Here’s a scenario for you. You start an eCommerce business; use all the latest technology to ensure the best features and captivating design for your eStore. But that doesn’t end there. You can’t just sit back and relax after deploying the store and putting up the products.
Any business, especially an eCommerce website, needs constant monitoring and improvements. That means tracking a few key metrics to understand how the customers are interacting with your website. Do they like your features, design, and products? It will give you a basic sense of what needs to be improved going forward.
So what kind of metrics do the eCommerce experts track for their website? And what kind of benefits will it offer? That’s what we will discuss in this blog. Let’s dive straight into the top eCommerce metrics.
Top eCommerce Metrics to Track on Your eStore
eCommerce is a highly dynamic field of play. Even the smallest of changes can help improve the conversion rates significantly. So you need to keep a constant focus on some important metrics and key performance indicators (KPIs) if you want to get the best out of the 2.7 billion people who shop online.
Let’s look at the key metrics.
Conversion Rate
Conversion rate is a fundamental metric in eCommerce, reflecting the effectiveness of your website in turning visitors into paying customers. It essentially measures the percentage of visitors who complete a desired action, most commonly a purchase.
But conversion rate can also encompass other valuable actions like signing up for an email list, downloading a brochure, or creating an account.
Here’s the simple formula for conversion rate:
Conversion Rate = (Number of Conversions / Total Number of Visitors) x 100
For example, if your website received 1,000 visitors in a month and 50 of them completed a purchase, your conversion rate would be 5%.
- Below 1%: Significant room for improvement
- 1-2%: Room for optimization
- 2-5%: Good conversion rate
- Over 5%: Excellent conversion rate
To improve the conversion rate, work on the website usability, checkout process, CTAs, trust signals, etc.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is a crucial metric for any business, especially in eCommerce. It tells you exactly how much you spend, on average, to acquire a new customer.
It covers costs associated with attracting new customers. That includes costs for advertising spend (pay-per-click ads, social media marketing), content marketing creation, search engine optimization (SEO) efforts, and more. It can also cover the costs to convert leads into customers.
The formula for CAC is straightforward:
CAC = (Total Cost of Customer Acquisition) / (Number of New Customers Acquired)
For instance, let’s say your marketing and sales expenses for a quarter totaled $20,000 and you acquired 100 new customers in that period. Then your CAC would be $200 per customer ($20,000 / 100).
This metric is very important for assessing the effectiveness of your eCommerce marketing strategies. And with more knowledge, you can allocate your marketing budget more strategically. That will help ensure better business growth.
To bring down the customer acquisition cost, you should target the right audience, optimize the product pages and user-friendly checkout, and refine the marketing channel with expert help.
Average Order Value (AOV)
Average Order Value (AOV) is a vital metric in eCommerce, reflecting the average amount a customer spends per order in your online store. Understanding your AOV provides valuable insights into customer buying behavior and helps you develop strategies to increase revenue.
The formula for AOV is simple:
AOV = Total Revenue / Number of Orders
For instance, if your store generated $10,000 in revenue from 200 orders in a month, your AOV would be $50.
A higher AOV translates to increased revenue without necessarily needing a significant rise in customer acquisition. It improves profitability and reveals customer buying insights for better product placements.
To increase the average order value, you can implement upselling and cross-selling and free shipping, offer product bundling, limited time promotions, and loyalty programs.
Shopping Cart Abandonment Rate
Shopping cart abandonment rate is a crucial metric in eCommerce. It represents the percentage of visitors who add items to their cart but leave your website without completing the purchase. This can be a significant source of lost revenue, so make sure you understand why customers abandon carts and implement strategies to reduce it.
A few common reasons for shopping cart abandonment include complex checkout process, unexpected costs, guest checkout restrictions, lack of trust, etc.
The formula for shopping cart abandonment rate is:
Shopping Cart Abandonment Rate = (1 – (Completed Purchases / Shopping Carts Created)) x 100
You can easily address cart abandonment by simplifying the checkout, being transparent about the costs, integrating multiple payment gateways, implementing retargeting campaigns, etc.
Bounce Rate
In eCommerce, bounce rate refers to the percentage of visitors who leave your website after viewing only one page. It essentially indicates a situation where a visitor lands on your website, but for some reason, doesn’t find what they were looking for or aren’t enticed to explore further, leading them to “bounce” away.
A few common reasons for high bounce rates in eCommerce include misaligned expectations, poor website usability, mobile unfriendliness, irrelevant content, etc.
The formula for bounce rate is straightforward:
Bounce Rate = (Single-Page Visits / Total Website Visits) x 100
For example, your website received 1,000 visits in a month and 400 of those visitors left after viewing just one page. Then your bounce rate would be 40%.
Here are a few general guidelines:
- Below 20%: This is considered an excellent bounce rate, indicating a high level of user engagement.
- 20-40%: This is a good range for many eCommerce stores.
- 40-60%: This is an average bounce rate, but there might be room for improvement.
- Above 60%: This is a high bounce rate and suggests significant issues with user engagement or website usability.
Now, how to reduce the bounce rates? You can craft compelling headlines and CTAs, optimize the site performance, enhance the site navigation, offer high-quality content, and target the right audience.
Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV), often abbreviated as CLTV, is a crucial metric in eCommerce that measures the total revenue a customer is expected to generate over their entire relationship with your brand. It goes beyond a single purchase and takes into account the customer’s potential for repeat business and future purchases.
The customers’ lifetime value helps you understand their focus (to ensure better retention), allocate your marketing budget, tailor the strategies, and ensure maximum ROI.
Here’s the formula for Customer Lifetime Value:
CLV = Average Order Value (AOV) x Purchase Frequency x Average Customer Lifespan
- Purchase Frequency: This is the average number of times a customer makes a purchase within a specific timeframe (e.g., per year).
