For most in the retail business, the holiday season represents the best time of the year, in terms of the volume of sales figures. But for your e-commerce business, just how successful was it? There are a number of metrics which can be used to gauge the performance of your e-commerce business, apart from pure sales dollars, and there are a number of tools available which can be used to accomplish these measurements.
Many of the metrics described below are used routinely and conscientiously by Brand Labs on behalf of our e-commerce clients, to accurately gauge real success, and if you’d like to have that same kind of quantifiable accuracy in defining how good a holiday season your e-commerce enterprise has this year, try measuring performance against these yardsticks.
Cost Per Acquisition
This is a measurement of what it costs you to obtain a new customer, and the reason it’s important is that you should only be paying for quality traffic to your site, not those visitors who don’t convert into sales. Whichever channels you are using to acquire customers, they should be evaluated in terms of their effectiveness of acquisition, so you don’t end up spending money in areas which don’t produce results.
This is also an easy calculation, which requires only that you divide the dollar value of product returns by total sales dollars. The higher this number is, the less profitable your business is. A high return rate should cue you into the fact that you have a problem, either with the quality of your products or with customer service. You need to pay close attention to this, because every return represents a loss of revenue as well as an unsatisfied customer.
Cart Abandonment Rate
It’s easy to see why an e-commerce business would need to reduce cart abandonment to the lowest rate possible, since those are all lost sales. In order to accomplish this, you need to understand why customers are abandoning – it could be because of high shipping costs, total sales figure shock, too few payment options, a complicated checkout procedure, or even people who are just browsing. Until you have a handle on the reasons for abandonment, you might want to make use of Autoresponder Max, a service which reaches out to departing customers to remind them of what’s great about your site – and can even include a coupon to help persuade them.
This is a valuable metric because it identifies how many of your customers are returning customers, which is far less expensive than acquiring new ones. It can be measured by quantifying how many customers you acquired (for instance in the past year) who actually came back to make additional purchases at your site. There are obviously lots of things you can do to increase your retention rate, like great customer service, great products, and a killer website – and all of these are preferable to the cost of new customer acquisition.
More has been written about conversion rate than any other metric in e-commerce, and justifiably so, since it measures how many visitors to your site eventually become customers. In order to be as successful as possible at converting visitors into real customers, you have to provide the most enjoyable shopping experience to visitors. Because this is such an important metric, you should use every tool available to analyze your conversion rate, so you can make a determination on strategies that will increase your rate.
Average Order Value
Average order value is just what it sounds like – the total sales dollar value of all transactions for a customer, divided by the number of transactions. The higher the average order value for a given customer, the less overhead is involved on your part, including acquisition cost and all other costs associated with business transactions.
Customer Lifetime Value
How much is any given customer spending on your site, across the entire duration of their transaction history with you? This is a pretty simple calculation, which only involves adding up all sales dollars for a specific customer and subtracting the cost of customer acquisition. This metric makes it clear whether or not specific customers are worthwhile, compared to what it costs to acquire them.
Tools to use for Analysis
So where do you get the tools which can accurately measure all these key performance indicators (KPI’s)? One of the most popular and most effective analytical tools on the market is Google Analytics, which is one of the very best things to start with in your quest to measure e-commerce business performance, and which we make great use of at Brand Labs. This is a great general-purpose analytical package which measures many things very well.
Another great general-use analytical tool is MOZ, which is also very useful for search engine optimization, and which is a tool used by Brand Labs to great effect for more than six years now. Numerous other tools are available for the measurement of specific metrics, but to keep track of most of your important KPI’s, one of the two applications mentioned will tell you what you need to know.
Start tracking these key business indicators today, and gain a better understanding of how successful your e-commerce business really is during the holidays. For more in-depth consultation, contact us to take advantage of our years of expertise in design, development, digital marketing, and strategy & analytics.