7 Essential Metrics for a Thriving E-commerce Business
E-commerce is essential for businesses and entrepreneurs to embrace. Nowadays, when people want to buy something, their first instinct is to go to e-commerce platforms like Shopee, Lazada, Amazon, or AliExpress. Competing in the e-commerce market, both small and large businesses aim to increase sales, expand their customer base, and retain their customers.
To achieve these goals, it's crucial to focus on key metrics, monitor performance, and capitalize on opportunities. In this article, we’ll explore the indicators that you should consider when judging the success of your e-commerce business.
1. Understand the online customer journey
To effectively sell your products or services and make a lasting impression, it’s important to understand the customer experience throughout the entire customer journey. Each touchpoint affects customers’ satisfaction and decision-making.
Awareness: Introduce your brand to potential customers on the channels where they search for information. This can include Google searches with effective SEO, targeted social media marketing, online and offline advertising, app promotions, and word-of-mouth recommendations.
Consideration: Once customers are aware of your brand, help them evaluate your products or services against your competitors by providing comprehensive information. This can include user-friendly product pages, clear images and videos, engaging social media content, targeted advertising, email marketing, and product reviews from real users or influencers.
Decision: Encourage customers to make a purchase by offering incentives, such as easy-to-use checkout systems, immediate discounts or coupons, plenty of payment options, and a clear order confirmation process with complete order details.
Service: Ensure long-term customer satisfaction by offering exceptional customer support, opportunities for customer reviews, and hassle-free returns or satisfaction guarantees.
2. Master customer spending patterns and maximizing revenue
Understanding customer spending habits in your e-commerce business, whether on your own website or on platforms like Shopee and Lazada, provides valuable insights for refining your online marketing strategy. Key metrics such as average order value (AOV), customer lifetime value (CLV), and average profit per customer can help you create marketing campaigns that engage customers and boost sales.
Average order value (AOV): The higher the average order value, the better for your business. AOV, or “basket size,” measures the average amount customers spend per order. Use these six marketing strategies to increase your AOV:
Cross-selling: Offer promotions for bundled products or discounts for purchasing multiple items.
Sales promotions: Present similar products at lower prices to clear inventory.
Bundle promotions: Encourage customers to buy items in packs instead of individually.
Free shipping: Offer free shipping for orders above a certain amount.
Coupons: Provide discount coupons for future purchases.
Hassle-free returns: Build customer trust and encourage repeat purchases.
Customer lifetime value (CLV): This metric represents the total value a customer contributes to your business through their purchases. Since 67 percent of purchasers are repeat customers, maintaining a high CLV can lead to increased profitability. Use these eight methods to improve your CLV:
Referrals: Encourage existing customers to invite their friends to shop on your site, expanding your customer base while retaining loyal customers.
Upselling: Offer premium products with superior features that customers will pay more for.
Cross-selling: Promote complementary products to increase sales.
Targeted campaigns: Tailor promotions to specific customer segments.
Customer feedback: Provide opportunities for customers to share their experiences and opinions about your products or services.
Content marketing: Offer valuable content, such as articles, videos, or infographics, to engage customers.
Customer service: Respond promptly to customer inquiries and offer multiple contact channels for support.
Discounts: Reward existing customers with special offers and privileges to encourage repeat purchases.
3. Pay attention to your customers’ shopping experience
The leading business consulting firm PwC revealed that over 86 percent of customers would be willing to buy more products and services if they had a great shopping experience. That means if you can satisfy your customers throughout the purchase process, you'll close deals faster and potentially get more sales. To help understand whether your customers are happy, pay attention to these indicators: shopping cart abandonment rate and bounce rate.
Shopping cart abandonment
Shopping cart abandonment is common on websites and e-commerce platforms. But what factors cause customers to feel uneasy and abandon their carts?
Expensive shipping: Most customers are discouraged by high shipping costs.
Forced account sign-ups: Customers who only intend to make a single purchase at a store rarely want to go through the hassle of creating an account.
Lengthy check-out process: No customer wants to go through numerous steps before they can pay.
Hard-to-find prices: Needing to scroll or click through several pages to see the price of a product or service makes customers uncomfortable or guess that the product is expensive.
Website crashes: If a website freezes while a customer is trying to pay, they’ll be unhappy.
Unverified website: No one wants to shop on an unsecured website without an SSL certificate, as it increases the risk of having their credit card information stolen.
