Running a successful eCommerce business requires some knowledge of which metrics are important, how to measure them, and how to optimize them. If you’re new to the world of eCommerce metrics, it’s easy to feel overwhelmed by the long list of numbers you can potentially track.
There are hundreds of numbers you could track if you had all the time and resources in the world. The good news is you definitely don’t have to worry about all of them. There are a few key eCommerce metrics you can focus on that will make a big difference in helping you understand and grow your business.
By getting familiar with the eight ecommerce metrics in this article, you will be well on your way to growing your business by leveraging the information they reveal. Whether you’re starting a brand new ecommerce business or want to take your existing business to the next level, you’ll find the information you gain from these metrics to be valuable and actionable.
8 ecommerce metrics that will help you understand and grow your business
We’ll help you understand the most important and actionable ecommerce metrics, how to calculate them for your business, how often you should check them, and what a healthy target value looks like for each metric.
Web traffic refers to the number of visitors who are accessing your eCommerce website each day. The reason web traffic is a metric that comes up so often is that it can be very helpful in letting you know where you might want to focus your attention and resources.
While you want to see your number of daily visitors trend upward, it’s helpful to dig deeper and look at the breakdown of where those visitors are coming from. For example, you can track if they arrived at your website via Instagram, a newsletter link, or Google search. You can also track which cities and countries they are visiting from.
This is valuable because it allows you to analyze which channels are driving traffic to your website. With this information, you can decide to divert money away from underperforming channels and locations to higher-performing ones. You can also modify your approach in the underperforming channels to improve the resulting traffic to your site.
Some solutions may not even involve spending more money. For example, you might need to adjust your use of SEO terms. Monitoring your web traffic and where it comes from gives you the power to make these informed decisions.
You can see your website traffic on the backend of whichever website builder or ecommerce platform you use. You should check this metric weekly so that you can adjust any existing marketing efforts that don’t seem to be working.
For website traffic, there isn’t a one-size-fits-all target number to aim for. It depends on your business and your capacity for growth. Once you understand the other metrics in this article, you’ll be able to calculate how an increase in website traffic could boost your bottom line.
Customer conversion rate
You might have tons of traffic, but that doesn’t help you if none of those visitors spend money. Your conversion rate refers to the proportion of visitors to your website that makes a purchase.
There are multiple conversion rates that will give you valuable insights. These include the percentage of visitors adding items to their cart, the percentage of visitors reaching the checkout page, and the metric people typically refer to as the conversion rate, which is the percentage of visitors who go through with a purchase.
Tracking all three of these conversion rates will help you understand where you might be losing sales. Are visitors browsing your product pages, but stopping short of adding something to their cart? That could be a sign that your product photos or copy need an update.
Or maybe they’re adding items to the cart but don’t get as far as checking out. Maybe there was an unexpectedly high shipping cost that stopped them or a tedious form they had to fill out in order to make the purchase. By measuring these conversion rates, you have the knowledge needed to improve your customers’ experience and land more sales.
The goal of any eCommerce business is to increase its sales conversion rate. To calculate this, divide the number of sales by the number of visitors to your site for a given period and multiply by 100. For example, if 1000 people visit your website one day and 8 of them make a purchase, your conversion rate is (8/1000)*100=0.8%.
Your ecommerce platform likely provides this metric. While the ideal conversion rate may vary from one industry to the next, somewhere between 2 per cent and 5 per cent is considered a good rate for ecommerce. You can review these metrics monthly, in order to give any changes you made to your site some time to show results.
Email opt in rate
This metric indicates the percentage of new website visitors who opt-in to receive emails. Email marketing is still the marketing channel with the best ROI, so building a large email list is a worthwhile effort.
You can calculate this rate by dividing the number of people who opted in to receive emails by the number of visitors for a given period and multiplying by 100. If 100 people visit your site and 8 of them opt in, your email opt-in rate is
Average opt in rates are usually between 1 – 5 per cent. By checking this metric biweekly, you can make adjustments to improve your opt in rate.
You can do this by giving visitors an incentive to sign up, such as a discount code. Improving this rate allows you to gather a list of potential customers who care enough about your company to sign up, and to reach them regularly with email marketing campaigns.
