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7 Important e-Commerce Metrics and How to Calculate Them

7 Important e-Commerce Metrics and How to Calculate Them
 

7 Important e-Commerce Metrics and How to Calculate Them

Dozens of metrics exist to help you evaluate your business’s performance;

it’s easy to be overwhelmed with selecting the right ones to track. How do you distinguish between vanity metrics — numbers that look great but don’t propel your business forward — and the actionable metrics that can improve your business’s bottom line?

Tracking the wrong data can result in missed revenue and lost customers. Learn how tracking the right e-commerce metrics at the right time can provide the objective insight you need to achieve your company’s goals.

E-Commerce Metrics You Should Be Measuring

It’s important to identify the key data that can help you grow your business—and this data is different for every organization. But here are seven metrics that you should already be tracking to optimize your business objectives.

The Difference Between Metrics and KPIs

On the surface, metrics and key performance indicators (KPIs) seem interchangeable: Both are objective data points used to evaluate a business process. But while all KPIs are metrics; not all metrics are KPIs.

  Metrics

All measurable aspects of a business. They are used to track and analyze specific business processes.

  KPIs

Specific metrics that add business value and demonstrate whether your organization is achieving its objectives.

KPIs offer deep insight — rather than the broad view metrics offer — into how effectively you’re achieving your key business objectives.

 

Lifetime Value of a Customer

  • Net Present Value of (Average Profit Generated per Year x Number of Years) - (Acquisition Costs)
  • This metric determines how much each customer is worth to you.
  • Improve this number by encouraging repeat business and increasing average order value.
 

Average Order Value

  • (Sum of Revenue Generated) ÷ (# of Orders)
  • This metric identifies the average amount a customer spends on your site per order.
  • Improve this number by showing "related items" during the checkout process.
 

Gross Profit Margin

  • (Revenue - Cost to Get Sold) ÷ (Revenue)
  • While revenue is an easier number to track, gross profit margins more accurately reflect your business's financial position.
 

Conversion Rate

  • (Site Visitors Making a Purchase) ÷ (Total Number of Site Visitors)
  • Shows your success at closing deals.
  • The average conversion rate is approximately 3%.
  • Improve it by reducing checkout friction and minimizing cart abandonment.
 

Bounce Rate

  • (Number of Visitors Who Leave Immediately) ÷ (Total Number of Visitors)
  • Minimize the number of people leaving your site by providing valuable content and improving usability.
 

Website Traffic

  • The Number of Visitors to Your Site From Any Source
  • Improve this number by investing in nonpaid traffic sources.
 

Shopping Cart Abandonment Rates

  • (Number of People Not Completeing Checkout) ÷ (Number of People Starting Checkout)
  • Nearly 60% of U.S. online shoppers have abandoned a cart in the last three months; improve this number by reducing checkout friction and clearly communicating shipping costs.

How Often Should You Be Tracking Your Metrics?

Each business must determine its own optimal measurement periods of critical e-commerce metrics. For some, weekly measurements might provide the general directional indicators needed; other organizations may prefer the solid insight on long-term movements that yearly metrics provide.

When determining measurement frequency, consider these factors.

 

Sensitivity

How much time will elapse between when you make a change and see the effect? The longer the lag, the less frequently you need to measure.

 

Action

Frequent measuring may help you improve performance by ensuring you're staying on course.

 

Accuracy

Frequent measuring offers general directional indicators but not pinpoint accuracy. Less frequent measuring provides solid numbers through bigger samples.

 

Urgency

Frequently measure metrics that require immediate improvement.

 

Cost

If the benefits of improved performance outweighs the potential cost of frequent measuring, more frequent sampling is suggested.

Conclusion

Establishing and tracking KPIs and metrics are critical to your business’s success, but there’s no one-size-fits-all approach. By selecting the measurements that are most important to your goals and then measuring them with the appropriate frequency, you can position your business for year-over-year growth.

 
 
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