Metrics for Ecommerce: Which are the most important?
How do you measure the situation of your eCommerce? Do you know your main traffic channels or customer acquisition cost?
These are just a couple of Ecommerce metrics that every online store owner should know. Growing your eCommerce business is easier if you have control over your finances.
In this post, we summarize the main Ecommerce metrics that you can use to measure the performance of your online store, highlighting some key trends and examples.
Conversion rate
The conversion rate is one of the most important metrics for Ecommerce and measures the percentage of visits that perform a specific action (buy a product, subscribe to a form…) in a given period of time (for example, a month).
Conversion rate formula:
Conversion Rate = (Conversions (purchased a product/subscribed, etc.) / total clicks) x 100 = Conversion percentage .
For example, 1,000 people saw a product, but only 12 actually bought it. We would take 12 and divide it by 1,000, then multiply it by 100 to get our percentage: 1.2%.
(12 / 1,000) x 100 = 1.2% is the conversion rate.
In general, the conversion rate usually ranges between 1% and 3% , but there are online stores that are below that percentage.
Tip : How does the conversion rate change depending on the different traffic channels? Is the conversion rate higher for email traffic than, say, Facebook or Instagram traffic? Analyze all the traffic channels of your ecommerce for a better interpretation of the data.
Return on Investment
Return on investment (ROI) is one of the most used metrics and measures how much the company earns from its investments, not only in the e-commerce sector.
To calculate the return on investment (ROI) you need two figures: the profit and the cost of the initial investment.
Return on Investment (ROI) Formula:
ROI = (Profit – Investment) / Investment x 100 = Return on investment
Suppose we invest 1,000 in a social media marketing campaign on Facebook and at the end of the campaign we have earned 1,250 in sales. We would need to take the profit and subtract the cost of the investment, then divide this figure by the cost of the investment and multiply by 100 to get the percentage.
ROI = (1250 – 1000) / 1000 x 100 = 25%.
A good ROI will depend on several factors, but the higher the better. A result greater than 0 indicates a positive return on investment. If the result is less than 0, the investment will have a negative return.
Main customer acquisition channels
How do people find out about your company for the first time? Do you know what the main traffic channels are by sales volume? Have they converted immediately or heard about your brand through multiple channels before purchasing?
Tracking your top traffic channels can help you spend smarter on marketing.
Customer Lifetime Value (CLV )
You may be familiar with its acronym in English, Customer Lifetime Value , it is one of the most used eCommerce metrics. Calculate the money that each customer spends throughout their relationship with the company, from registration, first purchase or specific period.
To calculate the value of your customer’s life cycle you have to take the average value of the orders, multiply it by the number of sales they will make in a given period of time and, finally, multiply it by the total retention time.
- Average order value : expresses what, on average, each customer spends on each purchase.
- Retention time : Period of time in which the customer makes purchases, a year is taken as a reference, but it can be a month or a week, if your study takes it into account in this way.
Customer Lifecycle Value (CLV) Formula:
Customer Lifetime Value = Average Purchase Value * Number of recurring purchases * Average Customer Lifetime = CLV
For example, an online food store obtains an average order value of 50 that is placed 4 times a month. The client stays for a total of 6 months, until they leave.
We take 50 euros, multiply them by 4, which gives us 200 euros, and finally, we multiply them by the retention time or life cycle of 6 months: 1,200.
50 x 4 x 6 months = 1,200 is the value of the customer’s life cycle.
This metric is used in ecommerce companies with years of experience. This is because they have more information and data about customers’ purchasing habits, how often they make repeat purchases, etc.
Average Order Value (AOV)
Monitoring the AOV (Average Order Value) is very important for new ecommerce. It is the total amount of money that a customer spends each time he or she purchases.
We calculate it in a simple way: the total income during a period of time or during the activity, divided by the number of orders. Thus, we obtain the average value of the orders.
Average Order Value (AOV) formula:
AOV = Total Revenue / Number of Orders = Average Order Value.
