5 eCommerce metrics you need to be monitoring
We have spent a lot of time discussing the importance of setting goals and tracking critical metrics for your eCommerce business. However, as eSellers with limited time and resources, you’ll want to focus your efforts on a handful of numbers that really drive your success. In general, the most useful metrics are those that tell the story about your success in attracting, converting and retaining ideal customers for your business.
The following is an overview of several of the most important eCommerce metrics, including strategies and tips on how to integrate them into your operation.
The most tangible, essential metric in eCommerce is your conversion rate. This rate represents the ratio of purchases you generate relative to the total number of visitors on your site. If you have 10,000 visitors in a given period and 500 customers, your conversation rate is 5%. Five out of every 100 visitors make a purchase.
As you evaluate your own conversion rate, it is helpful to know the baseline for expectations. Worldwide, online conversion rates have ranged from around 2.5 to 3.25 percent in recent quarters. U.S. data is on par with global data. Interestingly, though, U.K. conversion rates run about 2 percent higher than U.S. and global rates.
It is also helpful to compare your conversion rates to other sites with similar businesses. Software businesses tend to convert at a rate roughly 1% higher than the global eCommerce average, and outdoor and sports sites convert at about 2% higher than average.
Ideally, you can dig down to a more granular level and identify conversion rates based on particular marketing strategies used and types of customers. For instance, first-time visitor rates are usually lower than conversion rates of repeat visitors. If you can figure out which digital advertising, social media and other marketing channels drive more efficient conversions, you can concentrate efforts in those areas.
Cart abandonment rate
Shopping cart abandonment rate is a measure of missed opportunities and has a close correlation to your conversion rate. We recently discussed some of the common factors that lead to high cart abandonment rates. Implementing some effective strategies to mitigate these causes can significantly reduce your abandonment rate and drive higher conversion rates.
Cart abandonment rates also fluctuate by industry, but the range is normally between 50 to 75 percent abandonment for specialty eCommerce sites. These numbers mean the majority of people who begin the buying process on a retail site leave without finishing a purchase. Tracking your own rate helps you figure out the extent to which you have a problem, and enables you to focus on strategies to lower your rate.
The rate at which you convert visitors into customers is just one factor that influences your revenue and profits. The average order size plays a role as well. A business that generates $30 per order on average over 1,000 monthly purchases makes $10,000 more in revenue than a similar site that generates $20 on average from the same customer base.
The bottom 90 percent of eCommerce buyers spend an average of $54 per order according to recent RJ Metrics data (see image below). While this offers some insight into what you should typically expect, data on big spenders gives greater hope. The average order size among the top 10 percent of buyers was $163 and the top 1 percent averaged $267.
The message from this data is clear; if you can attract more of the qualified prospects your business best serves you have a better chance of achieving a high average order. Additionally, a strong user experience, bundle discounts, and follow-up email communication campaigns can contribute to steady improvements in average order sizes.
Your bounce rate is the percentage of visitors to your site who exit from the landing page without clicking on any other pages. A high bounce rate typically means that visitors aren’t engaging with your content and find information or resources of value.
In eCommerce, a high bounce rate likely means that you aren’t accurately connecting visitors with a product landing page that meets their needs. In this case, review your digital advertising and social media strategies to ensure your target market, message strategy, and landing page are in sync. To drive sales, you need visitors to stick to investigate your content and solutions.
Another metric closely tied to bounce rate is length of visit duration. The longer people stay on your site on average, the more likely they are to purchase. Ideally, you have a relatively low bounce rate and a high average duration.
You have to invest in your business to attract customers. However, it is important to track how much you spend to acquire each customer. Cost-per-acquisition is calculated by dividing your advertising expenditures in a given period by the total number of first-time customers who placed orders in that period. If you invest $5,000 in advertising and attract 250 new customers, your cost-per-acquisition is $20.
CPA varies significantly by industry, but recent Google Adwords data revealed that the overall average CPA through its advertising platform is around $60. At the low end, tech promoters average about $20 per acquisition. In addition to industry norms, a comparison of your acquisition costs to your average order size offers insight into the financial health of your operation. An above-average order size combined with an in-line cost-per-acquisitions is favorable. If you achieve this combination, it makes sense to consider increasing your ad budget to attract more customers that match your existing customer base.
As eSellers, you don’t want to leave anything to chance in the competitive eCommerce environment. Tracking data on your customer base, conversion rates, cart abandonment, bounce rate and acquisition costs helps you understand what works and doesn’t work in your current operation. Use your measurements to identify opportunities for improvement and to establish new goals.