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Every E-commerce business needs to track metrics. Metrics give you deeper insight into your online store's performance and can provide context to help you understand why certain things are happening.
You can monitor countless metrics, and some are more crucial than others. Some metrics give you a better understanding of your customer acquisition and reach; others let you know how specific product lines perform, while different ones can be used to track your finances.
Financial information is helpful for e-commerce businesses and goes beyond just looking at income and expenditure. Saving accounts can help you prepare your business for unexpected emergencies and expenses. To help you get the most out of your e-commerce store, here are some of the best finance-focused metrics you need to track.
Understanding metrics is one of the many IT skills e-commerce managers need. In a nutshell, metrics are statics, percentages, and other data that provide context on a particular thing. Metrics can be super broad or specific, and their usefulness depends on what you're trying to figure out about your brand's performance.
For example, the number of purchases made in your store daily is an example of a metric, as is the frequency of abandoned shopping carts over a defined period.
Metrics help businesses see where they're performing well and in what ways they may be underachieving, so using metrics can be an excellent way to guide long and short-term strategies.
Metrics can be super beneficial, and it's not hyperbolic to say that you need to use them to run a successful business or store. Metrics provide factual insight and context, equipping you with the knowledge to make better decisions.
One key thing metrics help with is performance evaluation. Specific metrics can be tracked over some time, such as a quarter. The data you've gained in one period can be used to compare against another, and that comparison can help you see if things are improving or getting worse.
Keeping track of these things helps you know where your business is heading. This knowledge will also allow you to make better, more tactical decisions. For example, when working out what areas to invest in your marketing, look at past performance and help determine which areas need more attention and budget.
Finally, knowing your past metrics gives you a benchmark to aim for and exceed. Having the data of your past performances can make it easier to set realistic goals based on facts.
Max Wesman, Founder & COO of GoodHire, says, "Using metrics can be the difference between an okay online store and a great one. It provides guidance, insight, and knowledge that makes you a better business leader."
There are a lot of metrics focused on finance that you can track. Here are some of the best you should focus on first to help you better understand your store. Feel free to expand on these and add more metrics to your dashboard when ready.
If you need a metric to track income, it's far better to track net revenue than gross revenue, as it's more accurate and clearly shows how much your online store made. This is because new revenue tracks all your income minus any expenses. This means that the net revenue is all profit. It's essential to understand the difference between revenue and income in the context of financial management.
New revenue is a simple metric to work out. Simply take your gross income for a specific timeframe, which is all the money you've made within a certain period, and then deduct all your expenses.
Net Revenue = Gross Income
——————
Expenses
You can expand on net revenue and work out a net revenue percentage that is useful to track on graphs to see how your income changes across the year.
Tom Golubovich, Head of Marketing & Media Relations at Ninja Transfers, says, "Net revenue is far superior to gross income. It provides a better sense of how healthy your finances are."
This financial metric lets you see where most of your income comes from. With this data, you can see which channel most of your buyers are coming from, be it social, organic search, or email campaigns.
Knowing how your traffic streams perform can help you better strategize your subsequent marketing campaigns. For example, using this metric to find that Facebook Ads perform well indicates that you should increase your spending there.
The best way to work out this metric is to use Google Analytics, a key metric appearing on the dashboard.
Jerry Han, CMO at PrizeRebel, says, "Breaking down your total revenue by traffic sorts helps you see which sources are not pulling their weight. Seeing a low return on one traffic source can help you decide to add more budget or scrap it completely and focus efforts elsewhere."
The Average Oder Value metric is useful and lets you dig deeper into your customer buying habits. This metric informs you about how much each buyer spends on average per transaction at your store. This knowledge lets you know if they're stocking up their baskets with many items from your store or getting cheaper products.
This metric can help you work out if you need to change your prices, call to action, or advertising, especially if the number is below your expectations.
This metric can be worked out by dividing your total revenue by the number of orders made in a specific time frame.
Average Order Value = Total Revenue
———————
Number of Orders
This crucial financial metric can help you determine how much you can expect each customer to spend during their relationship with your brand. This metric is good at seeing customer retention, and you should aim for a high customer lifetime value. Furthermore, it is to track and get even deeper insights via modern survey tools and techniques.
It's cheaper to market to existing customers who keep returning, so working hard to build repeat business is an effective tactic to drive sales economically. There's a specific psychology behind eCommerce customer onboarding to follow to make it easier to hook customers in.
Customer Lifetime Value is worked out by multiplying the customer value by the average customer lifespan. You can figure out the customer value by taking the average order value and multiplying it with the average number of purchases.
CLV = Average Customer Lifespan(Average Order Value X Average Number of Purchases)
Alex Milligan, Co-founder & CMO of NuggMD, says, "Customer lifetime value can be used to help you direct your marketing efforts. A high CLV means you should focus on email marketing to get those past customers back shopping with you, while a low one means you need to focus on getting users to your site."
This metric is a ratio that shows your customer's lifetime value compared to their acquisition cost. This is important to measure as it lets you know how much you're getting back from your marketing efforts. It's best to aim for a ratio of at least 3:1, meaning that for every $1 of customer acquisition, you get back $3 in lifetime value.
You can work this ratio out by dividing your lifetime value by acquisition costs. Having a lifetime value of $25 at a cost of $7.5 gives you a ratio of 3.3:1, which is good. Knowing this can better inform you of your marketing efforts.
Michael Maximoff, Co-Founder & Managing Partner at Belkins, says, "This metric is the best to see how economical your marketing is. Paying too much to get the customers in can harm your business, so use this metric to check and correct course if you need to."
Cart abandonment is when a customer adds items to their cart but doesn't check out. This metric lets you work out how often customers are doing this. An abandoned cart is essentially a lost sale, and using this metric to find a high rate can indicate that you have issues within your checkout process or payment processing that you need to fix.
Jesse Hanson, Content Manager at Online Solitaire & World of Card Games, says, "Cart abandonment means something is wrong with your checkout experience. Using this metric to see how alarming your rate is can show that you need to make changes to refine the process and make it more enjoyable for the customer.
Using metrics can help you grow your e-commerce store from a good to a great one, as they equip you with the knowledge and insight to make better decisions about your process. There are a lot of metrics you can track about various properties of the store, yet monitoring your finances is the most important.
Use these six metrics to improve your performance and boost your e-commerce store.
Rosie Greaves is a professional content strategist specializing in all things digital marketing, B2B, and lifestyle. In addition to Spocket, you can find her published on Reader's Digest, E-commerce Platforms, and Judicious Inc. Check out her website Blog with Rosie for more information.
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