Like any kind of business, the most successful e-commerce businesses make informed, strategic decisions based on metrics. They know how their store is performing and where exactly they would like to improve. A common management principle states that what is measured gets managed, so while there are thousands of metrics you could track, it’s important to select the right ones to get the desired results.
“The goal is to turn data into information, and information into insight.”
– Carly Fiorina (former executive, president, and chair of Hewlett-Packard Co.)
The danger in tracking irrelevant business metrics, also called KPIs (key performance indicators), is that they can distract you from focusing on the things that truly matter. So it is highly important that you not simply track business metrics, but strategically choose the ones that can give rise to actionable insights for business growth.
Here are 5 key metrics to focus on in order to grow your business in 2020.
1. Conversion Rate
Conversion rate is the granddaddy of metrics for e-commerce, and is the metric you should worry about the most. It’s the percentage of website visitors who decide to make a purchase. As of Q2 in 2018, the average e-commerce conversion globally was 2.86%, and 2.63% in the U.S. Be aware that conversion rates vary by industry.
The most straightforward way to grow your e-commerce business is to improve your conversion rate. That means you need to know what your current conversion rate is, and have a way to track the data as you make changes to see what works. If you don’t already have it, get a tool like Google Analytics to gather data. (Hubspot’s Ultimate Guide to Google Analytics can help you get started.)
Tracking overall conversion rate and experimenting with changes in website design, different offers, various CTAs, and other elements is essential to improving conversion rate. But in 2020, optimize your strategy by breaking down and segmenting your conversion rate. Some ideas for segmentation include: traffic source, device type, new vs. returning visitors, product, and individual campaign. This can give you tremendous insight into what really works.
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2. Website Traffic
After conversion rate, perhaps the next important e-commerce metric is site traffic. If a certain percentage of visitors are purchasing, then the more visitors you have, the more there are to potentially convert. Search engine optimization is crucial in 2020, because 30.5% of all e-commerce traffic comes from organic searches.
Furthermore, 75% of people never scroll past the first page of search results. The higher your site can rank in search results, the more traffic your website will get. This means that being seen online is more important than ever.
To drive business growth through increased site traffic and online presence, you need a comprehensive SEO strategy that works. Unfortunately, SEO is a complex and constantly shifting landscape. Those who enlist the services of SEO experts will see much greater results, which can lead to more traffic, more customers, and more growth.
3. Average Order Value
Average order value (AOV) is the average dollar amount a customer spends on a purchase from your site. This is an important metric when combined with conversion rate because you may have a landing page or traffic source where the conversion rate is lower when compared to other segments, but the average order value is higher.
That may, in turn, generate more revenue. Armed with that specific data, you can make more informed decisions on where to invest time and resources for the greatest returns.
Segment your customers and then test different ways to increase the average order value. Some ideas include: cross-selling, upselling, bundling, coupons on next purchase, volume discounts, free shipping for a higher minimum purchase, donations to a non-profit for minimum purchase. Test one at a time to see what is most effective.
4. Lifetime Value of the Customer
The customer lifetime value (LTV) measures the total amount you earn from a typical customer over the course of their lifetime, or span of time as your customer. This metric allows you to determine how much to spend in acquiring a new customer and in retaining them. It can be more difficult to track if you have more sporadic returning customers.
Improving customer LTV is closely tied to loyalty and retention, and studies show that a repeat customer has a 60% – 70% chance of converting. (Compare that to your regular conversion rate.) So improving this metric can make a big difference.
Building long-term relationships and brand loyalty is the key to customer retention, and in turn lifetime value of each customer. In 2020, work on building a better emotional relationship with your customers. A recent study shows that customers with an emotional relationship with a brand have a 306% higher lifetime value . Some ideas include: feature fans in your content, take customer advice (and give them credit), go the extra mile, give customers an upgrade, provide excellent customer service, be more convenient than anyone else, solve a problem, and make quality a priority.
5. Percentage of Returning Customers
Rather than tracking returning visitors, it may be more effective to track returning customers to see how returning visits translates into revenue. Almost as important, your happy customers are your greatest source for positive online reviews, which have tremendous influence over potential new customers. In fact, 95% of people say that customer reviews influence their purchasing decisions,
Make the customer experience even better after the sale. Follow up with customer satisfaction and ask what you could do better. Consider introducing special offers like exclusive discounts for existing customers, or a customer loyalty program. If you make your customers feel special and appreciated, they are much more likely to buy from you again.
You Don’t Have to Do It Alone
Data-driven decisions and strategies can help your business grow in 2020, and data is what we do at Big Leap. We can help you turn information into insight, and then into action, whether it’s improving SEO, targeted content marketing, or developing a better online reputation. Contact the experts at Big Leap to see what we can do for you.