Ecommerce Basics: Metrics of Success

As an ecommerce vendor, you face a common challenge with and brick-and-mortar stores, namely, how to measure the success of your marketing programs. You however, have a number of significant advantages in addressing this challenge. Online applications give you almost instantaneous feedback to track and adjust marketing campaigns.

Ecommerce metrics 101

In other words, you have a wide variety of metrics of success by which you can measure the effectiveness of marketing campaigns.

Customer Acquisition Cost (CAC)

CAC is really a measure of the efficiency of a marketing program. A lower cost of acquisition means that the program is more efficient. Many ecommerce vendors simply divide their marketing campaign costs by the number of new customers drawn in by the campaign to determine CAC. However, you can get a more accurate CAC assessment by adding marketing wages, software costs, professional services, and marketing overhead into the campaign costs.

Customer Lifetime Value (CLV)

CLV measures the value that each customer adds to a company over the amount of time they conduct business with the company. CLV and repeat customer rate (RCR) are essentially measures of the same thing. CLV is typically measured by adding the gross profits from all purchases made by a customer. A more predictive CLV model will estimate likely future purchases as a function of past transactions and customer behaviors.

In either case, an ecommerce vendor should pay careful attention to the ratio of CLV to CAC. Anything less than a 3:1 ratio suggests the vendor is spending more to acquire a customer than the value it derives from that customer.

Conversion Rate (CV)

Early ecommerce metrics focused only on “eyeballs”, or the number of visitors who visited a website. Newer, more robust metrics now reveal how many of those visits produce actual sales. If a your CV is low, you can make simple changes and measure the value of each change by watching how it affects CV. A few common improvements include better text and visuals, product demonstration videos, and faster and easier checkouts. CV metrics can also give insights as to why a customer might have left items abandoned in an online cart, or whether product descriptions were either insufficient or excessive.

Bounce Rate

Your front page should do more than just bring a customer to your site. It should also lead customers into the your offerings below the front page. If you have a high bounce rate, too many prospective customers are doing little more than looking at your home page. If you have this problem, look to engage ecommerce service providers with premium web templates capable of enticing customers to linger.

Social Media Marketing Statistics

If you’re ignoring social media marketing, you’re doing so at your own peril. Facebook, Twitter, Instagram, Pinterest, and other such platforms offer volumes of marketing metrics companies can use to hone their messages to customers. Those platforms also provide marketing opportunities such as “shop or buy now” options that operate as add-ons to your marketing efforts.

Email Opt-In Conversion

Customers have several reasons for visiting your ecommerce site other than just buying. The customer might be doing background research, comparing different options, or fending off boredom. In any case, convincing the customer to enroll in an email contact program can get them to come back. You can improve email opt-in conversion with more aggressive requests or premiums for opt-ins.

Average Order Value (AOV)

AOV examines buying patterns and trends down to a granular level of individual product purchases. For example, if you’re seeing AOV’s comprised of many lesser-valued products, you will respond differently than if the order were for one or two higher-cost items. Thus, good AOV metrics tell you more than just the value of each order.

These metrics of success can help you determine where you’re winning and where you need to do better. Operating without considering them is to ignore your potential for growth and improvement.

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