Customer lifetime value
It is common wisdom among marketers that it costs less to retain an existing customer than to acquire a new one. Your customer lifetime value refers to the amount a customer spends with you over the course of their life. This metric is valuable since it helps you determine your customer retention. Increasing the lifetime value of each customer is an excellent way to boost your bottom line.
The commonly used LTV formulas are:
- The simple LTV equation, 52(a)*t=LTV, where a is the average customer value per week and t is the average customer lifespan.
- The custom LTV equation, t*(52*s*c*p)=LTV, where t has the same value as above, s is the customer expenditure per visit, c is the number of visits per week, and p is the profit margin per customer.
- The traditional LTV equation, m(r/(1+i-r))=LTV, where m is the average gross margin per customer lifespan, r is the customer retention rate, and i is the rate of discount. The discount rate is an interest rate used to determine the present value of future cash flows, typically between 8 and 15 per cent
Since you will get a different number depending on which formula you use, you can take the average of the three results to obtain a good estimate of your customer LTV.
This metric can be calculated as part of your year-end checklist since the data likely won’t change dramatically from week to week or even month to month. A good target lifetime value will depend on your industry. You can create a target for yourself by considering what your target order value is and how many times your ideal customer could potentially purchase from you.
You can increase your LTV by increasing average order value (more on this below), and encouraging customer loyalty. Customer loyalty can be fostered through honest and transparent communications, loyalty programs that appeal to customers, creating a strong, cohesive brand, and delivering top-notch customer service.
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Average order value
This metric refers to the average dollar value of the orders you receive on your eCommerce website. Inching this value up even a little bit can have a major impact on your bottom line.
Your eCommerce platform likely provides this metric for you, but if you need to calculate it yourself, you can do so by dividing your total sales by the number of transactions. For example, if your sales this month total $5500 and you had 25 orders, the average order value for the month is $220. Now imagine you had the same number of customers, but they each spent a little bit more, and the average order value became $250. Without acquiring a single new customer, you’ve increased your total sales for the month to $6250.
This value can be measured biweekly. Increase your average order value by offering free shipping over a certain amount, bundled discounts, or showing recommended products the customer can add to their cart when they are at the checkout stage – much like the shelf near the till in many brick and mortar shops.
Customer Acquisition Cost
To calculate Customer Acquisition Cost (CAC), divide your total advertising and marketing expenses by the number of new customers acquired for a given period. This metric lets you know if you’re wasting money on marketing efforts that are not bringing in new clients. If the cost is too high, it’s a sign you should switch up your advertising and marketing campaigns so that they effectively turn more people into paying customers.
This metric can also be evaluated biweekly so that you give any changes to marketing and advertising a chance to bring in results. Customer referral programs can be a great, low-cost way to gain customers while reducing your CAC.
While the target CAC will vary from one industry to the next, experts suggest spending less than 33 per cent of your customer LTV on customer acquisition. Of course, this will eat into your profit margins, so the lower you can get your CAC, the better.
Shopping cart abandon rate
Your shopping cart abandon rate can be calculated by dividing the number of completed purchases by the number of carts created and multiplying by 100. If you had 25 completed purchases out of 40 created carts, your shopping cart abandon rate is 62.5%. That may seem high, but the average shopping cart abandon rate is over 68 per cent.
By making it as easy as possible for visitors to complete their purchase, and removing any unexpected costs and fees, you’re more likely to convert them into paying customers. This metric can be checked biweekly.
Revenue by traffic source
The best way to calculate your revenue by traffic source is to sign up for Google Analytics and add the tracking code to the head section of all your web pages. If this is not something you’re comfortable doing yourself, it is a small task that a professional can do for you.
Being able to see your revenue by traffic source will help you double down on the sources that are bringing you lots of revenue while diverting funds away from sources that are not profitable.
You can also change your approach to try to make those sources bring in more revenue. The choice is up to you, but each business is unique, and you might find that it makes more sense to really focus on a channel that is bringing you a lot of paying customers, rather than spreading your promotional spend too thin over many channels.
You can check this metric biweekly or monthly so that you know you’re using a large enough sample size to have meaningful data.
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