Tracking useful ecommerce metrics is essential to your ability to make informed, data-based decisions and grow your online brand. But the question is—which ecommerce metrics should you be paying closer attention to?
Of course, you’ll want to focus on ecommerce KPI or metrics that will have the most significant impact on your ecommerce website’s bottom line.
That’s what most ecommerce marketers also aim for.
But often, many of them wind up tracking “vanity metrics” such as social media “likes”, page views, or unqualified leads in the sales funnel, that have little to no effect on their overall business performance.
In this post, we’ll go through the top seven ecommerce metrics that every ecommerce marketing manager should be tracking. We’ll explain what these metrics mean, why they’re so vital for your marketing strategy, and more.
Read on…
Benefits of Tracking the Right Ecommerce Metrics
The key to successful ecommerce marketing is tracking the right metrics. It allows you to:
- make informed adjustments to content, design, and marketing plans
- improve the customer experience and boost your conversion rates
- anticipate changes in product demand and optimize inventory levels accordingly
- analyze the impact of new marketing channels on existing revenue streams
- and take many other smart ecommerce marketing decisions
What are the Top Ecommerce Metrics to Track?
Some ecommerce metrics may seem to be more critical than others, but the reality is, it depends on your company’s business objectives and strategy. What your competitors are tracking might not be relevant to you; what works for one company may not work for another.
However, our list of top ecommerce metrics are usually the most important ones to focus on regardless of your industry:
1. Average Order Value (AOV)
Definition: Average Order Value (AOV) means the total average amount that all customers spend on just one purchase. It is calculated as the total revenue for orders divided by the number of orders.
Why Measuring AOV is Important
There are a few reasons why average order value is so crucial.
- First, AOV is an indicator of how valuable a customer is to your business. If you have a low AOV it may indicate that you may be attracting customers without much buying power.
- Secondly, AOV shows how your website marketing campaigns such as product recommendations, cross-sells, etc. are faring.
5 Tips to Grow Your Average Order Value (AOV)
To grow your AOV, you can focus on strategies that will help create a higher perceived value of the products/services you offer. Such strategies include:
- increase pricing
- offer bundles
- cross-selling
- upselling
- Free shipping
How to Use A/B Testing to Measure and Boost Your AOV
A/B testing is one of the best ways to improve your AOV. There are many strategies at play on ecommerce websites that influence a purchase decision and each of these strategies can be A/B tested.
For example, offering a similar product to customers who have other products added to their cart can push up your AOV. Additionally, you could feature products that are complementary to the ones being viewed by highlighting them on the same page. If you have your store on Shopify, you can cross-sell and upsell using a Shopify app called ReConvert and Upselly. They offer several upselling and cross-selling features..
Using these tools for such techniques along with split testing variations of these features can also help. You might compare your original shopping cart to one with a “People who purchased this also frequently bought this” message and picture to see if AOV improves.
You may also choose to split-test a different message such as “Recommended items for you,” to see which one generates the best AOV.
2. Customer Acquisition Cost
Definition: The cost of customer acquisition through a particular channel or all the channels combined divided by the number of new customers per channel or across the board. Here’s how it is calculated:
Why Tracking Customer Acquisition Cost is Important
Knowing how much it costs to acquire a customer allows you to assess the effectiveness of your acquisition strategies and see how efficiently your marketing dollars are being spent.
For example, if you have a low CAC, it indicates that your advertising is highly effective and converting at a low cost.
If you have a high CAC, this means:
- your advertisements aren’t resonating with customers (OR)
- there is room for improvement in the way that potential buyers/consumers leads are nurtured after they’re initially captured.
Tips to Reduce Your Customer Acquisition Cost
Here are a couple of tips you can follow to reduce your customer acquisition cost:
Tip #1. Analyze your current ad spend. Figure out what’s working and what’s not working by tracking the actual cost of your ads, marketing along with how many sales, leads, or subscribers they’re generating.
Tip #2. If you’re currently running an advertising campaign, make sure you’re making the most out of it by using tools that will help you with efficient and effective tracking.
For that, you can use Triple Whale, an analytical platform for ecommerce brands, to learn from user behavior and optimize your ad or marketing expenses in the future.
How To Measure Customer Acquisition Cost
There are two ways to measure CAC. The first method is to measure customer acquisition costs per channel.
Also known as CPA (cost per action), this can be measured by dividing total campaign expenditures by the number of conversions (sales, leads, etc.) for each channel.
The second method is to measure customer acquisition cost by segment.
This calculates CAC on a per-segment basis, providing both actionable information and insight into where efforts should be focused. For instance, you can compare the return on investment for different segments.
You might find that most customers are of a particular demographic, or from a particular geographic location. Once you know these segments, you can determine how much it costs to acquire them.
3. Cart abandonment rate
Definition: The percentage of customers abandoning their cart after adding products to it. It is one of the most crucial ecommerce metrics to measure and is calculated with the below formula:
Why Measuring Cart Abandonment Rate is Important
Cart abandonment is a huge problem for online stores. Customers add products to their carts but don’t complete the transaction.
