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These days, setting up an eCommerce site is as easy as making a toast.
Running a profitable eCommerce site though; well, that’s a whole other beast.
Good business owners know data. Smart business owners know how to take data and make business decisions based on it.
Speaking of, we’ve put together the 15 metrics you need to know if you hope to run a profitable eCommerce store that goes beyond the basics.
Each one is interconnected, and they’re all important in making your store not just workable, but as profitable as it can be.
We’ll go from simple to complicated, just so our beginner readers’ heads don’t start spinning right away. Read on.
Your CAC is the amount of money you spend to create a new customer.
To see your CAC, take any time period, grab your total marketing budget for that period, and divide that by all of the new customers in that period (not repeat customers).
You can use the CAC to assess broad-scale results of your marketing efforts for a certain period - of everything you were doing, how much did it cost to get a single new customer into your store and fully checked out?
Your conversion rate is the number of people who visited your website divided by the number of people who “converted” - in our case, made it through the entire checkout process.
A conversion rate is one of the most basic eCommerce metrics, and it’s most commonly used to assess the immediate, direct effects of any new traffic source or ad campaign.
If a visitor puts something in his or her cart then exits your site without making it through checkout, that’s called shopping cart abandonment.
It’s such a vital metric to pay attention to because of its meaning - your visitors like your products, they’re just not making it all of the way through and giving you their money for one reason or another.
You have the opportunity to capitalize on SCA customers through methods like retargeting. By checking which pages your customers are leaving on, if there are any red flags, you can potentially use the data to improve those problem pages, too.
Most analytical programs will show your shopping cart abandonment rates without any extra work.
Your average order value is the average dollar amount spent when anyone checks out. To find your AOV, divide revenue by the number of successful checkouts.
Your AOV is often what makes or breaks the success of your store, especially if you have thin margins - if you do, you can’t expect to stay profitable if customers are buying just one or two items.
If a visitor “joins” your eCommerce site by making a purchase but does not come back for a certain period of time, that customer is considered to have “churned”.
To find your churn rate, set an arbitrary churn “period” (usually a few months or years), then see how many customers were acquired, but did not make repeat purchases during that span.
Use churn to assess brand loyalty and recognition. You can also try introducing marketing to a visitor who is about to churn - for example, increasing your mail campaigns between months three and six if your churn period is six months.
CPM is most commonly used on ad platforms. Sometimes, you can choose CPM over CPC, which means you pay every 1,000 times your ad is shown, rather than just when someone clicks.
This approach is preferred when your campaigns are optimized and you pay less per click on a CPM basis than you do on a CPC one.
Divide your impressions by 1,000, then divide your ad spend by that number to find your CPM.
Your CPC is the amount you pay for a single click in any online ad platform.
Divide your ad spend by your total number of clicks to see what your CPC is.
Once you have a firm idea on your conversion rates and your average order values, CPC can often be used to determine ahead of time to see if a traffic source is “worth it”.
For example, if a campaign is profitable at 30 cents per click, but the bid on your new ad platform is 60c for the same traffic, you’re warned that campaign might not be profitable - though it never hurts to test.
Your RPC is the total you make from a click on any one of your ads.
By itself, it’s not particularly useful - dividing revenue by the total number of clicks isn’t difficult.
However, when compared next to CPC in a program like Google Analytics, RPC can give you a very accurate representation of how your CPCs and revenue numbers are related.
For example, if a campaign looks good, but the RPC is just barely above your CPC, that campaign isn’t actually making you that much money and may need to be adjusted.
Your CPA is the amount you spent on each new customer in any particular ad campaign.
Drill your analytics down for just a single campaign, then divide total ad spend by the number of new orders.
CPA is particularly useful when you have data on the lifetime values of your customers - even if an ad campaign is in the red when looking at CPA, if you know your customers are going to spend more in the future, you can afford to compete wherever you’re advertising and still come out ahead over time.
Your cost of sale percentage is the relationship between how much you spend and how much you make.
For example, if you spent $500 to make $1,000, your COS % is 50%. Divide ad spend by revenue to find your store’s percentage.
Every industry will have different average COS percentages, dependent primarily on the LTV of the industry, explained below.
Use COS % to track the overall progress of the relationship between your advertising and how much money you’re actually making.
LTV is the average lifetime value that a single customer creates for you.
See yours by dividing your revenue by your total number of customers. You can drill down to find the “LTV” within a year or so, but by and large, this metric is used in its traditional sense on a broad scale.
Whenever one company promotes another at a huge discount (for example, Moz promoting Unbounce at 75% off for three months), you know that the company being promoted (Unbounce) has a high LTV.
They couldn’t offer that discount if they didn’t. By increasing your LTV, you open opportunities to higher ad spends and bigger initial discounts.
Assuming you’re in the black, each time a visitor lands on your website, you will make a certain amount of profit. Calculate this amount by dividing total profit by the total number of visitors.
More commonly, eCommerce store owners will drill down the average profit per visitor for an individual ad campaign or traffic source to get a more accurate representation of an individual campaign, as the broad profit per visitor takes everything into account, like your mailing campaigns and offline advertising channels.
The conversion rate of one particular product is how many people looked at that product divided by the number of visitors who made it through checkout with that particular item in their carts.
Your product conversion rate is important because it gives you insight into what your visitors are actually buying.
You can use this data to cross-sell winning products in your cart and source new products more efficiently in the future.
Your repeat purchase rate is your total number of customers divided b the total number of customers who made two or more purchases at your store.
This metric is important because it’s exponentially cheaper to keep current customers than gain new ones - if your repeat purchase rate is low, you must get it up to compete with other eCommerce brands who have their backends, and thus their repeat purchase rates, locked down.
(They will be able to outbid you for profitable keywords because they know they can make it back on repeat purchases.)
To find your product refund rate, divide the total number of products sold by the total number of products returned.
Your refund rate can’t be ignored, even if it’s close to negligible. When you’re calculating almost any other metric (even something as simple as conversion rate), you have to take into account your average refund rate, too.
If you don’t, you’ll miscalculate your projected revenue, and that could lead to losses down the line when the returns start coming in.
Now that you know what metrics to track, you can start making smarter decisions.
No more pushing campaign blindly. No more overstocking products.
To recap, here are the eCommerce metrics you need to track:
Monitor these metrics closely, and pivot when necessary.