00 in revenue.

Consistently monitoring your ROAS allows you to assess advertising effectiveness and forecast potential revenue from future campaigns.

Net Promoter Score

As an ecommerce manager, tracking metrics that gauge the quality of your fulfillment and products is crucial for assessing the customer experience. While return rates and on-site reviews offer valuable insights, the Net Promoter Score (NPS) provides a comprehensive measure of satisfaction.

Despite its intangible nature, the NPS is highly important, as it assesses the likelihood of customers recommending your brand to others, reflecting brand advocacy and overall satisfaction. Typically determined by surveying a sample of your customer base, respondents rate their likelihood of recommending your brand on a scale of 1 to 10, with 9 or 10 being promoters, 7 or 8 as neutral, and below 7 as detractors. Calculating the NPS involves subtracting the percentage of detractors from the percentage of promoters.

There you have it, savvy shoppers! 🎉 Armed with these must-know metrics, you're poised to conquer the e-commerce universe. So, sharpen those analytics skills and watch your online empire soar! Until next time, keep hustling and happy selling! 🛍️✨