Five Ecommerce Metrics to Know by Heart

Just as a brick-and-mortar store owner needs to consider square footage and shelf space, a digital business is built upon and relies on data. But many ecommerce firms and managers don’t often feel comfortable diving into that data and using it to craft strategies built on analytics and real insights.

5 Must-know metrics for ecommerce businesses

Ecommerce conversion rate
Bounce rate
Customer acquisition cost
Average order value
Customer lifetime value

Measuring the success of your ecommerce business, while controlling costs and increasing profits, depends upon sorting the data that should be available from your website while comparing the often-complicated relationships between them. Let’s look at five ecommerce metrics that are important to any online business and represent ecommerce best practices in the industry today.

1. Ecommerce conversion rate

Your ecommerce sales conversion rate is perhaps the most important metric to track, as it represents the percentage of visitors to your website who make a purchase. To calculate your sales conversion rate, simply divide the number of people who made a purchase by the total number of visitors to your site. While conversion rates can vary depending on what you sell, who you sell to, and the price you charge — the average ecommerce conversion rate is between one and five percent, according to Campaign Monitor.

There are, of course, many steps a customer takes before actually making a purchase, with the decision to continue or not being made at each step. This is the reason many ecommerce consultants divide the process into a series of micro-conversions (like signing up to a newsletter, creating an account and clicking on a product), culminating in a macro-conversion, represented by a purchase.

Each of these micro-conversions can represent a key performance indicator (KPI) for your business. Many business owners, for example, focus solely on abandoned carts. While this is certainly an important metric to track, it’s also the last of many steps in your ecommerce funnel. Decreasing the number of abandoned carts is the wrong metric to track if 90 percent of your customers cannot initially find the product they’re looking for.

It is also important to consider your conversion rate across devices. For example, if your mobile traffic is comparable to your desktop traffic, but the conversion rates are wildly different, you may have some optimizing to do. While a good rule of thumb when it comes to ecommerce is to assume a mobile-first approach, diving into this data can tell you what aspect of your website needs the most attention.

2. Bounce rates

One of the key micro-conversions to consider is the decision to explore your website or not. This is measured by your bounce rate — the percentage of visitors who land on your website but leave without clicking on anything. While a bounce rate for a successful blog can be 70 percent or more, a good ecommerce site should have a bounce rate closer to 30 percent or less.

There can be many reasons for a high bounce rate: slow page loads, too much information, too little information, poor navigation clues or even too few trust clues indicating your site is safe to enter credit card details. Bounce rates, as well as conversion rates, can also vary widely depending on the device a visitor is using. An ecommerce consultant can usually help you to isolate the culprits.

It’s also important to understand that a high bounce rate isn’t necessarily bad in specific marketing cases. If your landing page has only one offer, for example, a visitor who spends five seconds there shouldn’t be lumped in with those who spend a minute or more reading, since first-time visitors often log off and return later to mull over their purchase decision. You should know how to tweak your analytics filters accordingly.

3. Customer acquisition cost (CAC)

The amount it costs you to land each paying customer is another extremely important metric. Under no circumstances can the cost of getting each customer be more than what you make. Whether you compare the CAC to the initial sale, first-year sales, or your customer lifetime value depends on your business model and your ability to absorb temporary losses.

Calculating your overall CAC is easy – just divide the amount you spent on marketing by the number of customers you gained. Similarly, comparing the CAC from one marketing campaign or channel to another will tell you which is more effective.

Reducing CAC can be challenging. Most companies turn to organic traffic growth strategies, investing more time in social media, reaching out to social communities, or developing email campaigns than in advertising. However, it’s important to remember that utilizing these “free” channels has a cost in time—both for you and for the others who work on them.

4. Average order value

The average order value can be calculated by dividing the total value of sales by the number of purchases. The more customers buy each time they fill their carts, the higher your average order value will be. There are many strategies you can use to increase this metric, aside from simply increasing your prices. These include bundling products together, offering add-ons at the time of purchase, or offering free shipping for minimum orders.

Determining which of these different strategies works best for your business, however, requires trial and error and a more complex series of analytics than simple division can provide. You will need to try a strategy and monitor the response of your customers. Of course, you’ll need to ensure that your ecommerce platform can provide you with the right data to be measured – like determining which products customers often buy together and which kinds of customers would be interested in your offers.

5. Customer lifetime value (CLV)

From your customer’s perspective, a first sale is often just a trial for what may or may not be a lifetime relationship. They may buy something small at first, just to see if you deliver what you promise. Not everyone will make future purchases, of course, but being realistic about this will likely put your customer acquisition cost in a whole new light.

At its most basic level, you can calculate CLV by dividing your total sales by your total number of customers. However, this is seldom the best method. There are many other methods that would each require you to track sales over specific periods of time, while also being able to segment your customers based on when they first engaged with your business.

As with developing strategies to increase average order values, increasing your CLV relies upon having a robust platform like Drupal that can give you the data analytics tools you need. There are also many enterprise ecommerce solutions that you can use to properly monitor and tweak your processes as your ecommerce business continues to evolve over time.

Final thoughts

Understanding how to approach the metrics discussed here is crucial to growing an ecommerce business that is set up for lasting success. But, ensuring that you are drawing the right insights — and implementing the best optimization plan according to those insights, can be even more complicated. Acro Commerce’s expert analysts are dedicated to helping businesses leverage their data in the best way possible. Use it to both optimize their current ecommerce platforms and engineer entirely new ecommerce funnels to best support your goals. Interested in learning more? Reach out for a consultation today!

David Weedmark is an experienced web developer with a long and storied history in sales and online marketing. A published author, he enjoys playing with JavaScript — just for fun.