5 eCommerce metrics explained in plain English

One of the best things about selling online is how everything can be monitored, analysed and used to achieve better and better results.

Whether you’re just starting out or an eCommerce expert, you’ll probably agree that one of the best things about selling online is that just about everything can be monitored, analysed and used to get better and better results.

Sometimes, the hardest part is knowing which metrics you should be paying attention to get to these results. That’s whywe’ve written a white paper that we think paints a complete picture of not only basic eCommerce metrics, but also or how to go deeper and more granular, and even how these can help your company offline.

You can download that white paper by clicking here.

Otherwise, read on for what we think are the 5 basic eCommerce metrics every brand out there should be tracking.

Conversion Rate
This metric is like the most addictive game you’ve ever played: easy to understand but difficult to master. That’s because there’s so much that goes into maintaining an above-average conversion rate that it can be difficult to pinpoint exactly what you might be doing well (or not so well).

First off, what is it? Quite simply the number of visitors who purchased something, divided by the total number of visitors within the same period of time.

As you can probably figure out the conversion rate of your site is the most basic barometer of how good of a selling tool it is, and depending on your industry, this should be somewhere between 2% and 5%. While you can use it as an overall metric, things get more interesting when you use the same logic to measure specific pages, product categories, product lines or whatever may be logical to your business.

For some companies, improving conversion rates mean speeding up its eCommerce platform, reducing the number of clicks, improving the user experience and interface… the possibilities are nearly endless. You can find a number of real-life examples in our white paper on the topic.

 

Funnel Abandonment Rate
If you’ve worked online for even just a little bit of time you know about abandonment rate, or more precisely the cart abandonment rate. It’s not miles away from the conversion rate: it is calculated by dividing the number of customers who have purchased by the total number of customers who have added something to their online shopping cart.

Cart abandonment rate is the bane of existence for many eCommerce specialist because it is like money left on the table – a customer had strong intentions of purchasing, but for some reason, did not. But taking a step back from the cart, the sales funnel abandonment rate may be even MORE important. It allows brands to understand at what points customers are exiting the sales funnel.

By focusing on more than just the cart, you can pinpoint exactly which part of your online experience is losing your company customers. Is it your category page? Your shipping fees? Only by tracking funnel abandonment rate will you know.
Lifetime value of a customer
As any brand knows, it costs more to acquire a new customer than to retain an existing one. That’s why the lifetime value of a customer (or customer lifetime value) metric is so critical to understand. According to RJ Metrics, after one year, the top 10 percent of customers are worth six times the industry average and the top 1 percent are worth almost 18 times more.

The Lifetime value of a customer is not a metric unique to eCommerce. But contrary to other offline strategy, eCommerce is the perfect vessel as activity can be pre-programmed at critical times in order to drive this value.

Know a certain product is nearing the end of its lifecycle? Know the type of ROI that can be expected from a certain promotion? All these seemingly tactical activities can take a whole new life with joining up this metric with your eCommerce strategy.
Percentage of returning customers
Similarly to the relationship between conversion rate and funnel abandonment rate, the percentage of returning customers is within the same family as the lifetime value of a customer.

From our experience however, what’s important is that 69% of customer’s first-year spend happens within the first 30 days of purchase. By monitoring this metric and measuring marketing activity against it, your company can know exactly what levers to push and pull in the initial first steps with a new customer.

Not sure where to get started? That’s why we have just the right white paper for you.

Average order value
This is another metric that is not specific to eCommerce, but that can take a whole new dimension through eCommerce. As its name states, the average order value can be calculated by adding the value of all orders and dividing it by the number of customers who have placed these orders.

By tracking this online, companies can have a better indication of what products can be combined together to bring in more revenue. For example in our white paper, we provide the example of a company that saw a rise in order value, only to discover that the launch of a new product also gave way for some customers to create their own bundle. By promoting this bundle to other similar customers, this company was able to raise its average order value significantly.

 

So there you have it: the 5 critical metrics your company should be tracking. However this is just the very simple beginning. There are a lot of ways to take these five values to get more granular and really find out what makes your customers tick. Or even better, how to combine some of these together to put an eCommerce strategy in place that will drive significant sales in the long run, but also how they can help your company offline as well.

You can download our guide to eCommerce metrics by clicking here.