Metrics, indicators, KPIs…. The importance of taking them into account to evaluate the performance of our business is constantly reminded, especially if it is an ecommerce. So much so that we may feel overwhelmed and want to measure everything. For this reason, in this post, we will focus on the five most important metrics for ecommerce.
However, not all metrics are equally relevant, and some of them may even lead us to draw erroneous conclusions about the business’s good (or bad) performance.
Metrics For Ecommerce – Actionable vs. Vain
Before deciding which ecommerce metrics to focus on, we need to distinguish between actionable metrics and vanity metrics.
Let’s see it with an example: suppose that an online cosmetics store receives 100,000 monthly visits. A priori, this can lead us to think that the business is doing well and sales are high but are we taking into account how many of those visitors end up buying?
Or what is the same? What is the rate of conversion to purchase? While the number of visitors is a vanity metric, the conversion rate is an actionable metric that allows us to have a vision of what is happening in our ecommerce.
5 Metrics (Actionable) For Ecommerce
Conversion Rate (CR)
The conversion rate (conversion rate) represents the percentage of visitors who carry out a specific action on the website. When we talk about conversion rate, the most common thing is that we refer to the purchase, but the conversion rate of a form, a download page, etc., can also be measured.
The goal is to make this percentage as high as possible. In the case of ecommerce, the average conversion rate is usually between 1% and 3%.
Customer Acquisition Cost (CAC)
The customer acquisition cost is the cost of attracting a new customer, and we need to optimize it to be as low as possible.
For its calculation, we will add the expense made in Recruitment Marketing: direct investment in channels or advertising, Marketing agency fees, costs fixed attributable to the Marketing department, cost of the sales force, software, and tools, etc.
Finally, we will divide this sum by the number of clients captured during a given period.
Average Cart Value (AOV)
To calculate the average value of the cart (average order value), all we have to do is divide the total amount of sales by the total number of orders during a given period.
To maximize this value, it is interesting to use cross-selling strategies (offering complementary products or services) and up-selling (offering a higher quality product and, therefore, a higher price).
In addition, the value of the AOV will depend mainly on our type of ecommerce. For example, if we are dedicated to selling fashion, the average cart will typically be less than selling mobile phones.
Customer Lifecycle Value (CLTV)
The value of the customer lifetime (customer lifetime value) is the total amount that a user will spend throughout his life as a customer of our ecommerce.
To improve this figure, we can use strategies to increase the value of the average cart (cross-selling and up-selling) and loyalty systems to increase the frequency of purchase.
On the other hand, by making a simple comparison between CAC and CLTV, we can have a reliable indicator of the health of our business. In other words, if the CAC is higher than the CLTV, it means that the cost of attracting a customer is higher than the benefit it brings us.
Cart Abandonment Rate
The cart abandonment rate represents the percentage of users who added items to the cart but did not complete their purchase.
It is necessary to pay special attention to this indicator since a high value can alert us to any of these problems on our website:
- Slow loading
- Error in the payment process
- Little variety of payment methods
- Doubts with the shipping and return conditions
, form too long, etc.
We Must Never Stop Metering.
In short, the most important ecommerce metrics depend primarily on the type of business. However, these five are essential, and, conveniently, the Marketing department never loses sight of them.
In addition, we must bear in mind that measurement is a process that never ends. The objective will always be to continue measuring to optimize each of the indicators to the maximum and, therefore, to grow our business.
Also Read: eCommerce – Golden Rules For Selling Legal Services Online