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use data to track progress
From small start-up to multi-national giant, the key to selling successfully online is knowing how to improve. By understanding exactly what is happening in your store at any given moment. When you use a digital platform, you can track and record every customer interaction. This means a wealth of ecommerce data. I believe there is no excuse for not using this knowledge to your advantage and becoming more efficient and effective than your competitors. In a world where data is driving every decision we make as consumers, retailers have the power to use ecommerce data too. This is going to sound amazing, but I have met a number of business leaders who fail to make the most of their access to the metrics and even seem unaware of their importance. Here are the 5 key statistics that should drive every ecommerce website’s growth:
1. Conversion
Conversion is the holy grail of ecommerce metrics. When it comes to basic ecommerce data this is the minimum you should understand. Conversion is usually measured as a percentage and put simply, it is the ratio of the total number of visitors to those who make a purchase. Improving conversion (or conversion rate optimisation) is one of the main levers which increase overall revenue. A typical industry average value for conversion is around 1.5% – 2.0%. This can be higher during sale periods (i.e. when visitors are coming specifically to make a purchase) or when you have a recurring purchase offer (such as a refill).
2. Average Order Value
AoV tells you the average spend of your customers and is measured in currency (e.g. $50). It should not to be confused with basket or cart size, which is the average number of items purchased. The higher your average order value, the more valuable your transactions become and online retailers use several tools to try to increase this. The classic examples are cross-selling (customers who bought X also bought Y), up-selling (persuading customers to take a more expensive option) or by offering incentives (e.g. free delivery on all orders over $100).
3. Transactions per hour
The number of transactions per hour tells you how busy your website is when you are making sales. Typically, the higher this value the busier the store and measuring it closely will help you predict and plan capacity. Customers who complete a purchase are more valuable than window shoppers. Preparing for peak shopping days is vital to delivering a good customer experience. Making sure that your visitors can check out in a timely manner, even at peak, requires knowledge of maximum throughput. With caching techniques available to limit the impact of browsing visitors on performance, knowing Trans/Hr ecommerce data becomes even more important.
4. Customer acquisition cost
Looking after your existing customers is important, but to deliver rapid growth you must sell to new ones. CAC is a marketing metric which tells you how much money you must spend to acquire a new customer. As this value increases attracting new visitors, who become buyers, is harder. Building a brand, using influencer channels, displaying social proof and viral advertising are all strategies which can strengthen your proposition and position in the market. This is an example of both marketing and ecommerce data driving business improvement.
5. Lifetime value (LTV)
Customer lifetime value is the most complicated of the metrics presented in this article, because it is a prediction based on multiple variables. The more ecommerce data you have about your customers the more accurate LTV will be. There are several ways of calculating how much a customer will spend across their lifetime with your company, from the simple to the complex (which can involve satisfaction scores, retention rates and more). Many businesses use a combination of calculations and work out an average. By identifying the behavior of your most valuable customers, you can target repeat purchases and increased customer spend.
In summary, knowing your ecommerce data is about knowing your customers. What they do, why they do and how it can change. In the digital world, you no longer need to make educated guesses or reply on the HiPPO (highest paid person’s opinion), you can leverage data. Building a dashboard to regularly report on the above metrics will help you understand how you can improve and look at your growth (or loss) trends. Remember, the numbers never lie!
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