According to Baymard, estimated that nearly 70 percent of shopping carts are abandoned on average. This means that roughly seven out of ten people who add products to a shopping cart fail to make a purchase.
As a marketer, you must try to focus on this ecommerce KPI, determine why customers aren’t moving beyond the cart and take steps to fix the problem.
If not, you will continue losing revenue from lost sales.
How To Track on Shopping Cart Abandonment Rate Using Various Tools
There are many ways to measure how many times customers add items to their cart but do not convert. One of them is by setting ecommerce metrics on Google Analytics.
To set up shopping cart abandonment cart rate tracking on Google Analytics, here’s what you need to do:
Step 1: Navigate to the Goals Tab
To begin tracking your visitors’ shopping cart abandonment rate, you need to set up a Google Analytics goal. To do this, navigate to the Tools tab in your Analytics settings and select “Goals” under the Goals Column.
Step 2: Set Up Your Shopping Cart Abandonment Goal
Once you are on the goals page, click the “Create Goal” button to begin. And select Checkout Complete.
Then, the first thing you need to do is name your goal. Call it something simple, like “Shopping Cart Abandonment.”
After naming your goal, Google Analytics will ask what type of goal you wish to set up. Select the last option: “Destination.”
Next, click where it says “Destination” and enter the “URL path.”
Then, you need to type the URL of your shopping cart checkout page into the field that Google Analytics brings up. This is typically something like
www.yoursite.com/checkout/5746579
Click “Apply” when finished.
Finally, click “Verify” to make sure everything is working properly.
You will see a new “Goal Details” section under your shopping cart abandonment goal. You can use this to measure how many people reach your checkout page but don’t convert.
You need to have ecommerce funnel metrics to see the buyer’s journey till cart abandonment.
What your ecommerce funnel visualization would look like:
4. Customer Lifetime Value (LTV)
Definition: The total amount of revenue generated by one customer over the course of their entire journey with your company. It can be calculated with the below formula:
Why Tracking Customer Lifetime Value is Important
Customer lifetime value is important because it allows you to gain insight into how much money your business will generate from each individual customer throughout the course of their relationship with your company. It can be in the form of repeat purchases or even referrals to new customers.
Benefits of Measuring Customer Lifetime Value
The other advantages of measuring customer lifetime value are that it allows marketers to:
- calculate future profits from individual customers or specific market segments
- devise strategies for targeting similar prospects who can stay with you longer
How to Measure Customer Lifetime Value
Many companies have a difficult time measuring customer lifetime value. Some might think that the difficulties lie in establishing the process, but in reality, it’s simply a matter of taking the right steps.
You can find a customer lifetime value graphic showing the steps to measure CLV:
5. Repeat Customer Rate
Definition: Repeat customer rate is the percentage of customers who have purchased from your ecommerce store more than once.
Repeat Customer Rate = (Number of recurring transactions) / (number of total transactions)
Why Tracking Repeat Customer Rate is Important
Tracking repeat customer rate is crucial because it can give you a sense of how well your store is retaining customers. If your repeat customer rate is low, that may indicate that you need to improve your customer retention strategy.
How to Improve Your Repeat Customer Rate
There are several ways to improve your ecommerce store’s repeat customer rate. Some of the most effective methods include:
- Creating a loyalty program that rewards customers for their loyalty
- Offering discounts to customers who have made multiple purchases
- Improving the customer experience to make it more enjoyable and engaging
- Developing targeted marketing campaigns specifically designed to attract returning customers
- Providing excellent customer service to ensure that every customer’s needs are met
- Using customer analytics to track and analyze customer behavior
The bottom line is that if you want to improve your ecommerce business, you need to focus on retaining your current customers. The more you can make them happy and keep them coming back; the more successful your store will be.
How to Measure Repeat Customer Rate with Klaviyo
With Klaviyo, You may make a segment of buyers who have placed an order more than once (basically, your repeat customers), and you do have the option to apply a timeframe.
A repeat buyer segment is a set of customers who have returned to buy from your company after their first purchase. This allows you to learn more about your clients’ buying habits and customize your marketing accordingly.
Creating a Repeat Purchase Segment:
When creating a repeat purchaser segment, include the following conditions:
Customer activity > Has Placed Order > is at least 2 > overall time
More Targeting Options
1. Adjust Timeframe
You may also change the time frame; for example, you can isolate buyers who bought a specific number of times on particular days or months rather than identifying purchase activity for the entire time.
2. Add a Filter
You may even identify repeat purchasers of a particular product or those who have purchased from a specific category.
3. Add Additional Conditions
To make a group of repeat purchasers on a specific list, add the “Additional Condition” to your segment. You may further narrow this group by adding as many additional conditions based on the customer behavior.
6. Average order return rate
Definition: The average percentage of customers who return an item for a refund or exchange.
