E-Commerce Metrics That Actually Matter
Running an e-commerce store has become relatively complex because of the continuously changing preferences of today’s consumer’s generation. The world is unpredictable, that’s why businesses have to pay close attention to data and focus on evolving their business models with the changing trends.
Selling online without keeping a record of your e-commerce metrics is like driving with eyes closed. No business can survive if you don’t track how you’re doing and compare progress over time. And while it’s crucial for e-commerce businesses to continuously measure website performance and increase their conversion rates, not knowing what metrics to look at exactly can easily harm your business.
Here are some of the most important metrics in e-commerce to keep an eye on:
1. Average Order Value (AOV)
AOV is the ratio between the total of revenue generated and the number of orders. According to some experts, it’s the most valuable metric to focus on in e-commerce business.
2. Return on Ad Spend (ROAS)
ROAS is the amount of money you’re getting back in revenue for every dollar you spend on advertising to drive new revenue. This one is crucial; If you don’t know how much you’re paying to drive new revenue, you can easily spend more than you’re making. This is how you calculate ROAS: ROAS = Revenue from Advertising / Cost of Advertising
3. Customer Lifetime Value (CLV)
CLV measures how much any customer spends with your online shop during the customer lifecycle. With this valuable information, you’ll know that rather than spending more money to attract new customers all the time, it is better and more cost-effective to work on the ones that your brand has already earned.
CLV is calculated by subtracting the acquisition cost from the revenue earned from them, but you must understand its two different types:
• Historical Customer Lifetime Value- Value based upon past purchases.
• Predictive Customer Lifetime Value — Predicted Customer Lifetime Value based on past behaviour.
4. Revenue per visitor (RPV)
RPV is a fundamental metric that will tell you how much revenue each unique visitor is driving. It’s a helpful ratio that combines both AOV and the E-commerce conversion rate:
RPV = AOV x Conversion Rate
5. Cart Abandonment Rate
This is the percentage of people who almost complete a purchase but then leave your website. They put something in their cart and even make it to checkout, but for some reason, they never finish their purchase.
The average shopping cart abandonment rate is around 70%. The higher your abandonment rate, the more it indicates that something is putting shoppers off once they initiate the checkout process. If you can lower this number, it will boost both your conversion rate and overall revenue. How can you reduce the abandonment rate?
• Include trust signals, like reviews
• Do everything you can to reduce any possible confusion
• Maybe offer free shipping to customers
• Provide checkout to guests
• See if the overall checkout experience can be improved
The overall reflection of all these metrics is user experience. Improving the shopping experience of existing and potential customers will positively change these crucial metrics. Also, there are tons of tools you can use to keep an eye on your business metrics. It’s best to use software that allows you to break down each metric by location, the device used, campaign, product, and so on.
Let us help you take care of all this and make your e-commerce website thrive online; our team of experts at Web Marketing Vancouver is ready!