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Designing and establishing a profitable business model is an essential part of any successful eCommerce strategy. But in order to better understand and evaluate its profitability, you must measure the results and know where to allocate more effort and time. Ultimately it’s about mastering the leading eCommerce KPIs and metrics.
Managing an online store can be a tough job. More often than not a lot of money and time is invested to increase conversions – but how are these results measured? Here we’ll review the 5 major eCommerce metrics of today that allow business owners to really get to know their online store customers and optimise sales.
1. The cost of acquiring a customer
This e-Commerce metric serves to obtain the average cost of each acquired client and also to better evaluate the profitability of marketing strategies and campaigns. The cost of acquiring a customer is calculated by dividing the total amount invested in sales (any action that aims to attract more sales) and marketing efforts within a certain period by the number of customers that have been acquired during that timeframe.
For more detail on calculating the cost of customer acquisition, read this great post by Kissmetrics.
2. The value of the customer life cycle
This is one of the most important eCommerce metrics. The value of the customer life cycle represents the total income generated by the customer in eCommerce purchases starting from user registration. It is determined by multiplying the average profit that the customer has generated in a year by the number of years, subtracting the acquisition cost. Refer to this intro guide to better assess customer life cycles in eCommerce.
3. Multiple eCommerce metrics: customer satisfaction
There are several tools that are used to interpret the preferences of clients, such as psychological graphs, search engine history, demographic studies, etc. However, beyond these statistics, Customer Service and Experience is what serves as a valuable source for suggestions and tips and it’s a better indicator of customer satisfaction within the eCommerce industry.
Those in charge of assessing Customer Service must have complete knowledge of the products that are offered in the online store in order to meet the needs of buyers. Once the most popular products are identified, a customisation strategy can be implemented to help offer products and services related to the client’s purchases.
4. The conversion rate
Generally, when someone refers to obtaining online store buyers, the term conversion rate pops up. These eCommerce metrics express (in percentage) the number of visitors that converted to buyers or customers. The conversion rate is one of the main success indicators of good eCommerce.
5. Return on investment (ROI)
Did you know that it is more profitable to keep a customer than to get a new one? That most sources confirm that “it costs between 4-10 times more to acquire a new customer than it does to keep an existing one?”
Once you’ve acquired a good amount of customers, always prioritise customer retention above customer acquisition. Many online stores make the mistake of calculating eCommerce ROI based on the data of a single sale. In order to know the exact economic value that a customer represents for a company, calculate the ROI based on all purchases made by that customer. You must take into account the value of the life cycle of a client (as mentioned in #2).
Assessing your eCommerce success
Nowadays, there are several customisation tools and software to help small businesses launch their eCommerce stores. These include Shopify, Woocommerce (for wordpress) and many more, all of which allow business owners to improve conversion and increase both the average cart value as well as number of sales. The Saas model used by Blueknow can transform a complex product into an easy-to-use tool. Have a look at a list by BusinessNewsDaily of the best eCommerce software for small businesses in 2015. Remember to always use the above 5 metrics as a solid initial base for your eCommerce strategy and assessment.
Main Image By Mydhili Bayyapunedi