Common causes of high average return rate
Customers frequently return items to retailers because of a variety of factors such as:
- Incorrect size: When the consumer receives a product that isn’t appropriate size as described.
- Incorrect description: When the purchased item does not match the displayed description in terms of style or color.
- Damaged product: Before or during the shipping process, if the delivered item is damaged, it is returned.
- Malfunctioning product: When the supplied products are not on par with the quality described
Why It’s Important to Track Ecommerce Return Rate
Measuring your return rate is crucial because it gives you insight into the quality of your products and services. It also lets you know if your business is meeting customer expectations.
A high return rate can be a sign of damaged or malfunctioning items, meaning that the retailer’s supply chain may need to be improved, or inaccurate descriptions and sizes may mean that there’s a problem with their product descriptions or sizing charts.
On the other hand, a low return rate could mean that customers are happy with their item choices and have an accurate understanding of how to choose the right size. It also means that they’re happy with your product quality.
If you have a high return rate, it may be time to reassess your product lines, supply chain, and product descriptions.
So you need to measure this because it influences long-term revenue. And high returns affect the conversion rate impacting your bottom line.
How to Manage Ecommerce Return
To measure return rates for any ecommerce business, you need to have a way to identify how many orders were refunded or returned.
The way is simple: you simply need to monitor your orders to figure out how many of them were refunded or returned.
Since most ecommerce platforms do not provide that information, you need to use external software (or a spreadsheet) that can track and measure the numbers. Once you’re able to do that, managing the returns becomes easier. To take care of the returns effectively on a Shopify store, you can use the Shopify app, Returnly.
You get everything you need to automate and manage your returns with the Returnly App. Returnly works with Shopify purchases and provides a self-service Returns Center for your business.
7. Overall Ecommerce Conversion Rate
Definition: The overall number of first-time buyers as a percentage of visitors.
Why It’s Critical to Calculate Your Ecommerce Conversion Rate
The overall ecommerce conversion rate is a great way to measure the effectiveness of your online marketing campaigns and website analytics because it allows you to compare how many people actually do anything on your site after seeing or hearing about it from another source.
It can also be a great tool for improving your ecommerce conversion rate because you can pinpoint the elements of your site that are working effectively and those that aren’t.
This metric will show you whether or not people understand what they should do when they get to your site. For example, if you have a lot of people going through your shopping process but never completing the purchase, then you will know that there is a disconnect somewhere between your site and the visitor.
How to Track Ecommerce Conversion Rate on Google Analytics
Conversion rates may be easily tracked using Google Analytics ecommerce tracking. To understand how your online brand is performing over a particular time duration or time, you can take a few simple steps that you can take to evaluate what’s happening with your site’s traffic.
Here’s a step-by-step process to go through your ecommerce conversion rates:
- Go to the Google Analytics dashboard’s “Conversions” section. From there, choose “Ecommerce” and then “Overview.”
- Take a look at the chart on this page. It will show you how well your site’s performance has been in the past.
- The conversion rate will be shown beneath the graph.
In an ideal scenario, you would check your ecommerce conversion rates on a daily basis or at least twice a week. If you notice that your site’s ecommerce CR is dropping for no apparent reason, it could mean that your website traffic to your site has waned somehow.
To prevent this from happening, always use the right conversion optimization strategies. You can also boost your conversion and grow your ecommerce revenues with tools like Okendo, and PushOwl.
8. Marketing Efficiency Ratio (MER)
Definition: The marketing efficiency ratio calculates how much revenue is generated for each dollar spent on marketing by an ecommerce business.
It could include marketing and sales channels such as advertising, branding, search engine optimization (SEO), public relations (PR), direct marketing, sales promotion, or any other direct or indirect marketing campaigns.
Example: A company generates $100,000 in revenue from its marketing efforts while spending only $10,000 on marketing. The company’s MER would be 10.
Why Tracking MER is Important
Tracking your ecommerce business’ MER is critical because it can help you make informed decisions about your marketing campaigns.
A high MER could indicate that a company is generating a lot of revenue from its marketing efforts, so you may want to consider increasing its marketing budget.
Conversely, a low MER could indicate that a company is not generating enough revenue from its marketing efforts, so it may want to reconsider its marketing strategy.
How to Calculate MER
As mentioned above, you can follow these steps to calculate your ecommerce business’ MER:
Step#1: Gather the expenses across all the marketing expenses your company has incurred within a given period.
Step#2: Divide the total marketing expenses by the total revenue generated from all marketing efforts within the same period.
This calculation will give you your ecommerce business’ MER. If your MER is high, continue doing what you’re doing. You can even increase your marketing budget. If it is low, consider making changes to your marketing strategy.
Conclusion:
Tracking the right ecommerce metrics can be a great tool for improving your business. If you don’t currently know what to track and how to track, start with these seven suggestions and see which ones work best for your business needs.
Whether you want to measure B2C KPIs, you can follow the above tips.
Remember, the power to grow your online store’s bottom line is in your hands once you zero in on the ecommerce metrics that matter most to you.