As an e-commerce business owner, it’s important to keep an eye on some key important e-commerce metrics to see how your business is doing. Understanding some of these metrics will help your business measure and track some important e-commerce goals. Managing an e-commerce business has evolved from just building an e-commerce website and having a social media presence to identifying important key performance indicators (KPI)to know if your e-commerce business is fulfilling the purpose it was established for.
So how do you know your e-commerce business is doing well? Or the new strategy you applied 2 months ago is taking your business in the right direction? The answer to these questions will be answered in this article. This article is going to explain some of the important e-commerce metrics you need to know as an e-commerce business owner or an online marketer.
What Are E-commerce Metrics?
E-commerce metrics are quantifiable important data and analytics that help online marketers or e-commerce businesses measure or track their overall marketing success. These metrics are often quantifiable and are used consistently to measure an online business website’s performance. For example, how many website visitors are you getting? Are visitors abandoning items in their online cart? How much did you spend to acquire a new customer? Tracking these metrics helps e-commerce business owners make better-informed decisions regarding conversions and revenue, marketing, customer satisfaction, and operations.
Difference Between Metrics and KPIs
Although both concepts are often used interchangeably, there is however a difference between the two concepts. A metric is quantifiable data used to track your overall e-commerce marketing success A key performance indicator, on the other hand, is quantifiable data that is used to analyze how effective you are at achieving an e-commerce business objective or goals. Therefore, KPIs are goal-oriented, and they use metrics to measure how close or far away you are from reaching those goals. An example of an e-commerce metric would be the daily traffic of your online store or the average order value. On the other hand, an example of a KPI would be the Average Order Value target of $70.
In simple terms, a metric helps businesses track the status of a business process, while a key performance indicator helps you determine if your business is reaching its goal or not. Both are metrics, while one keeps track of the overall performance of a business, the other measure the performance of those metrics about the business goals.
Why Are Metrics for E-commerce Important?
- As an e-commerce business owner, you should know that analyzing important metrics will go a long way in improving your overall business. In addition, eCommerce metrics allow you to make informed decisions about your overall e-commerce business. It will help you improve important areas of your business like customer relations, revenue, order management and fulfilment and other important areas.
- Measuring and identifying metrics and key performance indicators (KPIs) will help shape your marketing strategy to know what strategy works and what is not.
- They also provide important insights and data about your business which can help you determine where to increase your marketing efforts and what changes you need to make to build your customer base and generate more revenue.
- Relying on real-time data to determine your business choice rather than instinct will increase your chance of being successful with your business strategy. It’s more likely to please senior stakeholders, shareholders and lenders too.
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How to Decide Which Metrics or Kp Is to Use?
It is very important to know which business metrics to keep track of especially those that are important to your business. There are a lot of e-commerce KPIs or metrics to measure but not all of them are directly important to your business. To ensure that you are focusing on the right metrics, there are some things you need to keep in mind. They include;
- Your business goals: The metrics you choose to measure and keep track of must be in line with your business goals, and support your business strategy and overall performance.
- Can the metrics be measured: Ensure that the metrics you choose to track are measurable and provide unique insights into the progress your business made since you can’t rely on predictions or guesses.
- Actionable metrics: If the KPIs or metrics you are tracking allow you to change and improve your e-commerce store and make your online business more successful and engaging to your customers then it is something worth trying.
- Interconnected metrics: These metrics are often connected with other metrics to the extent that working and tweaking on one will help improve another. For example, working on the quality of your traffic will lead to more conversion rate. Tracking these types of metrics seems like a good idea.
- Relevant metrics: As I said earlier, choosing the right KPIs or metrics depends on your e-commerce goals and goals might differ from business to business. Therefore, it is important to choose metrics that are relevant to your business and not based on what’s trending in your industry or other business. Therefore, you should learn to optimize and tweak metrics at the right time for optimal results.
- Keep it short and effective: You don’t need to track irrelevant and unnecessary metrics that have no direct impact on your business. The key metrics you need to track must provide valuable insight and data to your business. They must help your business grow and improve in productive areas.
