Common eCommerce Mistakes | Not doing the math – Part #10
If your business has an ecommerce presence then you have a great deal to optimize, that requires math, which in turn requires accurate data. Tracking key metrics is not on the top of people's to-do list, unless you own an ecommerce platform. Measuring performance on your site is how you identify weak spots and maximize profits. Doing the math helps avoid wasting valuable resources where they are not needed. However this is one of many mistakes ecommerce websites make.
“Where performance is measured, performance improves. Where performance is reported, performance improves dramatically. Where performance is reported publically, performance improves exponentially.” ~ Clate Mask , CEO of Infusionsoft
As a sales and marketing manager or small business owner of an ecommerce website, it can be frustrating to determine the most useful and effective ways to measure your site. Not only that, but you also want to know exactly what you should be measuring. You want to make sure your analysis supports your overall goal — making sales! These Key Performance Indicators (KPIs) shouldn’t be viewed as a hunt for the worst, but the best ways to measure what your team can improve upon to make your company successful.
In this article we will examine the ecommerce metrics you need to measure, watch and guide so that the decisions you make for your online business are based upon solid data.
- Conversion Rate at Checkout. A conversion rate is measuring any activity against a desired goal. In this case, you would take the number of website visitors of a certain page on your ecommerce website, cart page for example, against the number of purchases. For the most part this ratio represents the number of visitors that thought about buying something and did or did not take the final step. For a deeper dive you should be able to segment this list by lead source, channels and date/time.
- How to move the needle? Segment your list and target your buyer persona versus just having anybody hit your site. SEO is an important tool here and so is targeted advertising. This will bring you targeted traffic.
- Returning Customers. Many ecommerce websites spend a substantial amount of money turning a visitor into a customer. Getting that customer to return is critical to your long-term success. The conversion rate at checkout is an incomplete picture. You need to know how many of those are one-time customers that did not return and conversely how many loyal customers bought from you again and again. Most ecommerce websites get over 50% of their revenue from returning customers.
- How to move the needle? Provide great customer service and today that is often handled via social media or still over the phone. Use email to follow up on purchases and provide support for their product. Remind them about the related products you offer. Offer discounts for their next purchase or coupons for referrals.
- Customer Value. This metric is at the very heart of your business. Traffic is an important component to conversion. Typically you are paying to play to get visitors to your website in one form or another, whether that be through paid advertising or spending money on a live event. You need to know the value of a customer. How much is the average transaction? How much does the average customer spend over varying dates? What is the value of a shopping cart, abandoned or not? Which lead magnets or products maximized the value of a customer? When a customer returns what is their second purchase value?
- How to move the needle? Measure the average value of a transaction. Now change how you recommend add-on purchases or quality improvement ideas. Related items are important to growing CLV. Offering discounts for buying more than one item or coupons for returning customers can help too. Increasing customer value is all about making your customer feel like they belong, they are valued and you appreciate them.
- Cart abandonment. Most carts are left without being paid for because people have an endless amount of sources to shop. People are also impulsive and change their mind. When you measure the abandonment rate of your shopping cart you are looking for patterns for specific products or transaction types. This helps you know if you have a competitive or quality control problem. This ratio can also be tied to marketing channel or user experience so you can determine if site load speed or other site improvements are worth the expense.
- How to move the needle? Watch your competition for quality or price changes. Make sure your customer knows exactly what they are buying. Use product review video testimonials to back your claims with social proof.
- Customer Acquisition. Nobody wants to spend any money to acquire a customer but that just isn't reality. Knowing exactly how much you are spending to acquire a customer is critical. It helps you determine your cost and then you can compare that to other costs, such as cost of goods sold. Here you will use only your sales and marketing expenditures and divide that by the number of new or repeat customers.
- How to move the needle? Find ways to reduce your customer acquisition costs by looking for and using any and all free opportunities to market to your customers – search engine optimization, social media, emails, word of mouth, content marketing, influencer marketing – before resorting to paid media.
- Retention Rate. This is critical for those ecommerce websites that have a subscription or automatic renew to their product or services. Those customers that keep returning and maintain their subscription are far more profitable than always acquiring new ones.
- How to move the needle? People have to be happy with your products and services to come back time after time, it is as simple as that. You are never done with your first sale, delivery times, shipping and product condition at delivery versus what you promised are all factors you can always improve upon.
- Gross margin. Revenue is the gross amount of money your store took in. However gross margin is what is left after you paid for the goods and the advertising. This has to be a positive number over time or you won't be in business very long. In order to grow the business you must be profitable.
- How to move the needle? This is a sum game. Here you make improvements by maximizing everything above and taking advantage of your increased volume as well as system improvements that enhance how quickly and efficiently you can deliver on your wares.
If you are looking for a resource to measure yourself against global conversion rates, we suggest SmartInsights or The Monetate Ecommerce Quarterly.
The tools needed to gather this data and to analyze it are in great supply. Google Analytics and reporting from your ecommerce platform should get you most of the way there. It’s best to use software that allows you to break down each metric by location, device used, campaign, product and so on. Never forget that their are also real people to factor into your analysis. If you use multi channel marketing your staff that handles your phones and comments on social media or live chat can have an affect. Customer behavior is also a factor to consider. Once you have set goals and selected KPIs, monitoring those indicators should become an everyday exercise. And most importantly: “Performance should inform business decisions, and you should use KPIs to drive actions.” ~ Shopify
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