The late Peter Drucker – one of the most widely-known and influential thinkers on management – educated an entire generation on leadership and business education.
But one of his quotes in particular still rings true in today’s fast-paced business world:
“If you can’t measure it, you can’t improve it.”
In the spirit of helping eComm professionals improve their businesses, today we’re looking at some of the primary eCommerce metrics to track.
Discover top eCommerce metrics and Key Performance Indicators (KPIs) that reveal the health of your business, help you predict your growth, and, ultimately, serve as a mirror for your management style.
What are eCommerce Metrics and KPIs?
Generally speaking, a metric represents a system or standard of measurement.
In eCommerce, a metric represents a quantifiable measurement of your shop’s performance.
A KPI (or a Key Performance Indicator) represents the way you measure business initiatives, objectives, or goals.
Pay attention to the difference between the two of them:
- KPIs measure progress toward specific goals (such as increasing your SQLs 5 times by the end of the quarter)
- Metrics measure the overall business health.
- A KPI is built by multiple metrics.
Unless tied to a bigger goal, metrics don’t mean much.
For example, you might be tracking your shop’s Social Media followers. Still, if Social Media isn’t part of your business initiatives, this metric shouldn’t matter too much.
As you can see, a metric becomes a compass as to whether or not you’re on the right path when it contributes to business objectives.
How to determine which eCommerce metrics matter for your business?
We have so many ways to collect data (even if 3rd party data is bye-bye) that it would be foolish not to let metrics guide your business.
However, many marketers fall into the trap of vanity metrics. Such metrics make you feel good but won’t make a difference in your business.
You must choose wisely when selecting the measure of eCommerce success.
Obviously, every business is unique in choosing the higher priority metrics – a rising SMB will have different objectives than an already established enterprise.
In general, all businesses pick metrics that surround:
- The popularity of your products/brands
- The frequency at which shoppers buy your products
- Issues or hiccups in the checkout process
- How many shoppers come back for a 2nd purchase
- How much revenue do you earn monthly
Most important eCommerce metrics
Sometimes, when you’re not making good-enough results, you feel like you’re shooting in the dark. You made all those extraordinary efforts, and for what? And more importantly, what could you’ve done better?
Here’s where metrics come to save your sanity by showing you exactly what you need to improve.
Let’s look at some important metrics you should measure to ensure you’re on the right path to eCommerce success.
Sales Conversion Rate – represents the % of the visitors who completed the checkout process.
To get this number, you need to divide the number of conversions by the number of total visitors.
While conversion generally refers to any action you want the user to take, in this case, we only look at the number of visitors who made a purchase.
Sales conversion rates show you how good of a job you did with marketing, how seamless the checkout process is, and how persuasive your sales pitches are.
Average Order Value (AOV) – represents the average amount spent each time a customer orders from your shop. Calculate your AOV by dividing your revenue by your orders.
Customer Lifetime Value (CLV) – and just maybe one of our personal favorites) – is the total revenue you can expect from a single customer during your relationship their relationship with your business.
Curious to learn more about CLV? We wrote the ultimate guide dedicated to calculating your CLV – check it out here.
Customer Acquisition Costs (CAC) – the CAC shows you how much you pay for a new customer. To calculate your CAC, you must divide your total marketing spend by the number of new customers.
CAC is an exciting metric to check against the CLV. If the CAC exceeds the CLV, your business is in trouble, as you’re bleeding your revenue into acquisition.
Customer Retention Rate (CR) – The CR shows the number of customers you retain over a fixed period.
To calculate retention, you simply need to divide the number of customers that stayed with you by the number of new customers you acquired at the beginning. To get the percentage, multiply that number by 100.
Net Promoter Score (NPS) – moving on to the customer happiness sector, we’ve reached the NPS. This metric shows how many customers are willing to recommend you to their community.
To find your NPS, you need to subtract the % of Detractors (gave you 0-6 on score) from the % of Promoters (gave 9-10 scores).
The NPS is an essential metric for eCommerce because, as we all know, Customer Satisfaction ensures the longevity of your business.
When the Net Promoter Score is negative, you need to take a look at your business, identify unhealthy patterns and fix recurring problems that leave your customers with a bitter taste.
Cart Abandonment Rate – This metric shows the percentage of online shoppers who add items to their cart but then abandon the shopping cart without completing the purchase.
To calculate the Abandonment Rate, divide the total number of completed purchases by the number of shopping carts created.
The purchase step is the one step that crowns all your efforts up until this point.
A high cart abandonment rate suggests your acquisition efforts are wasted for nothing. You need to look at the user experience on your website and identify friction points that make your prospects abandon your shop.
Ecommerce Churn Rate – The Churn Rate is the rate at which your business loses customers or subscribers over a fixed period.
Calculate the churn rate by subtracting the number of customers you have at the end of the period from the number of customers in the beginning.
Then divide the result by the number of customers in the beginning to get the percentage.
While there’s no industry benchmark for the churn rate, it’s agreed upon that an ideal churn rate is 5%.
Obviously, the lower your churn rate, the healthier your business is.
Repeat Customer Rate – As opposed to the churn rate, the repeat customer rate (or return rate) show you the percentage of customers who’ve returned for repeat purchases from your shop.
Since it’s 5x more expensive to acquire a new customer than to keep an existing one, you obviously want your return rate to be as high as possible.
To calculate the Returning Customer Rate, you must divide the number of Return Customers by the Total number of Customers, then multiply by 100.
Email Open Rate – Email is how most eCommerce businesses communicate with their subscribers – customers or not.