- Average Customer Lifespan: This is the average duration of a customer’s relationship with your brand.
To increase the CLV, provide good customer service, implement loyalty programs, offer personalized product recommendations, and engage them with email marketing. You can also use customer feedback to make improvements in the process and platform.
Returning Customer Rate
The Returning Customer Rate (RCR) is the percentage of customers who make at least two purchases from your online store within a specific timeframe. It’s a valuable indicator of customer satisfaction, brand loyalty, and the effectiveness of your efforts to nurture repeat business.
A high RCR offers benefits like increased revenue, reduced marketing costs, improved brand advocacy, and predictable sales.
The formula for RCR is straightforward:
RCR = (Number of Returning Customers / Total Number of Customers) x 100
For example, if your store had 1,000 customers in a month and 200 of them made a second purchase, your RCR would be 20%.
You can easily increase the returning customer rate by providing exceptional customer service, implementing loyalty programs, offering personalization, engaging with email marketing, etc.
Churn Rate
Churn rate, a crucial metric in eCommerce, reflects the percentage of customers who stop doing business with your store over a specific period. It essentially measures customer turnover and highlights potential weaknesses in your customer retention strategy.
It’s important to understand your churn rate to ensure the best customer retention and implement successful predictive analysis.
The formula for churn rate is:
Churn Rate = (Number of Lost Customers / Total Number of Customers at the Beginning of the Period) x 100
For example, if your store started a month with 500 customers and lost 25 of them by the end of the month, your churn rate would be 5%.
You can reduce the churn rate by good customer service and win-back campaigns (like special offers and incentives).
Click-through Rate
Click-through rate (CTR) is a fundamental metric in digital marketing that gauges the effectiveness of your online presence. It measures the percentage of people who see your ad, listing, or link and actually click on it. CTR is a valuable indicator of how well your ad or content captures user attention and compels them to take the desired action.
A high CTR indicates that your marketing efforts are resonating with your target audience. It suggests your ads, emails, or website links are grabbing attention, sparking interest, and successfully enticing users to take the desired action (clicking).
The formula for CTR is straightforward:
CTR = (Number of Clicks / Number of Impressions) x 100
- Clicks: This refers to the total number of times users clicked on your ad, email link, or website link.
- Impressions: This represents the total number of times your ad, email, or link was displayed.
To improve the CTR of your eCommerce website, craft compelling headlines and CTAs, target the right audience, and optimize the website for mobile-friendliness. You can also use A/B testing to examine and use the best versions of key elements like ad copies, email subject lines, and link placements.
Store Sessions (by Traffic Source, Device Type, and Location)
In eCommerce, understanding your store sessions by traffic source, device type, and location provides valuable insights into your customer base and their behavior.
By Traffic Source
With respect to traffic source, store sessions identify how visitors arrived at your store. Common traffic sources include
- Organic Search: Users who landed on your store through search engines like Google.
- Paid Search: Users who clicked on your paid advertisements displayed on search engines.
- Referral Traffic: Users who arrived from another website that linked to your store.
- Social Media: Users who clicked through from your social media platforms.
- Email Marketing: Users who clicked on a link in one of your marketing emails.
- Direct Traffic: Users who typed your store URL directly into their browser or accessed your store through a bookmark.
Analyze which traffic sources are driving the most sessions to your store. Focus on optimizing your marketing efforts for the channels that yield the highest return on investment (ROI).
By Device Type
This metric categorizes sessions based on the device used to access your store, such as:
- Desktop: Users who browsed your store on a traditional computer.
- Mobile: Users who accessed your store on a smartphone or tablet.
Ensure your website has a responsive design that adapts seamlessly to different screen sizes and provides a smooth shopping experience on all devices. If mobile traffic is significant, consider investing in a mobile app to further enhance the mobile shopping experience.
By Location
This metric identifies the geographical location of your website visitors. This can be:
- Country: Knowing which countries your visitors come from allows you to tailor your marketing efforts and website content to resonate with specific regions.
- City/Region (Optional): More granular location data can help you understand if your marketing efforts are reaching your target audience effectively. You can identify potential new markets to expand into.
If you see a strong interest from a particular country, consider translating your website content into the local language or offering localized payment options. You can also target your online advertising campaigns to specific geographical locations to maximize their reach and impact.So, do you need help with tracking any of the metrics for your eStore and implementing the best strategies? Then consult with our eCommerce development company. Our experts will monitor the website and ensure the best results.
FAQs on Top eCommerce Metrics
Q1. How often should I track my eCommerce metrics?
The frequency of tracking depends on your specific needs and the volume of your traffic. However, it’s recommended to track key metrics at least weekly and delve into more granular data monthly.
Q2. What are some common mistakes in interpreting eCommerce metrics?
Here are some common mistakes:
- Focusing on vanity metrics (e.g., website traffic) that don’t directly translate to sales.
- Looking at metrics in isolation without considering the bigger picture.
- Comparing your metrics to industry averages without considering your niche and business model.
Q3. How can I use eCommerce metrics to predict future sales?
By analyzing historical data on customer behavior, purchase history, and seasonal trends, you can use predictive analytics models to forecast future sales and inventory needs. This allows for better planning and resource allocation.
Conclusion
When trying to create and manage the best eCommerce website, you need to make constant adjustments. But how do you know what kind of improvements will work in your favor? That’s where the eCommerce metrics come in.
Common eCommerce metrics include conversion rate, customer acquisition cost, bounce rate, average order value, churn rate, click-through rate, etc.If you need help tracking these eCommerce metrics and implementing the best tactics, consult with our experts today!
