Ensure Your Business’s Success With These Metrics
Selling your products online without monitoring your performance is just like driving with your eyes closed! According to a study, there are over 26 million ecommerce sites around the globe. So, how does one succeed in such tight competition?
Ecommerce metrics are what you should be looking for. They help you in making a data-driven, informed decisions. With the availability of so many metrics, which one should be ideal for your business?
Of course, businesses are focused on metrics that significantly impact their business. However, often they end up tracking ‘vanity metrics’ that have little to zero impact on their business performance. It can be unqualified leads in the sales funnel, page views or social media likes. Monitoring these metrics isn’t a great idea to track your ecommerce progress.
So how do you determine which metrics are most relevant to your business? Before we answer that, it is essential to know the importance of ecommerce metrics to online business.
What is the Importance of Ecommerce Metrics to Online Businesses?
Imagine metrics as a magical wand helping you identify gaps and issues. With that thought, let us see how they do that:
1. Builds Robust Supply Chain
Typically, shoppers buy online because the price is often lower than in-store, the selection is vast and the convenience goes without saying. And so that means your product offerings might be very popular. Thus, the supply chain of your business must be robust. See if the products you advertise on the website are available in sufficient quantities in your warehouse. If not, it leads to slower delivery and the customer satisfaction level decreases. This results in negative customer satisfaction.
Having said that, having too many units in stock will fill up the space and unnecessarily increase your budget. Therefore it is always important to maintain a balance between supply and demand, and using metrics has proven handy in this case.
2. Analyze Data for Fraud Detection
Metrics play a vital role in detecting product activities as they can detect patterns depending on the customer behavior and warn you when a peculiar transaction takes place. For example, as an ecommerce business, you can send a warning message to the customer asking if they are doing the transaction and wait for the response before you process it.
3. Predicts What’s in Store for You
The metrics for ecommerce businesses help them determine future trends depending on numerous factors. It can be the category of products, the season size of transactions and many more. These analyses come in handy to determine what the upcoming sales will look like. And they help businesses consider what products they must focus on or if they need to make any adjustments in their inventory and what marketing strategy they must use to promote their products.
4. Personalize Customer Recommendations
You already know that selling to the same customer is much easier than getting a new one. Thus, when you sell to the same customer more than once, you are optimizing the value you can get from. So, recommending additional products is a natural extension of catering to their shopping patterns.
When a customer clicks on a particular product, if other products are recommended, there is a good chance that they will explore more and buy something along with the original purchase.
5. Predict the Inventory for the Upcoming Season
As a retailer, it becomes important to know if a particular product on your virtual shelf is worth the cost you are spending to maintain it in your inventory. Metrics will help you in determining the volume of sales of that product, what sales are predicted for the future, what is the customer satisfaction rate and more.
So these are some of the many benefits of keeping close track of your metrics. But how do you determine which is the most relevant one? Let’s find out in the next section.
How to Determine Which Ecommerce Metrics Are the Most Relevant for Your Business
The value of tracking multiple metrics is next to zero if they don’t bring any meaningful effect on the long-term success of an ecommerce business. So here is something you can do:
- Identify the key performance indicators (KPIs) that significantly impact the overall objectives and goals of the business from the large pool of metrics you track currently.
- A common business metric tracks paid search, the traffic that comes in as a result of a paid-search effort. Within that overarching metric, the KPI will get more specific and focus on the number of qualified leads that were generated from the paid search (metric).
- So when a metric changes, you have to see if it impacts your company. If the measurement point does not impact the bottom line, it is not worth the effort to track it. Thinking about which metric will contribute to improving your strategic objectives is not sufficient. You have to consider which one can contribute to achieving your current goals.
If your business has a hard time determining what metric is the most significant one to track, let us help you. For narrowing it down, these are the three crucial questions you should ask yourself:
- If a particular metric changes, how significant will the impact be on my business? If you see that the measurement point is insignificant to the bottom line, don’t waste time tracking it.
