As E-Commerce store owners, we know that having such vast amounts of data can be confusing and sometimes misleading. Here, we outline a few metrics we believe you should be tracking so you can use your data more efficiently.
Shopping Cart Abandonment Rate
Shopping Cart Abandonment Rate is a great metric to track because it provides great insight into why your products aren’t selling. Sometimes shoppers are presented with unexpected costs before the end of the process. If you notice a high abandonment rate towards the end of the checkout process and you add shipping and tax only at the final stage, you may be blindsiding your customers! You can fix this by including these fees as soon as your user views their cart. Other issues may be that customers are finding better prices elsewhere, your checkout process is too tedious or your delivery options don’t suit them.
There are many ways to recover users that have abandoned their carts. One would be to send them an e-mail after a day or two informing them that they haven’t completed checkout. If you want, you can also throw in a discount code if they complete the order. Just make sure not to over-send this e-mail as you may annoy returning customers who planned to return to the order eventually. Additionally, you should reduce the number of pages required to checkout, like Amazon’s One Click Buy. To make sure your prices are consistent, you should always be tracking the price of your products. Check out this Lifehacker article on some great price tracking tools.
Customer Lifetime Value
This metric is extremely important because knowing which type of customers have the highest lifetime value on your store can educate you on the right direction to grow your store. The basic formula for calculating this is (Average Order Value) x (Number of Repeat Sales) x (Average Retention Time).
If you find that males from New York between the age of 18-30 spend $150 per order, make 3 orders per year and stay around for 5 years and they are your highest spending customers, their Lifetime value is $2250! Therefore, you should focus your efforts on catering to that demographic as each customer with those features bring in the largest value to your store over time.
Average Order Value
Looking at your average order value is a great way to review your customers and their spending habits to better source for your store. To calculate your AOV, take the sum of all revenue and divide it by total number of orders over a certain time period.
If you are seeing a low number compared to what your average price point is on your store, it means that your customer is not purchasing multiple items and the lower priced items are more popular. Time to source more products at lower price points.
If you are seeing a higher value than your average price point, dive deeper to understand if customers are attracted to higher price points or if they are buying multiple items. This is a key difference. The result will help you align the products with your customer base. The higher the AOV is the more profit you are making per customer so we recommend monitoring it weekly if not daily.
Customer Service Engagement
How much your customers communicate with you can be both a good and bad sign depending on the kind of interactions. If you notice customers asking several questions about your products perhaps you should work on improving your product descriptions and providing more transparency through customer reviews. An FAQ page can do wonders for answering user questions as well. If customers are e-mailing regarding product quality, you should double check whether your supplier’s are being honest with respect to the products they are selling (material, sizing, longevity etc). If customers are engaging with you in a positive manner, then you know you’re doing something right! You can take advantage of this by requesting reviews and referrals which can increase your sales even further.
Promotional Response Rate
This final metric is revolves around whether your promotions and advertising campaigns are helping your brand or not. For example, when you send a promotional e-mail, it is crucial to track the number of users that take part and whether it significantly increases your sales. An extremely positive response does not necessarily mean you should continue with a promotion, especially if you were selling a very low number of products before. If this happens, it could mean your product prices are generally too high.
Similarly, if you don’t receive a positive response but your store is already selling at a volume you’re satisfied with it shows that you don’t need to reduce your prices in order to increase your sales. On the other hand, if you receive a low response rate and you’re not happy with your sales you might need to rethink your stores selling strategy, because the issue may not be in the prices of your products but other aspects, such as shipping time or product quality/quantity. If you don’t believe that is the case, then perhaps your promotion didn’t reach the correct audience or wasn’t clear enough and your next step should be rethinking your promotional strategy to reach more interested individuals.
We hope our explanation of this unique but important metrics help you better understand customer behavior and improve your sales. Check out Modalyst to pick up some unique products that might better fit your store!
