08/24/2020

Which E-Commerce Analytics Matter Most?

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In the age of digital marketing and e-commerce, there are scores of different kinds of analytics available to measure progress and performance. For pure data nerds, they are an endless source of fascination and discovery. For e-commerce managers, they are one more thing you need to stay on top of, among all the other management challenges. That’s why it’s important to know, which e-commerce analytics matter most? And how do you track them?

Here’ we’ll show you what we’ve found are the most important analytics to track for an e-commerce business, explaining terminology as we go.

The difference between e-commerce analytics metrics and KPI

First, it’s important to understand the difference between an analytics metric and a KPI, or Key Performance Indicator. Analytics measure actual performance numbers. KPIs use the metrics to measure progress against a specific, subjective target which you define. An analytics metric might be your actual clickthrough rate, whereas a KPI will show the progress of the CTR rate over time, and whether you’re on track towards a goal of, say, a 10% increase by X date.

Let’s focus now on the e-commerce analytics metrics that are the most important ones to track.

 

 

 

Conversion Rate (CR)

We have a lengthier post about conversion rates that goes into more detail, but here’s the main thing you need to know if you don’t already: conversion rate is the #1 e-commerce metric that should concern you.

If you get plenty of store traffic but only a handful of users are completing a purchase, your store is in trouble. You need to fix this one first. A new business just getting started can expect low conversion rates at the beginning, but if a month or a quarter goes by and you don’t see steady improvement then something needs to change.

 

How to calculate CR: Total # of Sales / Total # of Site Visits

 

The average conversion rate for U.S. e-commerce businesses is around 2.6 percent, but rates can vary drastically depending on your niche, your industry, awareness of your brand, or length of time in business.

Here’s where that all-important KPI comes in. To really understand where conversion rates are succeeding or not, you can set KPI goals for various segments of your marketing:

  • By channel used
  • By product category
  • By specific campaigns

This way you can discern which approaches are doing better than others, and then go with your best-yielding strategies to improve your CR.

 

 

 

Average Order Value (AOV)

AOV is a measure of how much your customers typically spend on a single order from you. It’s also a metric you will need to help you determine Customer Lifetime Value (see below).

 

How to calculate AOV: Total revenue / Total number of orders

 

You can increase your AOV through various strategies:

  • upselling add-ons
  • loyalty programs
  • pricing adjustments
  • adjusting your product mix

 

 

Customer Acquisition Cost (CAC)

Make sure that you’re not launching expensive campaigns that produce too few sales. When just starting out, this cost will be higher but it’s unsustainable if CAC remains high over too many months or quarters.

 

How to calculate CAC: total sales and marketing costs / # of new customers

 

Figure that it can cost 5 – 25X more to acquire a new customer vs keeping an existing one. Also, it’s a useful metric to compare against AOV. If it costs an average of $25 to attract a new buyer and your AOV is $100, you’ll still profit.

Improve your CAC by smarter ad targeting focused on your best customers, tweaking your landing pages, and carefully managing your campaign budgets.

 

 

 

Customer Lifetime Value (CLV)

In making long term plans for your business and projecting revenues, it helps a lot to know your CLV. Having steady repeat customers who can be relied on to spend a certain minimum amount at your store year over year is information you can literally take to the bank.

How to calculate CLV: Average order value X Average purchase frequency rate X Average customer lifespan.

You won’t be able to calculate this figure exactly; you’re looking for an average number from customers whose actual buying habits will vary. You can use the same strategies mentioned below to boost the CLV.

 

 

 

Customer Retention Rate (CRR)

Returning customers are the lifeblood of e-commerce businesses.  The costs are much lower to retain happy customers than to bring in new ones.The CRR e-commerce analytics metric tracks your ability to hold on to customers once you gain them.

 

How to calculate CRR: Subtract the # of new customers at the end of a given period from the total customer count. Divide result by total # of customers at beginning of the period. Multiply that figure by 100.

 

You can improve your CRR with several different strategies:

  • Email campaigns
  • Coupons and specials
  • Loyalty programs

 

 

 

Cart Abandonment Rate (CAR)

Cart abandonment is one of the biggest obstacles to successful sales conversions. We have an entire post about how to reduce abandoned shopping carts, so refer to that for more detail.  Every merchant should expect a certain degree of cart abandonment, you can’t prevent it in all cases though there are lots of strategies outlined in the previous post to reduce this rate.

 

How to calculate CAR: Total # of completed checkouts / Total # of carts loaded. Multiply by 100.

 

Checkout abandonment is a related, though separate problem. If they begin checking out with their cart but abandon on the checkout page, there’s more you can do to correct that because it’s easier to determine why they leave. Shipping costs are probably the biggest obstacle, followed by the need to create a new account. Failing to offer an express checkout option with a choice of payment processors also stops a lot of would-be purchasers.

Improve both abandonment rates with intuitive cart management including persistent pages, urgency messaging, and saving customers’ carts.

 

 

 

Email Click-Through Rate (CTR)

If you collect customer email addresses and use opt-in email campaigns, measuring your email CTR is the last on our list of the e-commerce analytics metrics that matter most. Hopefully, you’re sending out brief and friendly communications that include promotions with prominent Call to Action buttons that people will click on if interested. A CTR of 10% or better is a good KPI to reach for. Your email automation software will automatically calculate both the open rates and clickthrough rates of all your campaigns.

 

Keeping a steady eye on your e-commerce analytics on both a monthly and quarterly basis will show you where you may need to make strategic adjustments to reach your goals. For more about what it takes to grow sales from $15K a month to over $100K a month,  see our grow-your-business series.

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Julie Stewart

My mission at Shoppingfeed is explaining how to leverage e-commerce platforms and SaaS technology to e-merchants who just want to run their business and make more money.

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