Being able to measure how well your website is performing is a key part of running a successful e-commerce business. Where e-commerce businesses have an advantage over real-world businesses, is in their ability to track pretty much every customer behavior during their interaction with the company.
For example, a bricks-and-mortar business can place an ad on a billboard, on the radio, or on tv, but there is no definitive way of knowing how many customers found the business as a direct result of the ad. An e-commerce business can see exactly where visitors to their website are coming from which is extremely useful to see what works and what doesn’t.
There are lots of metrics you can track while running an e-commerce business and knowing which ones are the most important can make a big impact on your success levels.
Website Visitor Numbers
No e-commerce business can be successful unless enough people are visiting your website and ultimately making a purchase. Knowing how many people are visiting your website is a great starting point for understanding if your site is performing as it should. As a general rule, the more traffic your website receives, the more sales your business should make.
The amount of traffic your website is getting can be a way of seeing how good SEO is across the site. When an e-commerce website is being frequently shown in search results, more people will find your website. This is obviously the goal of all e-commerce businesses as, without good traffic numbers, sales will be hard to achieve.
Checking website visitor numbers is a great starting point for gauging how well your business is performing as a whole. It could even be argued that it’s the most important metric for e-commerce companies as, without appropriate traffic, your website will struggle to make enough sales to sustain your business long term.
It can be quite challenging to significantly increase your website visitor numbers. That’s why it’s even more important to keep track of them so you can see which of your efforts to draw visitors to your website is working, and which ones need some improvement. Once you have a clear idea of how many people are visiting your website, you can then dive deeper into other metrics and see what the visitors to your website actually do once they are there.
Conversion Rate
Your website’s conversion rate is, in simple terms, the number of visitors that turn into paying customers. As important as good traffic numbers are, your conversion rate needs to be at a suitable level to show your website is performing as it should and actually persuading people to make a purchase from you.
Let’s say you run an e-commerce website and you want to know if your website is encouraging people to buy your products. You start off by checking visitor numbers and see that every week, your website is getting an average of around 1000 unique visitors. When looking at your sales figures though, your sales are around 2 per week – this seems to be a low conversion rate and could indicate that things need to be changed on your website.
If you’re doing a good job at getting people to find and visit your website, it would be somewhat wasteful to not convert as many of them as possible into customers. If you can see that your conversion rate is low, you need to address the issues on your site that are preventing people from buying from you.
It could be that your checkout process is too long or too confusing. It could be that your website doesn’t give enough information on your products and shipping procedures. Even things like your website appearing unorganized, unprofessional, and untrustworthy can be enough to stop potential customers from making a purchase.
Knowing the conversion rate of your website is a must for all e-commerce business owners who want to be as successful as possible. High traffic numbers aren’t enough to keep your business running long term. Your website has to be proficient at converting visitors into customers. If it’s not doing that, you need to make some changes.
Cart Abandonment
Cart abandonment is an interesting metric as it gives you the number of people who put items into the shopping cart on your website, but still left the site without actually buying them. What makes this so interesting is that they clearly had a strong enough interest in a specific product to put it in their cart ready to buy, but then decided not to buy it.
It’s worth bearing in mind that this can sometimes happen for reasons out of your control such as customers signing off from the internet entirely to get on with their real-world lives, or people who were never going to make a purchase at that point but were instead, putting items into the cart ready to buy at a later date.
A high cart abandonment metric though can indicate some issues with your business that need to be addressed to get this number down. A good place to look if you have high cart abandonment numbers is your checkout process. If the process of moving from the cart to checkout is confusing, long, interrupted, or simply inconvenient, customers will probably go elsewhere where they can check out in just a couple of clicks.
Simplifying the checkout process on your website could be a quick way of reducing cart abandonment figures. You might also want to look at methods of payment your site allows as some customers will have a preferred method and if this isn’t accepted on your website, they might feel uncomfortable and go elsewhere.
While some cart abandonment probably can’t be avoided, it’s a good idea to do all you can to ensure that once a customer puts something into their cart, they go through the buying process and don’t leave without it.
Customer Acquisition Cost
A lot of effort tends to be put into driving new customers to your business. This is obviously a necessity as your business probably won’t last very long without regular increases in customer numbers. Care needs to be taken though to ensure the amount of money you’re spending on generating new customers doesn’t exceed the amount of money they end up spending with your business.
