How do you know if what you are doing for your business is actually working or not?
You spend a lot of time working to make your business run as smoothly as it possibly can. Analyzing, refining, and improving processes to help your customers have the best experience that they can have, all while hopefully increasing your overall sales. But how do you know if those changes you have made are actually helping the overall success of your site?
To keep in short and sweet, a metric is essentially a way for you to track and analyze a particular element of your business. Klipfolio provides the most detailed definition I can find:
A Business Metric is a quantifiable measure that is used to track and assess the status of a specific business process. …Every area of business has specific performance metrics that should be monitored – marketers track marketing and social media metrics, such as campaign and program statistics, sales teams monitor sales performance metrics such as new opportunities and leads, and executives look at big picture financial metrics.
– What are Business Metrics? By Klipfolio
This week, we are going over why metrics are important for your business, as well as outlining five key eCommerce metrics for you to track. Through understanding what metrics are and why they matter to your business, you will have the foundation to start implementing them yourself and seeing the benefits within your own business’s success.
Why Metrics Matter in eCommerce
How many people reach “the top of the mountain” so to speak, in their respective fields?
Whether that be sports, business, or life in general – people who find success don’t just mindlessly wander to the top.
Chances are, for the vast majority of them, they found ways to measure their performance, track what was working and what was not, as well as make the necessary adjustments to keep the train moving in the right direction. This same line of thinking can be directly applied to metrics for your business.
If you are running a small business, keeping that business growing is at the center of your mind. Sadly, our ideas don’t always end up lining up with what our audience wants from us. That is why keeping track of metrics is so important. Through tracking metrics, you can see what is working, what is yielding you the most success, and what isn’t doing you any good.
Consider the following passage from Bison Analytics:
Tracking metrics lets you improve overall results and align your people and processes with your organizational objectives, as well as giving you the following benefits:
- Measure financial performance – vital for keeping your cash flow healthy.
- Reveal the truth about performance, from the highest level (your overall business), through departments, teams and right down to each individual.
- Provide an actionable way to achieve overall business strategies and goals.
- Make sure employees are aware of what’s important to the business, by showing them what the business is being measured against.
- Highlight any issues that might otherwise go unnoticed, meaning that efficiency and productivity are given a boost.
– Why Are Metrics and KPIs Important For My Business? By Bison Analytics
Metrics are essentially the progress report from grade school that we grew up getting. They helped us tune in to the details we might not have paid any attention to, and let us know what to focus more on to ensure our overall success. With that in mind, let’s get into five helpful eCommerce metrics to track.
5 eCommerce Metrics to Track
1. Conversion Rate
How often are your leads actually turning into sales? The conversion rate is the percentage of people who go from a lead to a sale. “Leads” can be everyone from visitors to your webpage, to a potential client that you are trying to win over. The point of the conversion rate is to help shine a light on whether or not website visitors do what you want them to do. This might be signing up for a mailing list, making a purchase, or something else. This metric helps your marketing team see if their actions are leading to sales.
2. Cart Abandonment Rate
Are people adding items to their cart, then turning around and not buying? The cart abandonment rate lets you see the percent of people who do just that: abandon their current order before paying. Walking around the grocery store, the chances of you filling up a shopping cart then just saying, “you know what, I am not gonna get any of this” is slim to none. Online shopping is another story. People abandon their carts for a number of different reasons. The ideal is to keep the abandonment rate as low as you possibly can. Wikipedia has this to say about cart abandonment rates:
The typical shopping cart abandonment rate for online retailers varies between 60% and 80%, with an average of 71.4%. It is claimed that the best optimized checkout process has an abandonment rate of 20%.To achieve such optimization, websites use tools such as shopping cart recovery service or adopt strategies that are developed to improve conversion rates.
– Abandonment Rate on Wikipedia
The takeaway? Don’t stress everyone who doesn’t go through with a purchase, but note when your rate is above average.
3. Average Order Value
What are your customers buying when they purchase items from your site?
Understanding how much people are spending on average when they buy from you can help you figure out things like pricing strategy. Knowing how much on average you can account for per order is a major variable that is worth tracking.
Calculating this is simple. To find your average order value, divide your total revenue by the number of orders you received.
4. Rate of Return
The rate of return is a very important metric to track. Through this, you get an understanding of what your total profit or loss is over a certain period of time.
A rate of return (RoR) is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost. When calculating the rate of return, you are determining the percentage change from the beginning of the period until the end.
– Rate of Return by Investopedia
5. Site Speed
How fast is your webpage running? In this day and age, people want websites to load and load fast. If your page is lacking in its speed, that could in turn be hurting your chances of converting a lead into a sale. Faster is better these days, and the smoother your site is running, the better the user experience is for your customers.
To find out how fast your page is running, I would suggest downloading a third-party testing site for the most thorough analysis. At Fulfillrite, we use the score provided by Pingdom Tools as a metric to track site speed.
Through consistent tracking and use of metrics, you’ll be able to see what is working, what isn’t, and what you need to work on in order to improve. Whether you’re trying to close your first sale or turn a $5 million company into a $10 million company, these five metrics are worth tracking.