Growth comes from making data-backed choices.
Business growth doesn’t happen by accident. It’s the result of careful measurement, meaningful analysis, and conscious action.
Not all data is created equal, though. There are literally thousands of things you could measure about your business, your products, your marketing, your customers, and unless you have an unlimited supply of time and money there’s no way to measure it all.
(If you do have an unlimited supply of time and money, we’d love to hear your secret.)Knowing what metrics actually matter to your business is just as important as taking consistent measurements. You probably already have some of the basics under your belt—page views, click-through rates, total revenue and net profit. But if you’re stopping with the basics, you’re missing out on some key information that can help you slim down on cost, stabilize your revenue, and start to scale your profits.
These seven metrics aren’t hard to capture or to put to work, but they’re often overlooked. Many ecommerce entrepreneurs are operating blind, never knowing that they’re leaving key information on the table.
And what you don’t know could be killing your business.
1. Profit Per Visitor
This is technically a ratio of two metrics: your profit over a given period, and the number of visitors your ecommerce site received during the same period. Divide the first by the second, and you get your profit per visitor metric.
Why does it matter?
Knowing the profitability you can expect from visitors allows you to set more cost-effective limits for ad campaigns and other paid traffic sources. It gives you a glimpse of what your acquisition costs should be, how well you’re converting once visitors are on your site, and whether you need to focus more on maximizing conversions or increasing your traffic.
If the ratio is too high, it’s a sign that you’re doing well with visitors when they arrive, but aren’t driving the traffic numbers you need for sustainable growth and success.
Too low, and you need to beef up your conversion rate and maybe your prices.
2. Channel-Specific Conversion Rates
You’re already tracking your overall conversion rate (hopefully). But are you tying each conversion to the traffic source that sent it to you?
Take a look at the most recent monthly data from Custora, taken from more than 500 million ecommerce transactions: 22% of all ecommerce sales start with an organic search. Only 1% start with social media, and display ads only captures another 1%.
These numbers represent ecommerce broadly, of course. Your business might have a very different breakdown. Also, you can—and should—get even more specific with your channels. What’s your conversion rate for traffic from Facebook? Twitter? Specific keywords?
The more dialed in you get on where your conversions are coming from today, the more you can boost your conversion rate tomorrow. If you aren’t measuring conversions by channel, you’re throwing money at channels that don’t work and leaving behind opportunities on the ones that do.
3. Funnel Abandonment Rate
Everyone recognizes the importance of cart abandonment as a metric. Few realize that measuring funnel abandonment can lead to insights that are equally effective, if not more so.
Tracking your funnel abandonment rate—or really, rates, since you should be looking at the losses in each stage of your funnel—shows you where you need to do better with your marketing.
Are you ranked high in searches but not getting the clicks to match? Work on your headlines and descriptions, and fix this early-stage abandonment.
Visitors landing on your site but not spending any time there? Look for design issues, make sure your copy is concise and compelling, and put your irresistible offers higher on the page.
Do you have high traffic all the way to your purchase page, and people bail as soon as they see the price? You might have a product/margin issue going on that you need to address.
4. Repeat Purchase Rate
According to a report by RJMetrics, which looked at data from 176 e-retailers and over 18 million customers, only 32% of first-time customers place a second order within the first year.
When you consider that the cost of acquiring a new customer is at least 5 times higher than selling to an existing customer, that becomes a sobering statistic. It also means you need to make sure you keep your own ecommerce business’s repeat purchase rate as high as you can if you want to maximize profits and give yourself a foundation for growth.
If you’re seeing a number much lower than the 32% average, it’s time to rework your marketing efforts. Go after the low-hanging fruit, and take steps to build customer loyalty. Continue over-relying on first-time buyers, and acquisition costs could easily overrun your revenue.
5. Top Customer Value
There’s an old concept called the “Pareto principle” that says 80% of results come from 20% of the effort.
So 80% of your productivity comes from 20% of the hours you work, 80% of your sales come from 20% of your products, and 80% of your headaches can be attributed to 20% of the glitches in your system.
That same RJMetrics report showed a similar trend when it comes to top customer value. Across the ecommerce retailers examined, the top 1% of customers generated 18 times the value of the average customer.
Which means you should expect something similar.
When confronted with such a big gap in value, the impulse for most ecommerce entrepreneurs would be to try and extract more value from average customers. In reality, you’ll probably see a bigger dollar-for-dollar return by investing in your most loyal and high-value customers. You want to see a high top customer value—it means your business is working the way it should.
6. Location, Location, Location
This one is so easy, and so obvious, and so often overlooked.
Yes, one of the best things about ecommerce is it lets you sell all over the world without leaving your couch. That doesn’t mean location doesn’t matter, though. Knowing where your customers are coming from lets you supercharge your marketing efforts, and tells you a LOT about your customers.
Track location, and adjust your marketing accordingly. Don’t, and your roadmap to profits will quickly fade away.
7. Customer Lifetime Value
OK, this metric has probably come across your radar before. It’s actually widely considered one of the most important metrics there is, because it can tell you a lot about your business.
And once again, RJMetrics’ recent study has provided us with some serious food for thought.
In 2015, the fastest-growing ecommerce companies had a customer lifetime value that was 79% higher than average. Not only did they see markedly greater performance per customer, they also saw higher overall sales volumes and customer acquisitions.
When you consider how much easier it is to sell to existing customers, and how much more likely they are to purchase than new customers, it makes perfect sense.
The ecommerce businesses that are doing the best are bringing on plenty of new customers, but for each sale they make to a new customer they’re making several sales to existing customers. That drives lifetime value up exponentially, which drives the capability for growth and huge profits.
Tracking your customer lifetime value lets you see how well poised you are for growth and helps you direct your efforts towards the most profitable opportunities—the customers who are already helping you turn a profit.
We’re a big fan of recurring revenue via subscription sales as a customer value driver, and we’ve got plenty of other strategies up our sleeves for making repeat sales. Check out some of our other resources, and drop your questions in the comments!