Ecommerce performance: The top five metrics you should really be watchingby
With so much information available from various analytics packages and ecommerce service vendors stating how their products can really make a difference to a particular aspect of your web site’s performance, it is possible for online managers to get buried under waves of information and lose track of what is really important.
We decided it was time to go back to basics and cut through all the hype, trends, and mass of information available to find out what the most important ecommerce metrics are. We asked a number of ecommerce managers representing some of the most successful retail sites in the UK for their opinion.
Here are their top five ecommerce metrics for success:
Admittedly, revenue will not be the number one metric for all ecommerce sites; some will be more focused on customer support and education (and the cost reductions that can be achieved by doing this online), than on selling goods and services.
However for most of the people we talked to who were operating commercial retail sites this was by far the most important metric. Specifically they were interested in:
- Daily revenue trends.
- Seasonal trends (Month on month, quarter on quarter, and this period against the same period last year comparisons).
- Revenue measured against forecast.
Maximising revenue from an eCommerce site is of course a complex business and many of the other key metrics below feed this top level target.
2. Conversion rates
There are many ways of calculating conversion rates, for example looking at differing time periods, new vs repeat customers, conversion rates based on traffic sources, first touch, last touch, etc. However most people we talked to opted to keep it very simple and calculate conversion rates with this simple equation:
Conversion rate = Number of daily orders/Number of daily visits
So what is a good conversion rate? The answer is of course: “it depends”. In our study however, the overall wisdom was that if your conversion rate was less than 1% you have a problem, and if it’s over 2.5% you’re doing well.
3. Average order value (AOV)
Average order value is simply calculated as follows:
AOV = Total revenue for a period/Number of orders for the same period
AOV can of course be impacted by a number of factors which may be outside the ecommerce manager’s direct control, such as pricing and discounting strategies, promotional offers, and changes to the product mix carried. However, knowing how these factors are changing is an important metric to watch.
Where good ecommerce sites excel is in their ability to cross-sell and up-sell to customers by promoting better products, suggesting accessories, and encouraging multiple orders, and it is the success of these campaigns that this metric is really trying to measure and trend over time.
4. Traffic (and traffic sources)
At its simplest level this metric is just a measure of the number of visits to a site for comparison on a daily, monthly, seasonal or even hourly basis.
This was one metric where people wanted to drill down very quickly to see the make-up of this traffic, specifically understanding:
- Traffic sources. The proportions of traffic coming from SEO, PPC campaigns, advertising, promotional campaigns, social sites, repeat visits and new visits.
- Traffic destinations. Campaign pages, support pages, product pages, etc.
- Exit pages. Identifying the top pages where people clicked away from the site.
Interestingly, the people we talked to were very dismissive of the often quoted Unique Visits (or Visitors) metric, stating it was too unreliable as a metric, since it usually relies on cookies and has become irrelevant with people interacting with web sites from multiple devices.
5. Profit (or contribution)
Ensuring the website delivers value to the company overall by creating profitable revenue is of course the main aim of the ecommerce manager.
This is however a relatively hard metric to measure and not one the web analytics packages can help with. Most ecommerce managers have to turn to their accounts departments to track this metric, which usually means waiting for the monthly management accounts and information is not provided in such an immediate fashion as the rest of data above.
In terms of daily decision making however, the ecommerce managers we spoke to said this was at the centre of their thinking and they actively tracked a number of easier-to-measure metrics that go towards the overall profit number, specifically:
- Customer acquisition cost (CAC). Relative costs of PPC campaigns, SEO, social and promotional campaigns etc to acquire a visit to the site and to create a paying customer, and especially how this relates to the customer life time value (LTV). [BTW – the combined wisdom was that a CAC of £25-£100 for a consumer was good].
- Relative product margins. Being aware of which products have the largest profit margins and which are loss leaders, so that each product can be merchandised and promoted appropriately to customers.
There’s loads of other ecommerce and marketing metrics that people and organisations rave about (anyone have Net Promoter Score as their number one KPI?). However most are just variations of the top five listed above, and we, like the top ecommerce managers we gathered this data from, are confident that measuring and monitoring the above will mean you won’t go far wrong!
Jonathan Horden is CEO at PrismaStar.