The importance of metric analysis in an online business is crucial. And it is precisely these metrics that speak of your customers, your visitors, your target audience. Knowing how to read them and knowing which statistics you should prioritize is key for your business .However, measuring without a goal is of little use. Ideally, focus on KPIs: goal-based metrics . In this article we want to reveal 4 KPIs in ecommerce that we believe are fundamental for every ecommerce manager . Write down!list_altIndex of contents
KPIs in ecommerce: Sales formula, KPIs to increase sales
CAC: KPI to attract customers
LTV: KPI to retain customers
LTV: CAC: KPI ratio to improve profitabilityKPIs in ecommerce: Sales formula, KPIs to increase sales
The sales formula is one of the first you have to think about when you start to analyze the KPIs of your ecommerce. Let’s start with it:Sales = visits * selling mobile numbers uk rate * average orderVisits are the number of users who come to your ecommerce: the more users we have on our site, the more users we can convert into customers . On the contrary, if no user visits our site, it is impossible for us to be able to sell.In this way, we must focus our efforts on getting visitors. We can do it through different channels: SEO, SEM, referral, social networks and social media, etc.However, if the visitors who come to the site do not end up buying, the effort ends up being useless. For the conversion rate to be high, we have to make the sales process as simple and intuitive as possible . We will achieve this with strategies based on usability, user experience (UX), web design …
Visits and conversion are complemented by the average order, which is the average amount that each user spends at the time of purchase. To optimize each sale, we must try to ensure that the average order is always as high as possible.Some ways to increase the average customer order is through cross-selling , offering complementary or similar products, such as the famous smart recommendations (Amazon is the king of this).The up selling technique is another very valid strategy to improve the average order: it is about offering accessories that add real value to the original sale. For Betting Email List , you can buy a very cheap plane ticket, but if you want an even better service you can pay a plus for choosing the seat, for having a drink on board or certain special amenities.Do you like what you are reading? Subscribe to the blog!
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CAC: KPI to attract customers
Continuing with the analysis of the KPIs in ecommerce, it is essential to know what the cost of the customer acquisition or customer acquisition process (CAC) is . This formula can be as complex as we want: we can calculate the CAC per channel or per campaign, or we can go beyond spending on actions and include all the expenses of the marketing and sales departments, including salaries, commissions and other expenses. .The formula to analyze the KPIs to attract customers is the following:Average CAC = (sales and marketing expenses) / customersFor example, if in a month we have invested € 1,000 and have obtained 10 clients, the average acquisition cost of each client has been € 100. Is good or bad? It depends: if we are a sock shop and the average ticket is € 10, we are ruining ourselves. On the other hand, if we are a business school, in which a master’s degree costs € 10,000, it has been a great month.Another more interesting way to see the CAC is calculating the average CAC to know the amount that we can spend on attracting customers , that is, turn the result around. With this value we can look for formulas to increase the volume of leads, such as, for example, with a long-term inbound marketing strategy (more visits, more leads, and, therefore, more probability of attracting customers). How about?LTV: KPI to retain customers
The lifetime value or LTV (or CLV) is an ecommerce KPI that allows us to know how much a customer spends on average until they are no longer our customer.As with the CAC, with this metric we can drill as deep as we want, even calculating the individual LTV of our clients. However, this is a simple formula to calculate it:LTV = average order margin * average number of orders * average lifetimeThree factors come into play in this formula: the average margin per order, the number of orders per year usually made by a repeat customer, and the average lifetime (months or years) of our customers after purchasing from us for the first time.To illustrate it more simply and graphically, let’s take the example of a supermarket with an online sales channel. Suppose a parent buys online for the first time, to test, and places a specific order for cleaning products. If, after this first purchase, you have been satisfied and your expectations have been met, it is most likely that the following week you will return to the online store and, this time, you will be part of the weekly purchase. In this way, as you gain confidence in the online supermarket, the average order margin and the number of orders increases, in turn. At this point is the key: if we can maintain this trust over the months, the client’s LTV will be optimal.
However, if we fail to live up to the confidence offered by the competition, it will be difficult to increase the three factors in the formula: average order margin, number of orders and average life time.
This metric includes another marketing concept that, sometimes, we leave in the shadow of recruitment: loyalty. While we normally focus all efforts on recruiting, getting a customer to repeat the purchase, in addition to the average order being usually higher, has a much lower cost than recruiting someone who has never bought and, as we see in This formula is vital to optimize our ROI.
In fact, it is 6 times more profitable to invest efforts in building loyalty and recovering sleeping clients than in attracting new clients.
LTV: CAC: KPI ratio to improve profitability
The relationship between LTV and CAC indicates the profitability of our marketing strategy in general and of each channel in particular, and is one of the ways we have to measure ROI. I show you how!
With the CAC and LTV we are clear about the factors that we have to improve to optimize the profitability of our ecommerce clients . Some businesses, such as small businesses, will want the LTV to CAC ratio to be a very small value, around 10%.
For example, a private school has a very high LTV because children can spend 15 years studying, but to a myopia operations clinic, clients only go once. One will focus more on loyalty and making sure kids stay in school until they go to college. The other will focus on uptake and improving CAC so that the LTV: CAC ratio remains optimal.
After this analysis you can see that analyzing without an objective is useless, it leads us to drift. The ideal is to measure the corresponding KPIs to have an overview of the situation of our ecommerce or of the objectives we want to achieve.
From increasing sales, attracting and retaining customers to improving profitability: these 4 KPIs in ecommerce are key in the strategy of every ecommerce manager. We encourage you to read this other article about lead nurturing to increase sales in your ecommerce . Can you tell us your point of view?