Ecommerce metrics — you know they’re essential to your ability to make informed, data-based decisions, but which ecommerce metrics should you be paying closer attention to?
Of course you’ll want to focus on the metrics that will have the greatest impact on your bottom-line. But oftentimes you can easily wind up tracking “vanity metrics” that have little to no impact on your overall business performance — for example: pageviews, unqualified leads in the sales funnel, or social media “likes”.
The ability to collect and assess ecommerce metrics is an essential part of managing a successful online store. Changes in key metrics can alert you to situations you need to take action on immediately.
In this article, we’ll cover the ten ecommerce metrics that every ecommerce marketing manager should be focused on. We’ll detail what these metrics mean and why they play a key role in shaping your marketing strategy.
How to determine which ecommerce metrics matter for your business
There’s usually very little to no value in monitoring dozens of metrics if they don’t have a meaningful impact on the long-term success of your ecommerce store. Here’s what we recommend: from the larger list of metrics you currently track, identify the key performance indicators (KPIs) that consistently have the greatest impact on your overall business objectives.
To make a distinction between the two terms, metrics track the progress of any business process, whereas KPIs are metrics that show how effective you are at achieving specific goals. For example, a common metric for digital brands to track would be traffic generated from paid search, but a KPI would focus on the number of qualified leads generated from paid search.
If you’re still trying to figure out what metrics are the most important for your business to track, here are three questions you should ask yourself to help narrow it down:
- If this metric changed, how big of an impact would it have on my company? If a measurement point isn’t significant to the bottom line, it may not be worth the effort to monitor.
- Will improving this metric contribute to our strategic goals? Improvement for its own sake isn’t enough. Determine which metrics will make the biggest dent in your company’s (or your department’s) current goals.
- Is this a metric that will also improve other metrics? Many metrics are interconnected. Improving one can create a domino effect. For example, identifying key traffic channels can improve the quality of your traffic, which can then increase sales conversions.
The metrics we compiled for this article are ones that we see highly-successful ecommerce managers focusing on. These aren’t newly-minted ideas born from the latest craze in digital marketing. They are the tried and true fundamentals you can take to the meeting room, board room, or bank with zero hesitation. Get started with these (or as many of them you think necessary), then expand later if there’s a proven need to do so.
The Top Ten Ecommerce Metrics to Focus On
If you’re spending $100 per click on ads, but your average order value is just $10, there’s either something wrong with your logic OR you have a longer term vision that makes strategic sense.
To make wise decisions on ad spend and other marketing expenses, you need to know your average order value (AOV), total customer acquisition cost (CAC), and customer lifetime value (CLV). A firm grip on those numbers helps you sleep better at night and gives you confidence when you need to defend or explain your marketing strategy.
1. Average Order Value (AOV)
The AOV is a measure of how much your customers typically spend on a single order from you. You calculate AOV by dividing total revenue for a period by the total number of orders completed during that same period. If you sell $50,000 of products today and that revenue was created by 250 orders placed by customers, then your AOV is 50,000/250 or $200 per order.
2. Customer Lifetime Value (CLV)
One of the biggest marketing mistakes you can make is to view your customer base through the lens of one sale only. The CLV metric takes a big-picture approach. It views customers through the lens of how much revenue they will produce for your company over the entire course of your relationship with them.
To find the CLV, multiply the average order value by the average purchase frequency rate and the average customer lifespan. If your customers spend an average of $200 per order, place five orders per year, and continue to order from you for ten years, then your average CLV is 200 x 5 x 10 = $10,000. Remember, you’re seeking an average number, not an exact number.
3. Customer Retention Rate (CRR)
If you’re losing customers almost as quickly as you’re acquiring them, you know something is seriously wrong with your products or customer relationship strategy. Repeat customers are the life-blood of ecommerce businesses because it costs much less to retain happy customers than it is to bring new ones in.
The CRR ecommerce metric tracks your ability to hold on to customers once you gain them. To find CRR, subtract the number of new customers gained during a period from the number of customers at the end of that period. Divide the result by the number of customers you had at the beginning of the period, then multiply by 100. This metric is directly correlated to customer satisfaction and customer loyalty, so its value should not be underestimated.
4. Onsite Activity Metrics
Pay close attention to what visitors do after coming to your website. If they drop off quickly, you should look for problems with page load speed, page usability, or incongruence between what visitors are looking for and what you offer (make sure your ads are congruent with their landing pages, for instance). How many pages do visitors view? How long do they stay on those pages? Where do they go when they leave. By observing visitor actions, you can discover where they’re leaving you and begin to work on correcting the issues causing them to exit your site without placing an order.
5. Customer Acquisition Cost (CAC)
Customer Acquisition Cost is the total amount you typically spend in order to bring in a new customer. Some also call this metric the “startup killer” because many new companies start with high sales/marketing spending to attract new leads, with a relatively low number of leads will convert which results in a very high CAC. This metric is calculated by dividing your total sales and marketing costs for a given period by the number of new customers acquired during that period. Which sales and marketing costs do you consider? All of them.
If you start to see this metric gradual increase over time, this should be a warning sign that something is either wrong with your product, or your user experience.
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6. Shopping Cart Abandonment Rate
It hurts to see potential buyers load up a shopping cart, then abandon it before finalizing a purchase. There are a variety of possible reasons for why this could be happening, the most common being:
- Unexpected additional fees or high shipping costs
- No guest checkout option available
- Long checkout process that extends beyond a single page
- Payment security concerns
- Overall poorly structured user experience
This is an essential metric for ecommerce business owners to track, and can point to greater problems that are occurring on your site. To calculate cart abandonment, divide the number of completed cart check-outs during a given period by the total number of carts loaded during that same period, then multiply the result by 100.
