As an eCommerce store owner, you're constantly looking for ways to improve your business. After all, if it isn't improving, it's getting worse! But this is a big job and can be overwhelming at times. When trying to navigate the many metrics available in today's digital world, what should you focus on? And how do you know if the metrics you're measuring are actually helpful? The following guide will take you through some of the most important metrics that every eCommerce store owner should track in 2022.
Key Performance Indicators
Key performance indicators (KPIs) are metrics that help you measure your business’s overall performance. They’re important because they give you an idea of how successful your eCommerce store is in relation to your goals, as well as how effective certain strategies are at driving sales and increasing revenue.
There are many different types of KPIs, but for the purposes of this article we’ll focus on four: conversion rate, profit margin, average order value and customer retention rate (or attrition rate). These should be tracked closely because they provide insight into what's working for your business and where you can improve.
Here are some factors to consider when deciding which metrics to track:
Net Promoter Score
Net Promoter Score (NPS) is a customer loyalty metric that measures how likely customers are to recommend your business to others. NPS has been around for decades, but it's still one of the most effective ways to capture feedback from customers and understand their satisfaction with your store. In fact, it's so effective because it's easy to measure and interpret.
NPS can help you improve customer engagement in several key areas:
- Customer loyalty—The higher your NPS score, the more likely it is that customers will become repeat buyers or refer new ones.
- Customer satisfaction—Customers who indicate they would recommend you have given you a high-level indication of their satisfaction level with your brand and products/services. This is great information for gauging lead times on orders or identifying when something needs fixing in order for customers to feel satisfied enough to make recommendations about their experience with you as an organization (and thus increase conversion).
Conversion rate is the percentage of visitors who complete a desired action on your site, like signing up for an email newsletter or making a purchase. It's an important ecommerce metric because it tells you how well your store is performing and whether it needs to be optimized in some way (such as with A/B tests).
A high conversion rate means that most people who visit your website take the action you want them to take—which is great! But if you aren't seeing enough conversions, there may be a disconnect between what you're offering and what customers actually want from their online shopping experience. So when looking at conversion rates, think about whether they're in line with industry averages or if they are higher or lower than expected given the other goals of your business plan.
Customer Retention Rate
Customer retention rate is a metric that shows how many customers come back to your store after their first purchase. It’s also a good indicator of customer loyalty and how well your store is doing.
This metric tells you a lot about how well your marketing is working, which can help you figure out what marketing activities are effective at bringing in new customers and which ones aren’t worth the investment of time and money anymore.
Customer Life Time Value
Customer Lifetime Value (CLV) is the most important metric for ecommerce businesses. Why? Simply because it shows you how much revenue a single customer will generate over their lifetime.
To calculate CLV, you need to know the average number of purchases per month and the average purchase value. This can be calculated by looking at your past sales data or from industry averages.
Once you have these two numbers, multiply them together to get your customer lifetime value:
- Average monthly spend x estimated number of months they’ll do that = CLV
Now that you know how to calculate CLV, let's look at some ways in which it can help improve your store and marketing efforts:
Shopping Cart Abandonment Rate
This metric measures how many visitors added items to their shopping cart, but didn’t complete the purchase. The shopping cart abandonment rate is crucial for eCommerce businesses because it tells you about your customers' interest in your products and services, as well as their overall shopping experience. There are multiple reasons why shoppers might abandon their carts:
- They don't see what they're looking for or believe that there's nothing special about your store’s offerings
- They find more affordable options elsewhere
- They get distracted by something else on the website (a related product, an ad)
Conversion by Traffic Source
After you've started tracking your store's conversions, the next step is to understand which traffic sources are bringing in the most sales. This can be done by setting up a conversion code for each traffic source and then looking at which traffic sources have the highest conversion rate.
For example, if you're selling ecommerce products from your website and you're receiving organic SEO leads from Google search results and social media posts, you'll want to analyze which channels are converting into customers most often so that you can allocate more resources toward those channels as opposed to ones that aren't working as well.
Keep in mind: There are many factors that go into making a sale—and thus many opportunities for improvement—which means it's important not only to track how much revenue each channel generates but also what areas of your business need improvement (e.g., if one particular banner ad isn't doing well).
Mobile Optimization vs. Desktop Optimization
Before we get into the nitty-gritty of what mobile optimization is and how it differs from desktop optimization, let's take a quick look at the overall picture. With eCommerce sales reaching $2.3 Trillion in 2020, according to Statista, it's clear that mobile commerce has become a major force in today's digital marketing landscape. As such, it's important for your store to be optimized for mobile devices as well.
In order to ensure that your site is easy to use on all screens—no matter what device or screen size they're using—you need to make sure you have both a responsive design and an app available for users who prefer one over another (or both).
Email Marketing Success Metrics
- Open rate
- Click-through rate
- Bounce rate, or the percentage of emails that bounce
- Conversion rate, or the number of people who click through and make a purchase as a result of an email campaign.
Know what to measure in your eCommerce store.
There are many reasons to measure eCommerce metrics. The first is to get a better understanding of how your business is running and what areas are performing well. If you keep track of the right data, it will give you answers as to where improvements need to be made, which will help grow your revenue and increase customer satisfaction.
Another reason is that measuring certain eCommerce metrics can help predict future sales or events within the store. This can help increase revenue by making sure products are stocked at the right time for certain promotions or events (e.g., Black Friday). It can also reduce costs by knowing when inventory needs restocking before they run out completely!
We hope this article has helped you better understand the metrics that matter to your eCommerce store. If you’d like more information on how to measure these metrics or what to do with the data, we recommend checking out our blog post on measurement tips.