This is a guest post by Skubana. Skubana is a leader in multichannel inventory management, order fulfillment and purchase order management. It helps ecommerce merchants unify and automate there operations in one place.
How do you know your e-commerce business is doing well? How do you avoid pitfalls and spot the perfect opportunities? By tracking the right metrics of course!
The challenge is that with so many different metrics available it’s hard to know which ones should get priority. That’s why we are going to take a look at the nine most important metrics to monitor in your eCommerce business.
1. The average customer acquisition cost
How much does it cost to get someone who’s never heard of you all the way through your funnel until they hit that purchase button and finally become a customer? The CAC matters because it shows you exactly how much getting a new customer costs your business.
So what should this number look like? There’s no specific ideal and it varies from business to business. The key is that it should be profitable for you.
2. The customer lifetime value
How much does the average customer spend in your business over the course of your relationship? This is a crucial metric because you can compare it to the CAC and get a clearer idea of the average profit you make from each customer.
3. Customer retention rate
Repeat customers are the lifeblood of most businesses. According to Gartner about 65% of sales come from existing customers. They tend to spend more money than new customers and it’s generally cheaper to keep existing customers happy than to acquire brand new ones.
Work out what your current retention rate is and create a strategy to increase it. Even just increasing your retention rate by 5% can increase profitability by 25%!
4. Keep track of the conversion rate
What percentage of people that end up on your product page hit buy? What about the other stages of your funnel? These numbers are extremely important.
Calculating the conversion rate at all stages of your sales funnel and paying particular attention to behavior on your product page tells you just how effective your copy and images are at selling your product. You can use this info to understand where people drop off and focus on improving your funnel at those specific touch points.
Take a hard look at the pages that are losing you potential customers. Top exit pages tell their own story and discovering what it is and why visitors are so keen to hit the x button can help you turn them around.
And this isn’t all this metric is good for! The conversion rate also gives you an idea of the ratio between visitors and customers. This way you can calculate how much you need to increase traffic by in order to increase customers by a certain percentage making it an excellent planning tool.
5. Calculate the order average
How much does the average order come to? This number is super important because it gives you an idea of how many sales you need to make within a set time period in order to meet your financial goals. It gives the sales and marketing teams specific numbers to work toward.
Plus, increasing the order average is a very effective way to increase sales. Track it over time and establish a pattern then try different upsell and nurturing techniques to grow it.
6. Product margin
How much money do you make from each product you sell after all the expenses have been taken care of?
Most e-commerce businesses sell a combination of higher and lower margin items. While some items don’t make you a lot of money, they can be great at bringing people over to your site and turning them into customers who then go on to buy more from you.
That’s why it’s important to calculate the average product margin across all your products and compare it the average product margin across specific categories.
7. The abandoned cart rate
How many people add a product to a cart and then once they get to checkout, abandon the whole endeavour? According to the Baymard Institute, that number is 69.23% of shoppers.
Figure out what your average is and then look into different ways to bring it down. For lower value products a sequence of reminder emails starting shortly after the cart’s been abandoned can work pretty well. For high value items, you can create a nurturing sequence that addresses common objections, assuages customer fears and shows them how buying that product from you will specifically help them.
8. The rate of returns
E-commerce has pretty high rates of return when compared to traditional retail. They can run over 30% and this can really eat into inventory management time and affect profits.
Calculate your rate of return. Start with the general one across your whole business and then calculate the specific rates for different categories. From there, you can compare them to the averages in your industry and then come up with strategies to bring them down. This can be anything from better product descriptions to redefining your ideal customer segments.
9. The subscriber rate
If you are selling items through your own website (and you should be!) as well as though marketplaces like Amazon and Jet, keeping track of the rate at which your email list is growing is essential.
A list gives you access to customers you can retain, nurture and sell to at any time and can be a great tool for upselling. So calculate your current subscriber rate and then set a goal because growing your list consistently over time can really save money on new customer acquisition.
Putting the whole picture together
Tracking all the right e-commerce metrics and then bringing them all together to create a thorough picture of what your business looks like feels a lot like solving a challenging puzzle.
By themselves each metric only gives you a partial idea of what’s going on. The whole picture only starts making sense when you interpret the metrics together because they all affect each other. So start tracking the nine metrics we discussed and don’t forget to compare and contrast them.