How to Determine which Metrics Mater to Your Business

Metrics track the progress of business processes. Key Performance Indicators (KPIs) are metrics that show how effective you are achieving specific goals. For example, traffic generated from paid search is a metric, but a KPI would be the number of qualified leads generated from the paid search.

Many analytic metrics in the market offer little to no value. Maybe you have your own set of metrics that you track. Here is a challenge for you. From your list of metrics, determine the key performance indicators (KPIs) that have the greatest and consistent impact on your overall business objectives.

To figure out what metrics your business needs to track, below are a series of questions that you need to answer:

1. If the metric were to change, how big of an impact would it impose on your business? If the effect is severe to your bottom-line, the metric is worth monitoring.
   
   
2. Will the metric contribute to your strategic goals? Determine which metrics will dent your company's current goals.
   
   
3. Does this metric improve other metrics? Some metrics are interconnected. Interference could cause a domino effect. Identifying key traffic channels could enhance the quality of traffic, thus increasing sales conversion.

We will cover the eight most important metrics that every e-commerce manager should prioritize. The objective is to understand what these metrics mean and why they play a critical role in shaping your marketing strategy.

The Top Eight e-Commerce Metrics Worth Tracking

1. Average Order Value (AOV)

The Average Order Value (AOV) is a measure of how much your customers spend on a single order from your store. You can calculate AOV by dividing total revenue by the total number of orders durion a specific period. If you were to sell $50,000 worth of merchandise and this revenue came from 250 orders in a day, your AOV is $200 per order.

2. Customer Lifetime Value (CLV)

You cannot determine your customer base through the lens of one sale. The Customer Lifetime Value metric takes the big-picture perspective. This metric views your customers from the standpoint of how much revenue they can generate throughout your relationship.

You can calculate the CLV by multiplying the average order value by the average customer lifespan and the average purchase frequency rate. If a customer spends $200 per order, makes five orders a year, and continues to order from you for over ten years, the CLV of this particular client is $10,000. CLV is not an exact variable. It is an average number.

3. Customer Retention Rate (CRR)

If you are losing your clients as soon as you acquire them, then something must be going wrong with either your customer relationship strategy or product quality. Repeat-customers are the pillars of any e-commerce business. It costs less to retain existing customers than luring new customers.

The CRR metric tracks your ability to hold on to clients. To calculate CRR, subtract the number of new customers gained over a period from the number of customers at the end of that period. Divide the difference by the number of clients you had at the beginning of the period. Finally, multiply the result by 100.

There is a direct correlation of CRR to customer satisfaction and client loyalty. This is not a metric to underestimate.

4. Onsite Activity Metrics

Pay close attention to what users do once they log onto your website. Clients that drop off quickly is an indication of slow page load speeds, page usability, or incongruence between what the visitors and what they are looking for. Make sure that your ads are compatible with their landing pages.

Investigate how many pages do users view. How long do these visitors spend on these pages? Where do your visitors go once they leave a page? Observing user activity can give you an insight into why they leave you. From the information, you can begin working on fixing the issues that repel visitors.

5. Customer Acquisition Cost (CAC)

Customer Acquisition Cost is the total cost you incur while trying to bring in a new customer. This metric goes by the name "startup killer" in some circles. Why? Many new companies start with high sales and marketing spendings to attract new customers. A lower number of leads contributes to a high CAC.

You can calculate your CAC by dividing the total sales and marketing costs in a specific period by the number of new clients acquired during the period.

An increase in CAC over time is an indication of an irregularity in product quality or user experience.

6. Shopping Cart Abandonment Rate

It's devastating to see potential buyers loading up shopping carts only to abandon them. Cart abandonment occurs due to different reasons. The most common include:

• High shopping costs or unexpected additional fees
• No checkout option for guests
• Long checkout process
• Payment security concerns
• Poorly structured user experience

The shopping cart abandonment rate is an essential metric. You can trace problems within your site that repel customers. To calculate the cart abandonment rate, divide the number of completed checkouts by the number of loaded carts during a specific period. Finally, multiply the result by 100.

7. Bounce Rate

The bounce rate of a website is the percentage of visitors who bounce off (navigate away) your site after viewing one page. As an industry, e-commerce has a pretty high bounce rate of about 45.7%.

If your web site has a higher bounce rate, it could be an indication of serious problems. We calculate the bounce rate by dividing the total number of one-page visits by the total entries to a site. Data from Google Analytics make it easier to track the bounce rate.

8. Email Marketing Metrics

Email marketing is one of the most effective ways to get the word out. Below are some email metrics worth tracking:

1. Email Open Rate: Your target must open your mail before communication is effected. Your CRM can track the statistics for you. However, it is up to you to monitor the data and make changes.
   
   
2. Email Click-Through Rate (CTR): An effective marketing email should include a call to action and a tracking link. CTR measures the rate in percentage of sent emails that register at least one click.
   
   
3. Email Subscribe and Unsubscribe Rates: Some prospects request inclusion into the email list; others wish to opt-out. You want to track both metrics. From the reports, you can devise ways of improving your email communication.

The Bottom Line

Ecommerce analytic metrics inform our website optimization as well as direct our business strategy. There are hundreds of metrics that you can track. The eight metrics I mention in this article are some of the metrics with the most significant impact on your business. I hope you found the article informative.

Go out and sell more!