Basic Ecommerce Metrics Every Business Owner Should Track

What are ecommerce metrics?

Ecommerce metrics are performance indicators that businesses use to measure progress and success in their online sales efforts. They can cover a wide range of areas, from website traffic and conversion rates to customer satisfaction and average order value. By tracking key metrics, businesses can identify areas where they are performing well and identify opportunities for improvement.

While every business will have different eCommerce goals, some common reports and analytics that are worth tracking. These include website traffic, conversion rate, abandoned cart rate, average order value, and customer satisfaction. By tracking these metrics, businesses can get a better understanding of their online sales performance and make changes to improve their results.

What is the difference between a KPI and a metric?

Both are marketing terms, but a Key Performance Indicator (KPI) is a specific number you want to improve. For example, your goal might be to increase your website’s conversion rate by 2%. In this case, your KPI would be the conversion rate.

A metric is a measure of something. In the example above, the metric would be website traffic. It’s important to track both KPIs and metrics because they can give you different insights into your business’s performance.

For example, let’s say you want to increase your website’s conversion rate. You might look at your website traffic metric and see that you’re getting a lot of traffic, but your conversion rate is low. This could mean that your website isn’t designed well for conversions or that your product pages aren’t compelling.

On the other hand, you might look at your conversion rate metric and see that it’s high, but your website traffic is low. This could mean you must focus on driving more traffic to your site.

So, while KPIs are specific numbers that you want to improve, metrics are measures that can give you insights into what you need to do to improve your KPIs.

Top 5 key metrics for ecommerce

There are a lot of different eCommerce metrics that businesses can track. But not all of them are equally important. In this section, we’ll discuss some key metrics that every business should track.

1. Customer lifetime value

Customer lifetime value (CLV) is the total amount of money a customer will spend on your products or services throughout their relationship with your business. This key metric is important because it helps you to assess the long-term value of your customers.

How to calculate CLV?

You can try different ways to calculate CLV. Still, the most common method is to take the average order value and multiply it by the average number of purchases per customer.

Here's the formula to calculate customer lifetime value:

Customer Lifetime Value = Average Order Value x Average Number of Purchases For example, let’s say that the average order value on your website is $100 and the average customer makes 3 purchases per year. In this case, your customer’s lifetime value would be $300.

This metric is important because it helps you to assess the long-term value of your customers. If you know that the average customer is worth $300 to your business, you can be more aggressive in your marketing and acquisition efforts.

How to improve CLV?

The most common way to improve CLV is by increasing the average order value. This can be done by upselling and cross-selling products on your website. Another way to improve customer lifetime value is to increase the number of purchases customers make. This can be done by creating loyalty programs or running marketing campaigns that encourage customers to buy more frequently.

2. Customer retention rate

It’s the percentage of customers who continue to do business with you after their first purchase. This metric is important because it helps you to assess how well you’re retaining your customers.

How to measure customer retention rate?

You can calculate rates in many ways, but the easiest method is to take the number of customers at the start of a period and divide it by the number of customers at the end.

Here's the formula to measure the customer retention rate:

Customer Retention Rate = Customers at the Start of the Period / Customers at the End

For example, let’s say that you had 100 customers at the start of the year and ended with 80. In this situation, your customer retention rate would be 80%.

This metric is important because it helps you to assess how well you’re retaining your customers. If you have a high customer retention rate, you’re doing a good job of keeping your customers happy.

Why is customer retention rate important?

Some of the few reasons why the customer retention rate is so important are listed below:

• It's easier and less costly to keep existing customers than it is to acquire new ones.
• Existing customers are more likely to buy from you again.
• Existing customers are more likely to refer new customers to you.
• Existing customers are more likely to provide valuable feedback.

If you're not tracking the customer retention rate, now is the time to start. It's one of the most important metrics for eCommerce businesses and can give you insights into the health of your business.

3. Sales conversion rate

Sales conversion rate is the percentage of visitors to your website who make a purchase. This is probably the most important metric for any eCommerce business, as it directly measures the success of your online store in converting visitors into paying customers.

• Some of the smart recommendations to improve your sales conversion rate include:
• Improving the design and user experience of your website
• Making sure your prices are competitive
• Offering discounts and promotions
• Improving your product descriptions
• Making it easy for customers to find what they're looking for on your website

How to calculate the sales conversion rate?

To measure your sales conversion rate, just divide the number of sales by the visitors to your website. For example, if you had 100 visitors to your website and 10 made a purchase, your sales conversion rate would be 10%.

The formula for sales conversion rate is:

Sales Conversion Rate = Number of Sales / Number of Visitors

Why is the sales conversion rate important?

Your sales conversion rate is important because it tells you how effective your website is at converting visitors into paying customers. If you have a low sales conversion rate, it means that most people who visit your website are not buying anything from you. This could be because of several factors, such as high prices, poor product descriptions, or a confusing user interface.

Improving your sales conversion rate is one of the most effective ways to increase revenue for your business. Even a small increase in conversion rate can have a big impact on your bottom line.

What is a good sales conversion rate?

There is no magic number when it comes to the sales conversion rate. The average sales conversion rate for eCommerce websites is around 2-3%. However, the best-performing websites have conversion rates of 10% or higher.

5. Bounce rate

A "bounce" arises when someone visits your site and then leaves without taking any further action. The bounce rate is the percentage of visitors who visit your site and then "bounce" away again.

Why is a high bounce rate bad?

A high bounce rate indicates that people are coming to your site but not finding what they're looking for. This could be because your content is irrelevant to their needs or because they can't find their way around your site easily. Either way, it's important to try to reduce your bounce rate if you want to improve your website's performance.

How to calculate your bounce rate?

To calculate your bounce rate, divide the number of people who visit your site and "bounce" away by the total number of people who visit your site. For example, if 100 people visit your site and 60 of them leave without taking any further action, then your bounce rate would be 60%.

Here's the formula:

Bounce rate = (Number of people who bounce away / Total number of people who visit your site) x 100

What is a good bounce rate?

There is no hard and fast rule for a "good" bounce rate. It will vary depending on your industry, business goals, and other factors. However, as a general guide by SEMRush, a higher bounce rate (above 40%) is usually considered to be bad, while a low bounce rate (between 26%-40%) is usually considered to be good.

How can I reduce my bounce rate?

You can try several ways to reduce your bounce rate, including:

• Making sure your content is relevant and useful to your target audience
• Improving the navigation and usability of your website
• Using effective calls to action to encourage people to stay on your site and take further action
• Testing different design elements to see what works best for your visitors

By tracking the bounce rate and taking steps to reduce it, you can improve the overall performance of your website.

What should you do with all this data?

Now that you know what key eCommerce metrics you should be tracking, it's time to start putting this knowledge into action. Use these metrics to track the performance of your website and identify areas where you need to improve. For example, if your sales conversion rate is low, try testing different design elements or improving your product descriptions to see if you can boost conversions.

Remember, the key is to keep track of these metrics regularly and use the data to inform your decisions about how to improve your website. By tracking these eCommerce metrics, you can ensure that your business is on the right track to success.

If you need help getting started, or if you're not sure which metrics are most important for your business, consider partnering with Mailchimp, which has over 2 billion data points from which to garner smart recommendations. We can help you identify the key eCommerce metrics you should be tracking and provide guidance on how to improve your website's performance. We can also add valuable insights into automation and time-saving tools for a more efficient operation.