Measuring e-commerce success – six metrics to track
Measuring e-commerce success – six metrics to track
Running an online store is no cakewalk. You have to consider many factors to see and understand whether your business grows and attracts customers effectively. You can do that through analytics and measuring marketing metrics and KPIs. In this post, we analyze six of the most popular and important e-commerce metrics. Let’s get right to it!
Before we show you the most important e-commerce metrics, we have to explain two valid questions.
Which is it – a KPI or a metric?
These terms are very similar, and some people tend to mix them up. Metric is nothing more than information about the current state. If your CTR is at 20%, that’s just a metric. It informs you about your current situation.
KPI (this acronym stands for key performance indicator), on the other hand, informs you about what your metrics should be in order to achieve your marketing and sales goals. So, if you set CTR (click-through rate) at 40% to reach your marketing goals, that’s a KPI. All KPIs are (or at least should be) based on specific marketing metrics.
How to track marketing metrics
You can calculate some of the metrics on your own. This refers, for instance, to AOV (average order value). But measuring e-commerce metrics manually, while possible, is ineffective and time-consuming. You need to automate it somehow. For starters, standard analytics tools (such as Google Analytics) provide you with information on standard marketing metrics. If you use other marketing or sales tools, they surely come with an analytics module where you can quickly check all the relevant data about your company’s performance.
For example, thanks to Google Analytics, you get access to website-related metrics, and these are primarily:
- Sessions: How many sessions you have, and how long are they (to simplify, we can say that every visit to your online store is a session).
- Users: How many people visit your website. Here, you should pay extra attention to so-called unique visitors. These are users counted only once in a specific timeframe. For many people, that’s the most important indicator of how many people actually visit your website.
- Page views: How many pages your users display. How many pages are usually viewed during one session, etc. The more page views, the better.
These and more website metrics are available to measure in Google Analytics. That’s a good starting point for further analysis. This tool offers far more data, though. You will find it in the “Audience” tab. Here, you can find out more about your users’ demographics, behaviors, interests, and websites they’ve come from to your store. Read more about Google Analytics audience reports.
It works the same with other marketing tools. If you use an email marketing platform, it will provide you with information on your OR (open rates) and CTR (click-through rates), etc. Moreover, sometimes, you can get different results within the same metric depending on your marketing activities. For instance, your ads can have a CTR of 30% but your newsletters just 15%, and that’s perfectly natural.
With this introduction done, let’s have a look at six of the most important e-commerce metrics you ought to measure.
Six crucial e-commerce metrics
CTR: CLICK-THROUGH RATE
CTR is a universal marketing/web metric. It informs you about how many people clicked the link in your ad/email/social media post/push notification, etc. If you want to calculate CTR, you need to divide the number of clicks by the number of views. For example, if you run Google Ads for your online store and 1,000 people view your ad, but only 100 of them click it, your CTR is 10%.
Simply put, conversion is an action you want your customers to take. There is no closed list of conversions, as they depend on the profile of your business and your marketing goals. For instance, every submitted order is a conversion, and so is every sign-up for the newsletter or the loyalty program.
Conversion rate works exactly like CTR – it informs you about how many people performed the expected action vs. the whole number of people who could. Again, let’s use an example. You show your website visitors a pop-up encouraging them to sign up for the newsletter. You have 1,000 website views, so you assume that 1,000 people viewed the ad. And you have 50 sign-ups, so your conversion rate is 5%.
CART ABANDONMENT RATE
That’s the metric any e-commerce entrepreneur would happily forget about. Cart abandonment rate informs you about the percentage of customers who had put some products in their shopping carts but never finished the order. Of course, the lower the cart abandonment rate, the better. If it is high, there is likely something wrong with your store’s website, and you need to find out what causes the problem and eliminate it as quickly as possible. A high cart abandonment rate means lost orders and, therefore, money.
AOV: AVERAGE ORDER VALUE
This metric is self-explanatory, but it’s one of the most important metrics in every e-commerce business. It’s the average amount of money customers spend when shopping at your store. The higher AOV, the more money you make. To calculate AOV for, e.g., the last year, you need to take the sum of all orders from that period and divide it by the number of orders.
If you had 1,000 customers in the last year and they’ve spent $20,000 over that period, AOV is $20.
CPA: COST PER ACQUISITION
It’s the cost of every single customer who has ever placed an order at your store. If you run marketing activities, you obviously, spend money on them and expect them to generate more orders in return. Every order is placed by a specific user that needs to be acquired first. And every such user who places at least one order is referred to as an acquisition. CPA is usually calculated per marketing channel, and it shows you how much money you have to spend to get one customer.
If you run Facebook Ads, spend $1,000 on them, and get 40 orders, your CPA in this specific marketing channel is $25. If you make more money on each user than CPA, you’re in a good situation – your ads are profitable. If not, you have to subsidize each customer, and you will shortly be out of business.
ROAS: RETURN ON AD SPEND
The last e-commerce metric is similar to the previous one. Return on ad spend informs you how much money you make compared to the amount you had to spend on marketing activities. Usually, ROAS is showcased in the form of a ratio. If you make $10 on every $1 spent on your marketing, the ROAS ratio is 10:1.
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