A high email open rate shows you whether or not your subscribers are part of your business because they genuinely care about your brand or are there only for discounts and special offers.
You can look at this rate to determine your email marketing strategy’s success.
To identify this metric, you need to divide the total unique opens by the total recipients and multiply it by 100.
Clickthrough Rate (CTR ) – Closely related to the open rate, the CTR helps you measure the success of your Ad campaigns or the effectiveness of email campaigns.
This marketing metric reveals the ratio of users who click on a specific link.
The formula varies depending on the channel. The CTR is usually calculated by dividing the total clicks on your content by the total number of impressions. With email, you would divide the people who clicked on in-mail links by the number of people who opened your email.
How often should you plan and check eCommerce metrics?
Checking your eCommerce metrics means checking your eCommerce success.
Yet, you don’t achieve eCommerce success overnight, so you shouldn’t be disappointed if you check your metrics daily and don’t see visible progress.
When planning your metrics, the frequency heavily relies on your management system.
Maybe you do the 360° X-Ray of your business quarterly, trimesterly, or bi-annually. So you plan your metrics according to your goals and revisit them as frequently as needed. It all depends on your timeframe.
For example, suppose your objective is to get 200 leads per quarter. In that case, you should check all relevant metrics at least once a week – to ensure you’ll meet your KPI, avoid getting blindsided by the end of the quarter, and adapt quickly if things aren’t going your way.
Of course, some metrics should be checked more frequently than others.
- Website visits, leads per channel, or conversion rates should be checked weekly.
- Bounce rates, unsubscribe rates, and CTR should be checked at the end of each campaign.
- Customer Lifetime Value, Customer Loyalty, and Return Rates should be checked monthly (or at least adapted to the frequency at which your products are usually reordered).
Again, it all depends on the timeframe and the complexity of your business objectives.
Importance of eCommerce metrics for your business
Remember the quote from Peter Drucker – if you can’t measure it, you can’t improve it.
Measuring your metrics is as important inside a business as it is in your personal life. If you plan to run a marathon by the end of the year, you will set goals for your progress, then check your progress daily, right?
Otherwise, you are left with a vague idea of how much you should train, and you might injure yourself or fail to finish your marathon.
eCommerce businesses function by the same principle – you check your metrics to ensure you manage to achieve eCommerce success by the end of the timeframe.
- provide an objective overview of how your business works
- and reveal opportunities for improvements.
Objective feedback is what will grow your business.
In other words, data-driven decisions are the right decisions. You can’t build a sales funnel based on gut feelings – you need to look at the numbers and let them reveal roadblocks.
By the same logic, you can’t overinvest in acquisition if average order values are low and you don’t get back the money you put in.
Metrics will transform vague objectives and desires into concrete plans that can then be measured for efficiency.
Metrics tell you if your strategies are good enough to fulfill customers’ needs or if they need to be improved.
Lastly, metrics eliminate words like good quality and bad quality. They eliminate the subjective sentiment from your marketing campaigns and refocus your work on what’s important: the data and the truth revealed by the data.
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How to measure eCommerce success
By its nature, eCommerce is a highly fast-paced industry. The Internet ruined the attention span of millions of people and obliterated our patience.
Everything needs to be solved yesterday, if possible.
It’s only natural that eComm professionals are also looking for fast fixes and shortcuts to answer the eternal question: How can I reach eCommerce success with less effort?
It used to be that eCommerce success was measured by the Growth formula:
Traffic multiplied by the conversion rate
multiplied by the average order value equals growth.
Yet, the growth formula was altered by the pandemic, the rise in CAC, the scarcity of 3rd part data, and the increase in competition.
The number of Customers multiplied by Customer Lifetime Value divided by Customer Acquisition Cost equals growth.
Moving from acquisition marketing to lifecycle marketing, metrics related to customer experience will help you predict your success.
High NPS and return rates and high AOV and CLV should be your priority. Even if your short-term goals revolve around traffic, open rates, and conversions, that’s just half of your job.
In the long term, your path to business success is guaranteed by the happiness of your customers.
Whether you check your stats in Google Analytics, export them into Excel, or use a CRM for your analytics, metrics are the compass for eCommerce marketers, salespeople, and owners.
They help you identify the average customer value, predict meeting your eCommerce KPIs, and, ultimately, help you do your job better and achieve better results.
Whatever happens, make sure you react quickly to metrics below your standards, and repeat the actions that grew your stats. Like any other Industry, eCommerce is also a domain where you live and learn.
Frequently Asked Questions about eCommerce metrics
In eCommerce, a metric represents a quantifiable measurement of your shop’s performance. They can measure product quality, marketing efficiency, and even customer happiness.
It’s generally agreed upon 4 types of metrics in eCommerce: product metrics (related to what you sell), process metrics (related to how you produce it), project metrics (related to how you’re marketing the product), and customer metrics (related to customers’ satisfaction with your brand).
The most common metrics tracked by eCommerce professionals are: Sales conversion rate, Average order value, Customer lifetime value, Customer acquisition costs, Customer retention rate, Net promoter score, Cart abandonment rate, Ecommerce churn rate, Repeat customer rate, Email Open Rate.
The most common tool for tracking KPIs is web analytics. Google Analytics is able to track a myriad of data, from website performance to new subscribers, to sales. However, raw data is difficult to interpret, so you might want to pick a software that measures your KPIs and helps you keep track of your performance.
Common KPIs for an eCommerce website include: traffic, traffic per channel, page sessions, bounce rates, conversion rates, page speed and load time.