Six essential e-commerce metrics you should track
With 2.14 billion global digital buyers in 2021, running an e-commerce store can be a smart business decision. But to truly find success, you need to know how well your store is performing, and you can find that out by keeping track of metrics.
If you don’t know how to do it alone, you can hire an agency that will do it for you. But the agency you hire needs to be professional and present you with a detailed marketing proposal, which they can either write themselves or use a marketing proposal template that clearly outlines every step of the marketing success process.
On the other hand, if you want to do it yourself, here are the metrics you need to keep track of.
Customer retention rate
Customer retention is very important for any business because the cost of retaining an existing customer is much smaller than the cost of acquiring a new one. This metric shows how many of your customers are repeat customers and it’s measured over a longer period of time.
The formula for customer retention rate is:
CRR = (Number of customers with more than 1 order / Total Customers) * 100
If your CRR isn’t satisfying, you can always increase it by providing a great experience for your customers and only selling the highest quality products. A great way to increase customer retention is to start a loyalty program that allows you to reward customers for every purchase they make.
Customer acquisition cost
It’s important to retain existing customers, but you also need to acquire new ones if you want your store to grow and find success. And the cost of acquiring a new customer can be very high depending on the acquisition channels you use.
Here is how to calculate your customer acquisition cost:
CAC = Total costs associated with acquisition / Total new customers
Keeping your customer acquisition cost under control is very important because it shows you whether you’re losing or making money with every new customer that comes to your business.
If you spend more money getting them to your website than they do on products, it’s a failed investment.
When it comes to CAC, it’s important to know the maximum acquisition cost you can afford and then make informed spending decisions.
Conversion rate
This is probably the most crucial metric of them all. Your conversion rate shows how many website visitors convert into paying customers and you can calculate it by using the following formula:
Conversion Rate = (Total number of customers / Total Unique Visitors) * 100
This is a metric you need to keep an eye on regularly and one you should always strive to improve.
The process of improving your CR is known as conversion rate optimisation (CRO). One of the best ways to improve your CRO is to hire a CRO agency and let experts do everything in a proper way.
Cart abandonment rate
Cart abandonment is something every e-commerce store owner deals with daily. The average documented e-commerce cart abandonment rate is as high as 69.57%.
Your cart abandonment rate shows you how much potential profit you’re losing. While it’s impossible to stop cart abandonment completely, you can significantly reduce it if you optimise your checkout process.
You can do this by:
● Not including any unexpected costs or hidden fees;
● Allowing customers to checkout without registration;
● Showing proof of safety;
● Allowing multiple payment options;
● Offering free and fast delivery.
Refund and return rates
Accepting returns and giving refunds is necessary for e-commerce stores because, without a good return policy, nobody would even dare shop from your website.
But it’s very important to keep track of your refund and return rates because high rates mean there’s something seriously wrong.
A high return rate usually shows that your products aren’t high quality or aren’t what the customer was expecting.
To minimise your returns, you should post high quality photos that show products in their true light, describe the materials in detail, and provide exact measurements and sizes of the products.
When you get a return, make sure to follow up with the unsatisfied customer to see what the issue was and if there is any way you can resolve it so the problem doesn’t repeat.
Customer lifetime value
Not all customers have the same value and each person who buys something from your website throughout their customer lifecycle spends a different amount of money.
There are three different types of CLV and they’re calculated based on the data you have and what stage your business is in.
The different CLV metrics are:
● Predictive - which can be calculated as Average Order Value x Number of Orders.
● Averaging - which can be calculated as Total Revenue / Total Number of Customers.
● Historical - which can be calculated as Order 1 + Order 2 + …
Putting your focus on increasing CLV will also help increase your customer retention rates and will allow you to focus less on your customer acquisition rates.
Conclusion
Keeping track of e-commerce metrics is a necessary task for anyone who wants to succeed in the world of online shopping and find ways to improve their offer and their store.
While there are many more metrics and you can’t keep up with all of them, you need to at least be aware of the most important ones like the ones you’ve read about here.