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Key Important E-commerce Metrics to Track in 2022
To help you track the most important e-commerce KPIs or metrics, we have divided most metrics into different categories to make them simpler and digestible.
Key Important E-commerce Metrics to Measure Sales
1. Conversion Rate
This is one of the most important e-commerce metrics for you to track as an online marketer. It is divided into two parts namely the conversion rate and sales conversion rate. The Conversion on one hand is determined by the number of visitors that take action on your website, divided by the total number of visitors. This action can be when a visitor signs up for your newsletter, make an enquiry, bought an item, created an account and some other relevant action on your website. In a more simple term, your conversion rate is an indication of how successful your business strategies are in getting people to engage with your e-commerce website.
The sales conversion rate on the other hand is a percentage that helps businesses determine the number of site visitors who completed their purchase and become paying customers of their business.
The formula for calculating conversion rate is the same for sales. It is displayed like this CVR = (# of Purchases / # of Sessions) x 100
For example, if you have a total of 1000 website visitors and about 100 of them purchase the new Samsung Galaxy A53 from your online store, your site’s conversion rate would be 10%.
2. Average Order Value (AOV)
This e-commerce KPI tells you the average amount customers are spending per order on your online store. This will give you an insight into how much revenue each customer is generating and can help you make decisions, such as the minimum threshold to apply for free shipping.
To calculate the Average Order Value, you need to divide the total revenue by the total number of orders.
The formula is displayed thus;
AOV = Total Revenue / Total Number of Orders
For example, let’s say in June, you had a total number of 500 orders made to your online store and you made a revenue of $15000 from the sales of those orders. Let’s calculate it below.
Total number of orders = $500
Total revenue earned = $15000
So, Conversion Rate = ($15000/$500) = $30
We can say, the average order value for June is $30.
3. Customer Lifetime Value (CLV)
This is the amount of money you estimate each consumer to spend on your products and services throughout their relationship with your business. It tells you the worth of each customer to your business and helps to understand the total amount of revenue you will gain from the consumer during the customer’s lifetime. This metric will help you understand your AOV and cost per acquisition(CPA). Calculating this metric can be a little tricky because the lifetime value is unknown. However, there is a formula which is displayed below.
CLV = Average Value of a Purchase x # of Times the Customer Will Buy Each Year x Average Length of the Customer Relationship (in Years)
For example, if the average number of $250 Samsung phones your customers tend to buy in a year is 20 and they often shop at your business for 5 years, you’ll multiply 250 x 20x 5 to get a CLV of $25,000.
Another way to determine this metric is by analyzing high-valued customers and figuring out their purchasing patterns, then replicating the system with the other customers.
To help improve this metric you have to focus on customer loyalty by offering discounts and special offers. You can also provide quality customer service and reduce the cost of acquiring new customers.
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5. Shopping Cart Abandonment Rate
The cart abandonment rate is another important e-commerce metric to track in 2022. The shopping cart abandonment rate is when a customer adds a product to their online shopping cart but for some reason abandoned that product. It is calculated by the number of visitors who abandoned their cart with the number of visitors who completed the purchase.
Formular= Shopping Cart Abandonment Rate = (# of Completed Purchases / # of Shopping Carts Created) x 100
6. Customer Acquisition Cost (CAC)
This e-commerce KPI helps determine on average the expense of gaining a customer. The formula for calculating CAC is the amount spent on marketing divided by the number of new customers.
For example, if your business spends $200 in June and acquires 300 new customers, we can calculate to see,
CAC = $200 / 400 customers
= $2 per customer
If you want to generate profit, your customer acquisition cost must be less than your consumer lifetime value and your acquisition cost should also be lower than your average order value (AOV), allowing you to profit from each new customer.
Email Marketing-Related E-Commerce Metrics
Email marketing is a very important aspect of e-commerce and one of the most effective ways to market to your customers.
6. Email Click-through Rate (CTR)
This is an important email marketing metric you have to take into consideration as an e-commerce business owner. It displays the percentage of email recipients who clicked on certain links that your email contains. This helps know the number of people that are showing interest in your content or product. These metrics signify a high possibility of conversion. The formula to calculate this metric is the total number of clicks divided by the total number of email deliveries multiplied by 100. (Total number of clicks ÷ total number of email deliveries) × 100.