For example, if your online store generated 1,000 euros in July, and there were 25 orders placed, the average value of the orders is 1,000 euros/25 = 40 euros is the AOV.
Tip : A simple rule of thumb is to keep acquisition costs (CAC) lower than the average order value.
Customer Acquisition Cost (CAC)
The cost of acquiring a customer, Customer Acquisition Cost (CAC) is the amount of money it costs to acquire a new customer, that is, all the marketing actions you carry out to get a new customer.
To calculate the cost of acquiring a customer, you will need to add up all your sales and marketing costs and divide them by the total number of customers acquired over a given period of time.
Customer Acquisition Cost (CAC) formula:
Cost of acquiring a customer = (Marketing investment + sales investment) / number of customers = CAC
For example: A cosmetics company spends 3,000 euros on a campaign that brings in 114 new customers.
3,000 / 114 = 26.32 spent to acquire a new customer.
Generally, the lower the CAC, the better . The aim is to ensure that the cost is optimal when it comes to acquiring new clients. The CAC must be less than your CLV .
As with conversion rate, it is recommended to track these Ecommerce metrics site-wide as well as based on individual traffic sources.
For example, if your in-store CAC is 17 euros, but your organic search CAC is only 8 euros, you may want to redirect more of your marketing budget to SEO positioning.
Tip : A simple rule of thumb is to keep acquisition costs (CAC) lower than the average order value.
bounce rate
The bounce rate indicates the percentage of visitors who, after viewing a page, leave the website.
A high bounce rate is associated with web usability problems , the visitor does not find the website easy to use or intuitive or is not interested in the product or content.
Bounce rate formula:
Bounce rate = Visits that abandon after viewing a page / total visits.
Some tips to reduce the bounce rate are:
- Use high-quality and attractive product photos and videos.
- Review and add more benefits to the description of the product sheets.
- Redesign the branding or change the colors you use on that specific page.
- Redesign the design of your online store or website to make purchasing easier.
An optimal bounce rate in E-commerce should not be greater than 30% , although this will depend on the industry and various factors such as the product, content or web design.
Tip : We can find the bounce rate in Google Analytics, under the Behavior > Site Content > All Pages > Exit Pages section .
Cart abandonment rate
Abandonments during the purchasing process are frequent in online stores, so it is important to calculate the cart abandonment rate and convert abandoned shopping carts.
The cart abandonment rate is the percentage that measures the conversion of
Cart abandonment rate formula:
Cart abandonment rate = No. of completed transactions / Total no. of shopping baskets * 100 = Cart abandonment rate
For example, during a month, you have obtained 150 transactions and 300 shopping baskets created. We divide the transactions between the shopping baskets and multiply by 100 to obtain the percentage, which is the abandonment rate.
(150 / 300) x 100 = 50% is the cart abandonment rate percentage.
There are different ways to recover abandoned carts in your online store , such as adding more payment methods, not including a registration section (or optional), including trust seals, offering a discount or cross-selling related products.
The cart abandonment rate will depend on the industry and usually ranges between 70% , and the higher it is, it means that the visitor does not find your product or website interesting, so it is important to offer a good user experience .
Customer satisfaction
When it comes to knowing our type of client and their tastes, demographic data or search history can be very useful. But apart from this, our customer service has answers to many questions about how to improve customer satisfaction in an online store.
Customer service agents have to be part of customer loyalty, first-hand knowledge of the products offered in the online store. To do this, you can include personalization systems that help you find the product or service you are looking for.
What Ecommerce metrics are important to you?
Other metrics for Ecommerce that you should pay attention to are the opening rate of your Newstletter or how many subscribers click on your emails .
Without a strategy that encompasses all these metrics for Ecommerce it will not be scalable in the long term, so it is advisable that you take these metrics into account when creating your strategies.
Do you use other metrics for Ecommerce? Tell us which metrics are most important in your online business.
