If you go into google analytics or any other analytics program these days, you will probably be bewildered by all the different metrics they are tracking. However, by tracking just the 10 metrics identified below you will get a clear overview of the real profitability of your website. Not only that, but these metrics will also indicate the areas of your store you need to improve.
Why do you need metrics?
“If you don’t collect any metrics, you’re flying blind. If you collect and focus on too many, they may be obstructing your field of view.”― Scott M. Graffius. Agile Scrum: Your Quick Start Guide with Step-by-Step Instructions
We couldn’t have said it any better ourselves.
What is an eCommerce metric?
An eCommerce metric is a measurement of a real activity that quantifies any defined measurement of website performance. They are about taking all the actions a visitor performs on a site then analyzing them, usually with a view to increasing sales. It’s a method of determining how efficient and effective you are at converting visitors into sales dollars and providing clues for improvement.
Why do you need eCommerce Metrics?
eCommerce metrics allow you to make sure there is a return on the advertising and marketing investment.
If you are paying for Facebook Ads, Google Ads, and SEO work, eCommerce Metrics are crucial. You want to make sure the money you are spending is generating maximum profitability.
If you pay $47 for a sale you collect only $37 on, you will be in trouble pretty quickly. eCommerce metrics keep you on track and provide data you can follow to make sure your advertising and marketing spend is profitable.
The important thing about eCommerce metric tracking is to focus on the right numbers so that you can make accurate decisions about how to improve your site and, ultimately, your conversion rate.
Let’s look at the eCommerce metrics you should be tracking and how to calculate them.
- Conversion Rate (CR)
What is it?
Conversion rate occurs when visitors take any desired action you want them to take. This may be purchasing a product, filling the contact, subscribing to your email list, etc.
If you can track new customers separately, you can also calculate the New Customer Conversion Rate.
Formula:
Customer Conversion Rate = (Total Conversions) ÷ (Number of Customer Visits)
New Customer Conversion Rate = (Total New Customer Orders) ÷ (Number of New Customer Visits)
- Cost Per Visit (CPV)
What is it?
Cost per visit is the cost on average associated with attracting one visitor to your website.
Customer Cost per Visit:
Customer CPV = (Customer Marketing Expense) ÷ (number of Customer Visits)
New Customer CPV = (New Customer Marketing Expense) ÷ (number of New Customer Visits)
Formula:
Cost per Visit = (Marketing Expense) ÷ (number of Visits)
How to calculate it:
Divide your Advertising and Marketing Spend by the number of Visits.
Example:
$70,000 per month marketing expenses 300,000 visits per month
$70,000 ÷ 300,000 = $0.23 Cost Per Visit
If you are doing marketing campaigns from different sources, you will probably want to separate the visits by channel or campaign. That way you can calculate the cost of a visitor against spend on a particular marketing campaign.
- Customer Acquisition Cost:
What is it?
It is the total advertising and marketing cost to acquire a new customer.
Formula:
Customer Acquisition Cost = (Cost of sales + Marketing Expenses) ÷ (New customers gained)
How to calculate it:
Add the cost of sales to the total marketing spend then divide by the number of new customers you have gained.
Example:
Marketing Expenses = $80,000
Cost of sales = $20,000
Total Orders = 4,000
($60,000 + $20,000) ÷ 4000 = $20.00 Customer Acquisition Cost
If you are doing separate marketing campaigns, you may wish to track which campaign the visitor that placed the order came from. You can then give a customer acquisition cost for each different marketing channel. This will then allow you to calculate which ads and advertising platforms are giving you the best return on investment.
- Sales per Visit (SPV)
What is it?
It’s similar to Conversion Rate, except that instead of showing you the percentage of visits you “close” orders for, the SPV shows you the actual average amount purchased per Visit (not per order). You can improve your SPV by increasing your Conversion Rate, increasing your average order size (see below), or both.
If you can track customer sales per visits versus new customer sales per visits separately, you can calculate both Customer Sales per Visit and New Customer Sales per Visit:
Customer SPV = (Total Customer Sales) ÷ (number of Customer Visits)
New Customer SPV = (Total New Customer Sales) ÷ (number New Customer Visits)
Formula:
Sales Per Visit = (Total Sales) ÷ (number of Visits)
How to calculate it:
Divide Total Sales by the number of Visits.
Example:
Total Sales = $500,000
Visits = 50,000
$500,000 ÷ 50,000 = $10.00 Sales Per Visit
- Average Order Amount (AOA)
What is it?
It’s the average value of an order placed on your website.
Formula:
Average Order Amount = (Total Sales) ÷ (Total Orders)
How to calculate it:
Divide Total Sales by the Total Orders.
Example:
Total Sales for 1 week = $500,000
Total Orders for the same week = 5,000
$500,000÷ 5000 = $100 Average Order Amount
Upselling which is persuading the customer to buy a more expensive product or additional product is a proven way to increase AOA.
It is certainly important to convert your visitors into buyers, but you can also increase revenue by simply increasing the average order amount each visitor purchases on your site.
- Repeat Purchase Rate (RPR)
What is it?
The repeat purchase rate is the percentage of your customers who come back for additional purchases. This can sometimes also be known as the reorder rate.
Formula:
Repeat Purchase Rate = (Number of customers who have ordered more than once) ÷ (Total Customers)
How to calculate it:
Divide the number of customers who have purchased more than once by the total amount of customers you have.
Example:
Number of customers who have ordered more than once = 15,000
Total orders = 65,000
15,000÷65,000 = 23% Repeat Purchase Rate
If your eCommerce site can re-attract existing customers into making additional purchases. This is usually less the cost of acquiring a new customer (CAC) and will help to lower the cost of sales, and should also help you drive up profitability.
Conclusion
Ecommerce metric tracking can be overwhelming until it’s broken down into insights that help you make the right business decisions. The metrics defined above will also give you an overview of the viability and profitability of your business.
You can use the metrics above to identify if you need to spend more time improving your website, in an attempt to increase the conversion rate. These same metrics can also be used to determine which marketing ads and channels are the most profitable and which are not.
What are your thoughts about the above article?
Let me know in the comments below.