- Will the improvement of this metric help us achieve our strategic goals? As we already said, improvement isn’t enough. You have to track those metrics that will make the biggest impact on your business’s current goals.
- Will this metric also improve other metrics? Most of the metrics are related to each other. So when you improve, it results in a domino effect. For instance, addressing important traffic channels helps improve your traffic quality, which results in increased sales conversions.
So let us talk about the metrics that you must focus on. Here we have compiled the ones that most successful ecommerce managers focus on.
What Are the Important Metrics for Ecommerce?
Here are some tried-and-true fundamentals:
1. Sales Conversion Rate
Getting significant traffic yet insignificant sales is not uncommon for some ecommerce entrepreneurs. Therefore the average conversion rate for the ecommerce industry is quite low. So, that means getting traffic to your website is not everything. As people land on your website, they require a lot of persuasions to place an order. They must feel the product, the price, the payment security and the overall experience, in general, feels right.
Conversion is basically converting the visitor into a purchaser. Therefore, the process of improving on these metrics is called conversion rate optimization. Here are some things to look for as you keep your conversion rate in check:
- Navigation: See if visitors can their way easily to your website with the help of heatmaps.
- Buttons: Check whether or not they click on call-to-actions.
- Drop-off Pages: What page is their dealbreaker? Is it your About Us page or product page?
Among all the ecommerce metrics, the sales conversion rate is considered one of the most important. You can calculate it with this formula:
Conversion Rate = Number of Sales/Number of Users x 100%
2. Customer Lifetime Value (CLV)
Another important ecommerce metric is the customer lifetime value. It is a metric that measures how much amount customers spend with your online store throughout their customer lifestyle. Basically, there are three ways of calculating based on the stage of your business and the data you have collected so far:
- Predictive : CLV x Number of Orders
- Averaging : Total Revenue/ Total Number of Customers
- Historical : Order 1+ Order 2+ …
Customer lifetime value is crucial as it shows customer loyalty; the more people repeatedly buy from you, the better.
3. Average Order Value
The average order value is exactly what it sounds like: the average amount a consumer spends on every order from your store. Therefore, increasing the average order value can easily increase your total revenue even if you don’t have any new traffic.
A bigger order costs only a fraction more for product handling and shipping and saves you from acquisition and transactional expenses. So the bottom line is higher average value translates to more profit.
4. Shopping Cart Abandonment Rate
According to a study, about 70% of consumers abandon online shopping cards. Now isn’t that scary news for an ecommerce business? Your Shopping Cart abandonment rate is important because it will shed light on the fact that visitors are not converting for various reasons. These some of the primary ones:
- Registration requirements
- Hidden charges during checkout
- No free shipping
- Slower delivery
- Fewer payment options
- Checkout isn’t safe
5. Bounce Rate
Website bounce rate can be defined as the percent of visitors that abandon your site after viewing just one page. It is calculated by dividing the total number of single phase sessions by the total sessions on the website. For instance, if 200 users land on your website and 15 of them abandon without making another request (single-page sitting), the bounce rate of your website is 7.5%.
Website bounce Rate = Single-page time / Total time.
6. Click-through Rate
Click-through rate is the ratio of the number of people who see your ad or message or download offer or CTA or whatever it is and click on it to proceed to the next step. It gauges how well your keywords, ads and free listings are performing. The calculation is done by dividing the number of clicks by the number of times the ad was shown:
Clicks ÷ Impressions = CTR. For example, if you get 5 clicks and 100 impressions, your CTR would be 5%.
If you have a high CTR, it is an indication that the users find your advertisements and listings relevant.
These are some of the best ecommerce metrics that you should continuously track.
In a dynamic industry like ecommerce, it is quite important to monitor your performance and progress. To give competition to all your competitors, you must do something new every day and know how you are doing and what is limiting your business. So start tracking all the metrics mentioned above and comprehensively analyze the same!