The most successful eCommerce businesses make decisions based on metrics. They know the state of their store’s performance at all times and know which levers to push to grow.
There are thousands of metrics you can track, but only a few of them directly represent the state of your business and can be turned into actionable insights that help you grow.
Let’s talk about the most important eCommerce metrics. You should have these numbers available to you at all times.
Whenever you consider metrics and experiments, you have to think about statistical significance.
Optimizely has a great definition: “Statistical significance is the likelihood that the difference in conversion rates between a given variation and the baseline is not due to random chance.”The most successful eCommerce businesses make decisions based on their metrics. Click To Tweet
Basically, statistical significance is a way to measure your confidence in a measurement. It’s a way to determine if your metrics are reliable. This way, you can decide if there’s really a relationship between your decisions and your results.
Let’s say you run an A/B experiment for your button colors – red vs. blue – and blue wins with a 98 percent statistical significance. You could be confident that your conversion rate would rise once you make all your store’s buttons blue.
But if you only had an eight percent statistical significance, you wouldn’t know for sure that blue buttons are better, only that they were better in that limited experiment.
Statistical significance relies on two variables: Sample size and effect size.
Sample size refers to the amount of data you measure. The larger your sample, the more confident you can be in the result. If the sample is small, there’s a higher chance that the data will over represent things aren’t predictors of future outcomes.
Effect size refers to the difference in your results. For instance, a 0.5 percent conversion rate change isn’t a very big effect, so you would need a big sample to determine whether the new result is significant or just random chance.
What does statistical significance mean for eCommerce stores? It means that making decisions based on your data is harder when you don’t have much data to measure.
If you’re a large store with tens of thousands of visitors every day, you have the data to accurately track your metrics and make good decisions, but if you only get a few hits each day, you won’t have much confidence in the patterns you see.
That said, you should be tracking data regardless of how much of it you have. You’ll struggle to make decisions until you have a lot of data, but it’s better than making unsupported decisions.
These are the eight most important metrics we believe every eCommerce store owner/marketer should track.
1. Sales conversion rate
Your conversion rate, quite simply, is the percentage of visitors who make a purchase. This is the metric you’ll worry about the most—that’s why it’s first on this list.Your conversion rate is the metric you should worry about the most. Click To Tweet
According to Marketing Sherpa, a fair conversion rate for eCommerce stores is between one and five percent.
Most analytics tools will tell you the conversion rate, but you can find it manually by dividing the number of people who bought a product by the total number of visitors.
Technically, there are little micro-conversions all over your site that lead to a macro-conversion (the purchase). For instance, a shopper clicking on a product on a category page is a micro-conversion because it’s the path to a sale.
Improving your eCommerce conversion rate is a big topic. Check out this guide from ConversionXL for more information: The Ultimate Guide to Increasing eCommerce Conversion Rates.
2. Email opt-ins
Email marketing is one of the most powerful tools eCommerce stores have to drive repeat business. It delivers a 4,400 percent ROI. That’s $44 for every $1 spent. Plus, your mailing list doesn’t make you dependent on another platform (like Facebook or Google) to drive traffic.
Ideally, you want to get as many people on your email list as possible, even if they don’t buy your products. So it’s important to track your total opt-ins and your opt-ins by source. That is, you want to know the individual opt-in rates of every form on your website.
You can track email opt-ins two ways:
- Use the built-in analytics in your email marketing tool
- Set up a conversion goal in Google Analytics to track your opt-in’s “thank you” page
3. Customer lifetime value
Your customer lifetime value is a metric of the total you earn from a typical customer over the course of their life. If you earn $25 over six transactions from a typical customer throughout their life, your CLV is $150. (You’ll have to subtract your acquisition costs, but we’ll get to that in a moment.)
Knowing your customer lifetime value tells you how much you can spend to acquire a customer and how far you should go to retain them.
There are lots of ways to increase your customer lifetime value, but they boil down to increasing your average order value (more on this in a minute) and building long-term relationships with your customers so they become repeat buyers.
