Do you know the saying “If you cannot measure something, you cannot manage it”? Probably yes. Collecting data and their proper analysis are key factors that allow for the effective functioning of every company. This rule is also valid in e-commerce.
5 key indicators in e-commerce
- Conversion rate
The conversion rate is calculated as the quotient of the total number of orders placed by customers to the number of sessions in the online store.
With this indicator, you can determine how much traffic must be generated in your e-shop, so that sales increase by X%. Useful, right?
This factor applies to the measurement of many activities - the assessment of the effectiveness of marketing campaigns, individual promotional channels or product categories.
- CAC (Cost of Acquiring Customer)
This indicator shows how much it costs to acquire a new customer. It’s the quotient of costs that we incurred in a given channel to acquire customers, to the number of new consumers. We calculate it in a given period of time and for a specific source of customer acquisition.
For example, if we spent £1000 on marketing activities on Facebook, and we acquired 10 new clients with this channel, the CAC is £100.
- LTV / CLV (Customer Lifetime Value) - customer's life cycle
The LTV is the product of the average value of orders, their number and the average lifetime of the customer.
Generally speaking, this indicator shows what average profit you get from transactions made by an average customer.
For example, if you sell live Christmas trees and customers buy them from you once a year, and each tree costs an average of £200, and each of these customers returns for another tree for three years, then the CLV is £600.
This means that each new client will generate an additional £600 for you.
- AOV (Average Order Value)
This indicator shows the average value of each order placed in your e-shop.
It’s calculated as the quotient of the value of orders in a given period to their number in the same period.
The higher the AOV indicator, the better for your business.
- Cart abandonment rate
This is a very important indicator in e-commerce, which is expressed by the quotient of the number of unfinished purchases/baskets to the number of all orders in a given period.
If this value is high, it is necessary to analyse the customer's purchase path and catch “weak links” that discourage customers from finalising purchases.
Of course, there is much more data that can be measured in e-commerce. The selection of key KPIs for a given business should be made individually. Thanks to this, it’s possible to constantly monitor the condition of the e-shop and optimise the pursued actions.