The Obsession That’s Helping E-Commerce Businesses Make More Money

Laveta Brigham

October 13, 2020 5 min read Opinions expressed by Entrepreneur contributors are their own. How can you possibly know how your business is performing if you’re not tracking and measuring very specific metrics? Without them, it’s like navigating a desert without a compass. If you can’t measure it, you can’t […]

5 min read

Opinions expressed by Entrepreneur contributors are their own.

How can you possibly know how your business is performing if you’re not tracking and measuring very specific metrics? Without them, it’s like navigating a desert without a compass. If you can’t measure it, you can’t manage it. And it’s in the online world, where consumer behavior data is so readily available, that metrics can really shine.

So how can you measure your e-commerce metrics?

Most online retailers use Google Analytics as the first step to measuring and tracking their metrics:

Step 1: Determine your top metrics

Step 2: Set it up in Google Analytics

Step 3: Monitor your results on a regular basis

Related: How Google Analytics Help Small Business Owners to Make Better Business Decisions

But this data is limited in that it doesn’t explain why the user is behaving in a certain way, it just provides the quantitative data -— the what. A useful tool to delve deeper and better understand your user behavior is a heatmap, which shows the user’s journey in a visual, intuitive way. 

As such, a hybrid metric measurement strategy will help you understand not only what your users are doing on your site, but also why they are behaving in such a manner. This ultimately can help you improve your user’s experience, resulting in more sales and increased profits.

If your business is at the stage where you can budget for an in-house or outsourced data analyst, this expert insight and analysis can prove invaluable for your online business, whether it’s product or service-based. We do that in my business — we employ a full-time data intelligence officer to analyze user behavior at frequent set intervals and provide qualitative insights and advice, to help consistently optimize and improve our user’s experience, based on these key metrics:

E-commerce businesses should also meticulously measure all these metrics and more, as befits a business that sells physical goods.


The e-commerce metrics that matter most


1. Sales conversion rate

The conversion rate is simply the number of site visitors divided by the number of sales, or in other words, the percentage of visitors that buy from your store.

You can improve your conversion rate, and earn more sales, by:

  • Improving page loading speed

  • Prominently displaying customer reviews for each product

  • Using high-quality product images

  • Adding trust badges to indicate payment and site security

  • Offering live chat as a customer service option

  • Simplifying the checkout process without requiring login data

Related: How to Make Your E-commerce Site More Trustworthy

2. Website traffic

Once you’ve improved your conversion rate, it’s time to focus on driving more visitors to your site so that you can convert them. This is your website traffic.

Methods of increasing your website traffic include:

  • Optimizing your site for Google Search using keywords

  • Using influencer marketing to get social media influencers to promote your site 

  • Promoting on social media such as Facebook and Instagram

 3. Customer acquisition cost (CAC)

This is the cost of gaining a customer and it is crucial because you need to understand what it’s costing you to acquire customers versus how much they’re spending on your site.

The calculation for CAC is basically dividing all the marketing costs by the number of customers acquired during that period.

My company managed to reduce our CAC by 20% by lowering the cost per click (CPC) of our Facebook ads. The marketing and design team achieved this reduction by implementing Facebook’s best practice of creating video ads with a super-engaging first three seconds as well as by optimizing the customer funnel.

“Adjusting your creative to the platform you are advertising on will give you the highest impact, resulting in a lower cost per quality lead (CPQL) and ultimately an optimized CAC.” — Michael Miler, Head of Marketing at Become.

4. Average order value

The average amount that customers spend per order on your site is the Average Order Value. This metric is important because if you can increase the amount that each customer spends, you’ll earn more profit without incurring an extra customer acquisition cost as you already have the customer ripe and ready to buy.

You can increase your average order value by:

  • Upselling: enticing your customer to purchase an item of higher value or complementary items

  • Discounting: motivating your customers to increase their order size by offering free shipping for orders over a pre-specified value or a discount on large orders

  • Bundling: offering an attractive price for bundled products, for example, if they purchase two complementary items bundled together it will be cheaper than buying them separately

  • Suggesting: making sure your site has the Recommended Products tool whereby you offer product suggestions to shoppers based on their browsing history and what similar customers have bought

5. Customer lifetime value (LTV)

The amount that you predict each customer will spend in your online store is known as LTV and it’s important to help you work out how much you should spend on customer acquisition and retention.

Tips for increasing LTV include:

  • Excelling at customer service

  • Building relationships with customers

  • Conducting regular surveys to gain insight into your customers wants, needs and challenges

Related: Ecommerce Analytics: 4 Metrics That Are Often Overlooked


How long is a piece of string?

Don’t let this be the motto of your business. Without specific, measurable, attainable, relevant and time-based metrics in place, no business can succeed. And with data at your fingertips as an e-commerce business owner, there is no reason not to mine the riches of these exceptional customer insights.


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