Tracking the right metrics is important to any type of business. For an ecommerce business, having data available and tracking the right metrics is essential. Aside from the basic inventory metrics that help keep your fulfillment processes running smoothly, you also want to have a good understanding of how your business is performing overall. Here are several key metrics every ecommerce business should track:
1. Cart Abandonment Rate
One of the biggest recurring sources of lost revenue for ecommerce sites is cart abandonment. Cart abandonment is what happens when a potential customer adds items to their cart and then does not complete the checkout process. Sometimes they leave the site before actually starting to check out and sometimes they leave during the checkout process before completing the transaction.
Adding something to the cart and then starting the checkout process are sure signs of intent to buy. So, if someone is abandoning their cart after showing intentions to buy, there could be something going wrong on your site or in the checkout process. It’s important for you to know how often that’s happening and to figure out why in order to fix it.
By keeping an eye on your cart abandonment rate, you’ll be able to see how many users abandon their carts over time. Plus, as long as you have conversion funnels set up correctly in analytics, you’ll also be able to see at which point most people are abandoning their carts. Not only does this help you identify problems and make improvements, but it also helps you better evaluate those improvements over time while also reducing potential revenue loss.
2. Average Order Value
Another important metric to track is the Average Order Value (AOV). You’ll need to know your total revenue and transactions for this, but, as long as you have robust analytics, you’ll be able to see and analyze those numbers easily. AOV helps you determine the lifetime value of a customer and helps provide information on where to focus more of your efforts for continued growth.
In analytics, you’ll be able to segment your AOV by channel or campaign to see what sources tend to drive larger orders. Keeping an eye on this metric over time can also inform future strategies and allow you to test things like product bundles or subscriptions.
3. Bounce Rate
Bounce rate refers to the number of people that land on your website and leave without visiting another page. It can be a good metric for gauging how many single page sessions your website receives and a high bounce rate can be an indication of a potential user experience issue on your site or on a particular page.
But, it’s not a metric you can view in isolation as it doesn’t tell the whole story of how someone is engaging with the page.
For example, someone could watch several minutes of video and read all of the content on a page, but if they leave without going to another page, their visit still counts as a “bounce”. When evaluating bounce rate, you also want to take other metrics into account like time on page, average session duration, other engagement metrics, and any event tracking you have set up for elements on the page.
There are plenty of ways to reduce bounce rate on your website, but the particular improvements you should consider will need to be customized for your situation and site. Usually, a high bounce rate on a page points to performance or user experience issues, so starting your evaluation there can lead to some valuable insights for how to improve.
After all, you want potential customers to be visiting multiple pages on your website, easily finding what they need, and then completing their transaction as seamlessly as possible.
4. Customer Lifetime Value
Gaining new customers can help your business continue growing, but new customer acquisition generally costs far more than retaining a customer. On top of that, loyal customers tend to spend more, purchase more often, and send referrals to your business.
You’ll get a clear picture of how valuable a loyal customer can be to your business by calculating Customer Lifetime Value (CLV or LTV). Knowing this information can help you figure out where your most profitable and loyal customers come from, how to retain them over time, and how to get more of them.
Customer Retention and Loyalty
Improving your customer retention rate, or the percentage of return customers, is a good move for your business. After all, the better you are at retaining customers, the more likely you are to turn those customers into loyal customers or even brand ambassadors.
These are the customers that will advocate for your brand, share their positive experiences with their friends, and regularly recommend your business in addition to continuing to purchase from you.
There are plenty of customer retention strategies to help keep customers engaged with your brand and encourage them to become loyal customers. Although retaining customers after a purchase is important, so is making sure they have a fantastic experience with your website in order to make the purchase in the first place.
5. Conversion Rate
You may know your total revenue, total transactions, and other important metrics, but what about your conversion rate? Although those other metrics will tell you the total of what you have, they won’t necessarily tell you the potential you’re missing out on. Conversion rate can help you there.
Conversion rate is a solid metric that tells you the percentage of people on your website that convert, or make a purchase. This, paired with other metrics like bounce rate and cart abandonment, can help you identify areas for improvement on your ecommerce site.
For example, if you have a low conversion rate, high bounce rate, and high cart abandonment rate for a certain product line, category, traffic source, or another comparison, you could have a problem and it’s time to dig in. Perhaps you’re wasting time and money on a product most of your customers don’t care about, targeting the wrong audience on a specific channel, offering a poor mobile experience, or something else.
