We all know that measuring progress is crucial for entrepreneurs, be it an online eCommerce business or an offline physical store. It helps you make informed decisions to drive your business to success with increased efficiency, productivity, and ROI. This article delves deep into significant eCommerce metrics you should measure to thrive in the dynamic business world.
Metrics are essential to gauge your progress in business and life. Whether you are an entrepreneur, a teacher, a professional coach, or a digital marketer, it helps you to measure your ongoing performance and find opportunities for improvement. In other words, performance measurement metrics help you make informed business decisions based on data and analytics trends.
Also, compared to other marketing channels, digital marketing, the essential channel for an eCommerce store, provides more visibility to marketing performance regarding customer behavior, actions, and revenue. It is difficult to gauge how many people see your company’s billboard on the street or visit your restaurant seeing an ad in the newspaper. However, it is much easier to obtain data on how many people visited your online store and how many purchases were made.
After all, you need to be constantly aware of your business numbers to thrive in the dynamic and highly competitive global eCommerce market, which is expected to total over 8.1 trillion US dollars by 2026. The projection denotes a massive 39% growth from the 5.8 trillion US dollars in 2023.
Metric and KPI
A metric is any quantifiable, consistently defined measurement of performance. From an eCommerce perspective, some significant metrics could range from numbers to gauge website performance to Average Order Value, from website traffic sources to ad conversion rates.
There is a valid reason for the long and extensive list of eCommerce metrics. After all, the data sources are also varied, such as Google Analytics, social media, online store homepage and product pages, checkout/shopping cart, and cart abandonment. All these varied sources provide data essential for interpreting performance, trends, and marketing strategies – what is working and what is not to help your business grow.
KPI denotes the Key Performance Indicator. While metric provides value, KPIs are the numbers you need to track to measure performance and growth. For example, though website visits or traffic are important, the number of orders should be your KPI that shows growth.
Key eCommerce Metrics To Track
We know the significance of eCommerce metrics and KPIs as crucial data to evaluate overall business success. However, which metrics should be prioritized differs based on the nature of eCommerce businesses. However, here are some of the most useful metrics that every eCommerce merchant should track:
• Conversion Rate
As an eCommerce merchant, your priority is to convert customers. Again, the KPIs will show you if you are driving visitors to the right pages and products based on what they are looking for. Tracking codes added to your shopping cart provide an additional layer of context to be sure of conversion.
The conversion rate (CVR) is the number of people who purchased from your website out of the total number of people visiting your website. The formula looks like the following:
CVR = (No. of Purchases / No. of Sessions) x 100
However, there is no universally accepted CVR, as it varies by industry. So, make sure you check your industry’s conversion rate trends.
• Average Order Value
Average Order Value is a metric that tracks how much a customer typically spends on a single order they place on your eCommerce store. In the initial days, you might not get much traffic. So, you can focus on bundling your products to ensure your customers get what they need together. Apart from that, grab opportunities to cross-sell and upsell your products to increase revenue potential.
• Customer Lifetime Value [LTV]
As you might know, your LTV is inversely proportional to customer acquisition costs, meaning the higher the LTV, the less you need to spend on acquiring new customers. So, you need to build an amazing and long-lasting relationship with your customers, which will reduce customer churn and save money on acquisitions. Here’s how to calculate CLV:
Average Order Value x Average Purchase Frequency Rate x Average Customer Lifespan
Here, you should note that you will look at an average number to help estimate, not an exact number.
• Customer Retention Rate [CRR]
As we all know, repeat customers form the backbone of any business, whether online retail or any other type. This metric measures your competence in retaining customers once you obtain one.
Calculate the Customer Retention Rate (CRR) by deducting the number of new customers acquired during a specific period from the total number of customers at the period’s end. Divide this difference by the initial number of customers at the beginning of the period, then multiply the outcome by 100. This metric is closely tied to customer satisfaction and loyalty.
• Cost of Acquisition
Customer Acquisition Cost [CAC] is usually the amount you spend to gain a new customer. New companies or startups often spend considerable money on marketing and sales with relatively few leads, thus leading to a very high acquisition cost.
You can calculate this metric by dividing the total sales and marketing expenses incurred during a specific period by the number of newly acquired customers within that same period. Remember to consider all sales and marketing costs incurred in the specific period.
• Cart Abandonment Rate
Shopping cart abandonment is probably one of the worst experiences of your eCommerce business. Unfortunately, though it is a sad and common reality, occurring due to a variety of reasons, such as the following:
- An additional fee or high shipping cost, which was unanticipated
- Absence of guest checkout option
- Lengthy checkout process extending through multiple pages
- Apprehensions over payment security
- Bad user experience
You can calculate the shopping cart abandonment rate by dividing the number of completed cart checkouts in a specified period by the total number of loaded carts, then multiply the quotient by 100.
• Return on Ad Spend [ROAS]
You must know exactly how much you are spending at any given time to acquire customers and drive revenue, or you can easily spend more than your profit margin. In that case, you would set yourself up for failure and disaster. The following is the formula to calculate your ROAS:
ROAS = Revenue From Advertising / Cost of Advertising
You need to ensure that you generate equivalent revenue for every dollar you spend on advertising. Monitor your ROAS consistently to make informed decisions based on data-driven projections about the revenue potential of your advertising campaigns.
• Determine Marketing Channels
You should analyze which marketing channels are working for your business by tracking metrics such as conversion rate, cart abandonment, AOV, and others based on each channel you use. Such thorough analysis will help you understand where you are getting more revenue-generating traffic and test the shopping experience of the other channels.
• Net Promoter Score [NPS]
It is a comprehensive way to measure the most significant aspect of your eCommerce business: the customer experience. You need to know what your customers think about your product and fulfillment process. Though less tangible than the other metrics listed, it is a significant survey showing how likely your customers would recommend your products or services.
Customers rated 9 or 10 are usually classified as promoters, while those rated 7 or 8 are considered neutral. Any rating below 7 is categorized as a detractor. You can calculate the Net Promoter Score (NPS) by subtracting the percentage of detractors from the percentage of promoters.
Conclusion:
So, as we all know, running a successful eCommerce business is no “mean feat.” You need to don multiple hats, including maintaining product quality, branding, marketing, customer support, and others. Data is your best friend here. Armed with data and analytics and the knowledge of the significant metrics to measure, you can drive your eCommerce business to a path of success and glory. Derive actionable insights from the numbers you gauge and work on the opportunities it provide.
However, if you need an expert to guide you through this process, contact XPDEL, and we will be happy to help your business soar to new heights.
About XPDEL:
XPDEL helps eCommerce brands accelerate their growth, empowering them with multi-channel fulfillment, whether shipping directly to consumers, delivering to businesses, or selling through retail stores. We are founded and operated by veterans with experience from Amazon, FedEx, UPS, JDA, Walmart, Target, and other leading companies in eCommerce and Retail. Guided by these experts, we provide customer experiences that help you grow your business.