4. Customer acquisition cost
Naturally, it costs something to acquire a new customer. This value is called your customer acquisition cost.
In order to make money, your customer acquisition cost needs to be less than your customer lifetime value. Ideally, your acquisition cost should be less than your average order value so you make money off every new customer.
Some businesses can afford to lose money on the first sale and make it up off that customer later, but eCommerce businesses don’t usually have margins to support that.
You can calculate your CAC by dividing your total marketing spend by your number of customers. That’s an overall figure, however. It’s also useful to calculate your CAC by source. You want to know your CAC for each traffic channel.
How do you lower your customer acquisition cost?
- Improve your site for conversions.
- Optimize your paid ads so you spend less for the same results.
- Invest in nearly-free marketing channels that you control, like email marketing, social media, online communities, or content marketing.
- Create a referral program so your customers refer you to new customers. This usually costs something, but it’s a fixed price you only pay when you make a sale.
5. Revenue by traffic source
In our post on traffic quality, we talked about how all traffic isn’t equal. Some traffic sources send visitors who are more likely to become customers. It’s important to stop spending cash on sources that don’t work well or don’t work at all, and invest that money in sources that do work.All traffic isn't equal: Make sure you understand how much traffic comes in from each source. Click To Tweet
How do you identify which ones work? By calculating your revenue by traffic source—a metric that shows you which channels send you actual customers, as opposed to visitors who never buy. How you raise your traffic by source depends on the source.
6. Average order value
Your average order value is, quite simply, the average value of each purchase. To discover yours, divide the total value of all sales by the numbers of carts.
Naturally, you want customers to spend as much as possible so you earn as much as possible. You need to know your average order value so you can find ways to raise it.
How do you drive this metric up?
- Bundle products together so the customer gets a slight discount on the products as opposed to buying them separately.
- Upsell your customers additional features or premium versions of your products.
- Recommend products that complement their purchases.
- Offer free shipping for higher total purchases. (E.g., If your AOV is $54, offer free shipping at $60 to tempt your customers to spend more.)
You can see more strategies for increasing average order value here as well.
7. Shopping cart abandonment rate
This metric is the percentage of shoppers who add items to their shopping cart, but then leave your store without making a purchase. Nearly 70 percent of shoppers abandon their carts, but some of that revenue is recoverable, so it’s important to lower your cart abandonment rate as much as possible.70 percent of shoppers abandon their carts, but some of that revenue is recoverable. Click To Tweet
How do you reduce your cart abandonment rate?
- Simplify your checkout process so the customer can order smoothly.
- Use remarketing to bring would-be customers back to your store.
- Send cart abandonment emails. These prompt the shopper to return and complete their purchase.
8. Net Promoter Score
Net Promoter score is a simple survey that measures your customers’ satisfaction with your brand and products. It asks two questions:
- How likely are you to recommend us to a friend? (Scale of one through 10.)
- Can you tell us why you responded with that number?
Pro tip: Segment your respondents according to their scores for email marketing. Divide them into categories:
- Detractors: People who score six or lower. These are not excited about the brand and most likely won’t purchase again.
- Passives: People who score seven or eight. They are somewhat satisfied, but may buy again.
- Promoters: People who score nine or ten. These are your biggest fans. They will purchase from you again and will promote you to their friends.
Reach out to your detractors and passives. Ask them for more information regarding their responses and why they dislike your brand and if there’s anything you can do to improve the experience. If they have a small problem, this is your chance to solve it.
You should also reach out to your promoters. Thank them for your support and reward them in a small way to make them even more loyal.
Any store, small or large, should be paying attention to these metrics. As we noted initially, statistical significance plays a part in whether you can accurately measure changes in these metrics. Stores with smaller data sets should focus on improving non-rate metrics to start, like AOV, lifetime value, and customer acquisition costs. As your store grows to process a higher volume of orders, and therefore has more data points, you’ll be able to more accurately track and influence change on other metrics, like conversion rate, to make the best decisions for your store.