If we think about costs to run a specific marketing campaign. Let’s say you want to run a social media ad over the course of a month to promote a specific product (or category of products) on your website. You commit to a budget of $1000 for the ad campaign. Throughout the campaign, 100 new customers enter your business and each one makes a purchase to the value of around $8. While your initial thought of “that ad campaign generated around $800 worth of sales” is valid, the fact that you had to spend $1000 to generate $800 is a problem if you were to have similar results with future campaigns.
The cost to your business to get each customer needs to be carefully monitored. If each marketing strategy is costing your business more money than it generates, your customer acquisition cost is too high and can quickly result in financial difficulty. At worst, you want your campaigns to generate at least its cost in sales, anything more than that is a bonus and is a sign of a successful customer acquisition strategy.
Customer Retention Rate
New customers are important but so are current customers. When you’re looking at your customer numbers over a set period of time, it’s worth subtracting the number of new customers from the total. This will give you a good idea of how many customers have purchased from your business previously and then made the decision to do so again.
A very basic example of looking at customer retention rate is to consider that an e-commerce website made 500 sales in a month. These sales were made to 497 new customers and 3 returning customers. Of the 497 new customers generated in that month, only 1 will shop with the business again. With numbers like this, a huge amount of work (and money) will likely be needed to keep generating enough new customers each month to keep the business running.
If half of all the new customers your business generates return and purchase from your website on a regular basis, this is a much better position to be in. If you have to constantly try to encourage new customers to your business, you’ll likely find it very difficult to ever grow your business to the levels you want. High customer retention rates show that your website works well, your products are meeting expectations, and your customer service is satisfactory.
Los of businesses seem to put a big focus on getting new customers. This can be to the detriment of current customers who have shown loyalty to the company but then begin to feel left out from the enticing offers, discounts, and “new customer only” deals. Returning customers are the ones who clearly like your business and feel that it’s worth spending their money with. These are the people who should not be neglected or forgotten about.
Average Order Value
This metric is a good way of seeing how much money each customer tends to spend on your website. Clearly, the more money each customer spends, the better for your business. Lots of small orders can quickly become less profitable when you take into account shipping costs, the cost of picking and packing the order, and any marketing costs that you’ve incurred for the products sold. Increasing the average order value is beneficial to make sure your business is making enough money to sustain itself in the long term.
Some ways you can try to increase the average order value include upselling related items, offering discounts on more expensive orders, and offering a gift or reward for spending more with your business. Upselling related items can be as simple as having a “customers who bought this also bought…” section during the checkout process. This can sometimes be enough to convince a customer to spend a little bit more. Discounting more expensive orders can offer great encouragement for someone to add a few more items to their cart before checking out. It can be surprising how much people will spend to get a discount, even if what they actually wanted was less than the discounted price they get. Rewards and gifts make customers feel special so they are more willing to spend extra money with you to feel like their loyalty has been rewarded.
Keeping an eye on your average order value is very useful if you want to see how your website is doing in regards to encouraging customers to spend their money with your business. It’s very easy to understand this metric – the more money each customer spends on your website, the more money your business will make.
How Often Should You Check Your E-commerce Website Metrics?
There’s no standard answer as to how often you should check your website metrics other than you should check them regularly but not too frequently. While this is obviously a fairly confusing answer, it’s one of the most accurate ones. You need to monitor the metrics of your e-commerce website regularly to see if things are going well or if changes are needed. However, if you check them too frequently, you won’t be allowing enough time for the results to give you a good understanding of your website’s true performance.
Some metrics, such as website visitor numbers, could be checked on a weekly basis to see how well your marketing strategy is working in helping people find your website. If your weekly numbers continue to grow, it could be sensibly assumed that things are going well and you can carry on doing what you are doing.
Bi-weekly checks could be useful for metrics such as average order value as these are likely to be more accurate over a slightly longer period of time. You’ll want to see the average order value of a decent-sized customer base, so bi-weekly checks can be sufficient to give you a good idea of how much money customers are spending with you.
Cart abandonment could be checked once a month so you can see how many customers changed their minds at the last minute over a longer period of time. Monthly checks on this type of metric are beneficial as having 10 cart abandonments over a week could be a bad sign, but if those were the only abandonments in the entire month, then your website is looking in much better shape.
Only you, as a business owner, are in the best position to understand how often checking your metrics will be beneficial to you. Keep an eye on them enough to know the state of your business but not too much to get inaccurate information.