By tracking your conversion rate and segmenting it, you can gain some valuable insights and ideas for how to improve your marketing efforts and also increase your conversions. Here are a few different segments to look into when you’re analyzing your conversion rate to get you started:
1. Conversion Rate for New vs Returning Customers
In general, the conversion rate for returning customers should be higher than the conversion rate for new customers simply because returning customers are more familiar with your business.
This is especially true if you are doing customer retention right and rewarding your customers for their loyalty. Knowing this metric for these two groups over time can help you test changes and strategies to both improve customer retention and increase conversions for brand new customers as well.
2. Conversion Rate by Device Type
Looking at the conversion rate by device type can help you identify user experience issues specific to devices. A responsive website should offer a fantastic user experience no matter what device is used to visit it. However, a low conversion rate on a specific device could indicate an issue for users on that device.
Overall, consumers are getting more comfortable with mobile purchases, but there are a lot of things that can throw up red flags and discourage them from purchasing. If you have a lower than normal conversion rate on mobile, resolving any friction in your processes or usability issues there and ensuring you have trust signals can help improve it.
3. Conversion Rate by Traffic Source
Looking at conversion rate and other metrics by traffic source can also give you some insight into your marketing efforts and how well they’re working. You may notice a higher or lower conversion rate on certain traffic sources than others. This can tell you that your marketing efforts could be missing the mark or resonating with your audience.
It’s important not to write off a channel just because it has a low conversion rate without digging into the reasons why it is underperforming and doing some testing. You may find that a certain channel isn’t for you or you may find that you can improve results drastically by improving your approach. If you simply write it off when your targeting, messaging, etc. was the real issue, then you may miss out on a channel that could have been one of your high performers.
You’re running a business, so revenue is a key metric. Revenue only tells you so much, but when segmented and paired with other metrics, it can provide a plethora of information and insights for how well your business is doing as well as valuable improvements to make. Here are a few revenue numbers and segments to explore:
1. Total Revenue
Total revenue is simply how much money your business has brought in over a certain time. It’s definitely useful for you to know as you evaluate the overall health and growth rate of your business.
2. Revenue by Traffic Source
Segmenting revenue by traffic source can tell you which channels deliver the biggest impact to your bottom line. This can be useful as you determine marketing budgets and efforts moving forward.
You don’t want to just write off or ignore something that delivers the lowest revenue without looking into why and conducting some tests. You don’t want to continue doing things that aren’t working for your business, but you also don’t want to write off lucrative opportunities without reason either.
3. Revenue by Device Type
Looking at revenue by device type can help you see the devices that currently deliver the highest value to your business. You can also go deeper than a simple desktop vs mobile overview to learn more about your high-value customers. Like conversion rate, this can also uncover potential issues or insight for improvement for specific device types.
4. Revenue by Campaign
It’s important to properly evaluate your marketing campaigns to see what worked and what didn’t. Looking at revenue by campaign can help provide a piece of that puzzle. Revenue alone won’t give you the full picture of your campaign’s success or failure, but it can certainly provide some useful information.
5. Revenue by Product
You also want to look at your revenue by product. This will give you some insight into which products and types of products make the biggest impact on your bottom line and which ones don’t perform. This can be useful information for future inventory decisions, offer creations, marketing efforts, and more.
7. Customer Acquisition Cost
Your customer acquisition cost is how much it costs your business to gain a customer. Knowing this number overall and by segment is invaluable for evaluating your marketing efforts, business growth rate, and general business health as well.
Total transactions will tell you the total number of completed orders you have. This can be a useful metric to have on-hand in addition to other metrics as you evaluate your website, products, marketing efforts, and more.
You can segment transactions by time (daily, hourly, weekly, monthly, quarterly, yearly), traffic source, device type, product/category, campaign, etc. to get valuable insights and information about the state of your business and areas where you could improve.
Regardless of the size of your store, it’s important for you to be tracking important metrics. These are just some of the key metrics every ecommerce business should track, but don’t stop there. The more data you have available to analyze, the better the insights you’ll be able to glean from it.
Besides, by tracking and analyzing these metrics in addition to others, you may uncover unique opportunities that allow you to outshine your competitors while also making a difference in your bottom line.
How is your ecommerce site performing? Is it helping your business or hurting it? If it’s been a while since your site went live, it may be time for a refresh or a complete overhaul. Contact us for a meeting of the MINDs to discuss how to get your website up to date and back on track!