No business owner enjoys having customers visit their store, look at products, and leave buying nothing. The formula for measuring the departure of these customers is called the bounce rate. A reasonable average for an e-commerce website is around 20-55 percent. To encourage customers to repeatedly visit your website and make purchases, check the following aspects of your site.
Mobile-friendly: Nowadays, everyone shops on mobile phones. Therefore, your website must look good on smartphones and tablets and use the full functionality of mobile devices.
Fast-loading: Customers get impatient when waiting for pictures and product information to load. Don’t allow your customers to experience this.
Relevance and product options: When a customer is searching for jeans, for example, they expect to find jeans in their search results. Putting irrelevant items in the search results can encourage customers to go to a site that meets their expectations.
Good UX: A well-designed website that follows UX principles helps customers understand what the site offers or sells.
Quality content: If a site features low-quality content or inappropriate language, customers won’t return in the future.
4. Understand repeat customers
In both e-commerce and offline businesses, it's crucial to transform new customers into loyal ones. Implementing a repeat purchase strategy can help you achieve this goal.
Understanding how many customers return for repeat purchases enables you to assess the success of your marketing initiatives and the effectiveness of your tactics. It also helps you gauge how much your products or services have fostered customer loyalty. Prioritizing efforts to encourage repeat business can further enhance these metrics. Here are some ways to do this:
Analyze customer data: When customers sign up for memberships to purchase your products or services, you can identify their unique interests. By offering promotions tailored to their preferences, you increase the chance that they will make more purchases in the future.
Maintain consistent quality: Ensure that the products or services customers receive are consistently of high quality, from their first purchase to every purchase afterward. Provide exceptional after-sales service, such as guidance and support when customers face unsolvable issues.
Continuously develop your business: In a fast-paced business environment, identify which customers appreciate and dislike about your products. Use this information to develop better products or services, encouraging customers to return.
Repeat Purchase Frequency: Understanding the repeat purchase frequency of loyal customers—the number of times they return to buy products or services—can enhance your profits. Employ the same strategies used for boosting repeat purchases to increase frequency.
5. Customer retention rate: value your existing customers and keep them engaged
Customers who consistently purchase your products are crucial for your business’s success. Your customer retention rate (CRR) is your number of returning customers over a specific period, excluding new customers. Keeping your CRR high is important, as retaining existing customers is less expensive than acquiring new ones. Furthermore, loyal customers are more likely to recommend your products or services to others.
6. Analyze your customer acquisition cost
Acquiring new customers at minimal cost is ideal. One crucial metric to consider is customer acquisition cost (CAC), which is significant for both traditional e-commerce and offline businesses.
Simply put, CAC is the total cost of acquiring a new customer. Evaluate the value-for-money ratio by comparing the overall expenses, such as employee salaries and advertising costs, to the number of new customers gained. For example:
Spending 400,000 baht to acquire 50,000 new customers in the first quarter of the year.
Spending 444,000 baht to gain 53,500 new customers in the second quarter of the year.
In the first quarter, the CAC is more favorable, amounting to 8 baht per new customer, while it is slightly higher at 8.29 baht per new customer in the second quarter.
You can improve your CAC by following these recommendations:
Focus on your target customers: Identify your core customers and run specific campaigns or ads that target them, rather than casting a wide net hoping to attract a broad audience.
Engage in retargeting: Run campaigns for existing customers who have made purchases or added items to their carts but haven't completed the transaction. Encourage them to return and complete their purchases, which is more cost-effective than acquiring new customers.
Increase your conversion rate: Optimize your conversion rates by conducting A/B testing to determine which content, pages, or campaigns are most effective at capturing attention and converting leads into customers. Once you identify the best performers, continue refining and improving your strategies.
7. Analyze SEO effectiveness, conversion rates, and customer behavior
Evaluate key metrics related to SEO, leads, and customer behavior on your website or e-commerce platform to optimize the online customer journey. Focus on improving organic search rankings on Google, analyzing store sessions to understand where your customers come from, and developing targeted marketing strategies.
To analyze the effectiveness of your SEO, measure the following:
Organic customers from Google searches
Direct traffic from customers visiting your website
Customers from various social media platforms
Customers resulting from marketing emails
Morphosis is a digital agency that specializes in online marketing, digital product development, UX/UI design, SEO, and UX research. We're committed to helping your business excel in the online marketplace and delivering what your customers desire. Contact us for a consultation today.