Related resources: 17 Practical Ways to Reduce Cart Abandonment (Step-by-Step)
7. Bounce Rate
Closely related to cart abandonment rate, the bounce rate of a site is the percentage of visitors to a particular website who navigate away from the site—or “bounce”—after viewing only one page. The average bounce rate for ecommerce is relatively high, at 45.7 percent. If your website has an unusually high bounce rate, this could indicate a variety of serious problems occurring with your user experience.
Bounce rate is calculated by the total number of one-page visits divided by the total number of entries to a website. Google Analytics makes it easy for you to track the bounce rate, so there’s no excuse why you shouldn’t be paying close attention to this key metric.
8. Email Marketing Metrics
While many digital marketers and ecommerce managers alike are saying that “Email is dead”, we believe that email marketing will carry into next year as one of the most effective methods of communicating with customers, especially for ecommerce businesses. Despite more dynamic and personal methods of marketing emerging in recent years, email remains to be beaten in terms of visibility and efficiency. Here are a few key email metrics you should be tracking:
- Email Open Rate: Email marketing can be a major factor in your ecommerce success. Before your emails can persuade a prospect to take action, though, they must be opened. Your email service provider or CRM tracks this statistic for you automatically, but it’s up to you to monitor the data and take the necessary steps to improve it. Compare open rates for each email you send. Which ones draw the best response? Which get the worst? What does that tell you about your audience? Compare all the variables to look for clues in how you can improve your next email campaign. This is a key marketing metric if your organization relies on a content marketing strategy to bring in new customers.
- Email Click-through Rate: Each email should contain a call to action (CTA) and a tracking link that monitors responses. The click-through-rate (CTR) measures the percentage of emails sent that register at least one click. There are two ways to measure click-through: One is to compare unique clicks to the total number of emails sent. The other is to compare unique clicks to the number of emails that were opened, not to the total number sent. The CTR can vary considerably, depending on the method used. As with open rate, your email service provider tracks this for you, so make sure you are clear on how they calculate the result.
- Email Subscribe and Unsubscribe Rates: Your email list changes over time. New prospects want you to include their email addresses in your list, others lose interest and opt out. You want to track and monitor both metrics. The data will be included on the reports you pull from your email service provider. Look for correlations. Which campaigns or pages are sending you the most and least subscribers? Which emails sent are getting the most unsubscribes … and why? You can glean critical information about your audience by watching what they do and when they do it.
9. Net Promoter Score (NPS)
This metric is less tangible than other metrics included in this list, but that shouldn’t downplay its significance. The Net Promoter Score (NPS) is a survey that measures how likely your customers would be to recommend your products or services to a friend. The NPS is typically determined by sending out a survey to a representative sample of your customer-base asking them how likely they would be to recommend your brand on a scale of 1-10 (see chart below).
Customers that respond with a 9 or 10 are referred to as promoters; those that respond with a 7 or 8 are considered neutral; anything below a 7 is considered a detractor. To calculate the NPS metric, simply subtract the percentage of detractors from the percentage of promoters. The NPS is one of the best ways to gauge customer satisfaction.
10. Conversion Rate (CR)
It’s very likely that your ecommerce business is already tracking some form of conversion rate on its site, but it’s important to stress the value of tracking CR and how it ultimately relates to the other metrics on this list. Conversion rate is determined by simply dividing the number of conversion (those who took the action you wanted them to take) by the total number of visitors who were given the opportunity to take the action.
While the average sales conversion rate for U.S. ecommerce businesses hovers at around 2.6 percent, it’s important to note that average conversion rates can vary based drastically by industry. The conversion rate for a website selling luxury watches will certainly not have the same conversion rate as a low-priced clothing retailer.
If you’re starting to notice your site’s conversion rate steadily decreasing, you may consider looking into a conversion optimization program.
Ecommerce Metrics: Important Questions to Ask
The 10 metrics we’ve given are essential for most companies, but you may want to go further or track metrics not listed. It can be difficult to determine which metrics have the greatest impact and generate the most revenue for a particular business.
Ecommerce metrics help inform website optimization and the direction of your overall business strategy. Once you’ve identified what you want to track, your next step is to determine how to track them with a high degree of confidence. Armed with that data, you can create experiments to test ways you can create change to optimize your ecommerce revenue results.
If you’re looking for actionable ways to increase your KPIs and overall conversion rate, it may be time to consider investing in a conversion rate optimization program. At The Good, we’re committed to working with brands of all sizes (SMB to enterprise) to help actualize KPIs and achieve specific business objectives. We believe in data-backed decision making, and rely on extensive user testing to help determine exactly how we can begin improving your most important metrics.
Request a free landing page assessment so we can take a closer look at your site and talk about the specific objectives you’re hoping to attain through optimization. Every business has its own unique set of strengths and challenges a landing page assessment will help us identify those for you.
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- Right Ways to Use Metrics to Improve Ecommerce Sales
- Beyond Vanity Metrics: Understanding the Depth of Ecommerce CRO
- Why Business Metrics are Better Than Feature Lists
About the Author
Rudy Klobas regularly works to produce insightful, informative content and copywriting designed to help ecommerce leaders increase conversions.