7. Email Conversion Rate
For any e-commerce business, the goal is to make a sale and tracking your email conversion is one way of knowing if people are buying your product. It is the email recipient percentage that buys some products after clicking the product links on your email. The formula for calculating email conversion rate is (sales total through emails ÷ number of emails deliveries) x 10
8. Email open rate
The email open rate is the number of people that open your email campaign. There is a high chance that people will click a link in your email if they open it. To increase this number focus on writing an attention-grabbing headline. In e-commerce, this number hovers around 21%, so anything above 20% will put you at a significant advantage.
The formula for calculating the Email open rate is (Number of emails opened ÷ Number of emails sent) x 100 = Open rate
9. Unsubscribe rate
This e-commerce KPI helps evaluate the growth rate of an email listing and know the number of people unsubscribing to emails on your website. If the number of people unsubscribing to your email is high, then you know you have to redesign your email marketing campaign to make appealing content for your customers. You can also work on your headline, content and call-to-action button.
The unsubscribe rate formula is displayed thus: (Number of email unsubscribes ÷ Number of email sends) x 100 = Unsubscribe rate
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Customer Satisfaction Metrics
10. Net promoter score (NPS)
The net promoter score is an important e-commerce metric that tells you how many customers are willing to recommend your product to others. Tracking this metric allows business owners to have a clear understanding of customer satisfaction and brand loyalty.
To calculate the NPS, you need to understand what promoters and detractors are.
Your promoters are your loyal customers who recommend your products to their friends and family, whereas the detractors are the unhappy customers who won’t be recommending you to anyone.
NPS formula= ([Number of promoters – Number of detractors] ÷ Number of respondents) x 100 = NPS
Other Important E-commerce Metric
11. Bounce rate
Bounce rate is a very important metric that you have to track as an online business owner. This is because the bounce rate tells you the number of people that are leaving your website without taking any action. That action can be either filling out a form or clicking on a button. Research shows that the average bounce rate for an e-commerce website is between 20% and 45%. As an e-commerce business owner, you can try and work within that frame or lower. To reduce bounce rate, make sure you have an easy-to-navigate and responsive design website. Also, people should be able to tell what you sell immediately upon landing on your site. Make sure to work on your website speed and make your website more mobile-friendly. A chunk of website traffic comes from mobile devices so you have to note that.
The formula for calculating bounce rate is a single-page visit divided by a total website visit.
12. Customer Retention Rate
This is another important e-commerce KPI you must keep track of in 2022 if you want your business to evolve. It involves the number of customers who buy from you repeatedly over a given period. To calculate your customer retention rate, you have to determine the following values.
- How many customers do you have at the end of a given period?
- The number of new customers you acquired during that period.
- The number of customers you had at the beginning of the period
After getting this value, you can use this formula to calculate your customer retention rate.
Customer retention rate= (# of customers at the end of a period – # of new customers acquired in the period) / (# of customers at the beginning of the period) X 100
A high customer retention rate means that your customers are loyal customers who buy from your business from time to time while a low retention rate indicates that your customers are not satisfied with your service and they churn quickly. A churn rate is a rate at which customers stop doing business with your company.
13. Website Traffic
Your website traffic refers to the total number of people who visit your online eCommerce store. It’s very crucial to understand where your visitors are coming from, what device they are using and what location are they coming from. You have to understand how your visitors found your store and what demographics visit your site.
This information will help you plan your advertising to target your visitors based on their location, age, interest and other demographics. Also, you will be able to figure out your best channels. Knowing your traffic source will help improve and streamline your marketing and advertising efforts.
Conclusion
Monitoring e-commerce metrics or KPIs will help develop better growth strategies and ultimately drive quality traffic and sales to your website. Furthermore, you will be able to identify your progress and highlight areas that require improvement to help your overall performance. Getting insight into what works and what doesn’t on your website will help you improve tremendously on your marketing strategy. We hope this guide will help you make the best decision concerning which e-commerce metric to measure and track.