A quick guide to selecting the right eCommerce Metrics
Running an eCommerce business isn’t easy. With a thousand things to do, it’s easy to lose your way.
To avoid this, you need to refer to a map or ask for directions. The AARRR framework is such a map, and the metrics you choose are signs to tell if you’re moving towards your destination or not.
But first, let’s look at what makes an eCommerce business successful.
- It starts with getting people to know about you.
- After learning about you, visitors interact with you to get some value, get questions answered and so on.
- If they are satisfied with your answers, they could make a purchase.
- Post this, they may never purchase from you again. OR, delighted by your product/service, they may repeat their purchase, & even recommend you to others.
Does this process sound familiar? The AARRR framework is a handy tool to remember this process. (Just picture a one-eyed pirate with a parrot on his shoulder saying “AARRR Matey!”).
AARRR stands for
- Acquisition – People learn about you and visit your website
- Activation – Person interacts with your website in a meaningful way
- Revenue – Person makes a purchase and becomes a customer
- Retention – Customer is satisfied/delighted ? and makes a repeat purchase
- Referral – Customer is delighted enough to recommend your product
Sounds simple, doesn’t it, but it’s still easy to get lost. You need the right metrics tell you how far you’ve gone, how much further you have to go, and if you’re still moving. Let’s get to the metrics you can use.
The first step is people visiting your website in a number of ways
- By directly typing your website’s URL into their browser (Direct Traffic)
- After searching for something related to your website (Organic Traffic)
- After clicking on a link in an email you sent them (Email Traffic)
- Via a post on a social network (Social Traffic)
- From an advertisement in a search engine, or a social network (Paid Search, Google Ads, Facebook Ads etc.)
- After reading a guest post (Referral Traffic)
And so on.
You should know how many visitors are visiting your website, which pages they’re landing on, and how they get there. It is also important to know what these visitors do next, and how they convert into customers.
So what should you track? Metrics tracked should tell you the volume, cost, and quality of traffic that each source sends. First list all the sources that traffic reaches your website from. For each source, you should understand
- Traffic Volume – the number of unique visitors and total visits from each source.
- Landing Page – the first page that people see on your site. This is an indicator of what information people are looking for.
Supplementary information – You can also understand the engagement of users for each landing page – how long they spend on the site after visiting through that page (session duration), how many pages they visit, and how many leave without visiting any other page (bounce rate).
- Acquisition Cost – What is the cost for each visitor? What is the cost of each sale? This is easy to find for paid sources, but tricky for sources like social networks/email/SEO. However, you should try to estimate the costs that relate to the channel. e.g. For social channels, consider the cost of creating content for the channel, and the cost of tools used to measure the channel.
Supplementary information – Compare the acquisition cost for each source with the conversion rate and revenue from each visitor to understand which marketing channels are most effective
- Conversion Rate – What ratio of visitors from each source buy something?
You should also track your visitors through the rest of the AARRR funnel.
Once a visitor arrives on the site, they interact with the site. They read content, use tools, subscribe to newsletters and perform other key activities, moving towards a purchase decision. These key activities (activations) can vary based on the type of website/business.
Some typical activations you can track are
- Subscribing to a newsletter
- Adding products to a cart
- Signing up
- Spending x minutes on the website (e.g. 15 minutes)
- Downloading an eBook
- Contacting customer support
Some activations can be linked to a user, helping you to get in touch to coax the process further. Other activations are tricky to attribute to a specific user (such as spending 15 minutes on the website). However, you can associate them with a channel to understand it’s effectiveness.
Begin by listing down important activations for your website and start tracking them.
Supplementary information – You can go a level deeper, and understand how activated users convert into revenue, or engage with your website.
Revenue….the one metric to rule them all! If your store isn’t producing revenue, then all the other things don’t really matter.
However, it is other roads that lead to revenue. To understand your store’s revenue, you need to know both absolute figures as well as segmented figures.
The absolute metrics that must be tracked are
- Transaction Count
- Total Revenue
This gives you the overall picture, but you must look at segmented metrics as revenue is affected by every step of the funnel.
Understand how Acquisition affects your earnings by tracking metrics like
- Revenue by channel
- Transaction count by channel
- Conversion rate by channel – This is the ratio of transactions to traffic from each channel
- Average transaction value by channel
- Revenue by customer
- Revenue vs acquisition costs
Learn the effect of Activations through metrics like
- Revenue based on the type of activation (e.g. average revenue and conversion rate for subscribers to a newsletter)
- Revenue and number of transactions by product
Retention plays a big influence on revenue, and you should check out the following metrics to understand this
- Revenue per repeat customer
- Revenue per new customer
- Split of overall revenue between new customers and repeat customers
To know the impact of Referral on earnings, look at metrics like
- Revenue per referral source/type
- Revenue per referred customer
- Referral revenue per referring customer (to understand which customers are greater influencers)
In order to succeed in the eCommerce space, you need to keep customers coming back. It is estimated that acquiring a customer costs 5 times as much as retaining them. So a higher rate of retention increases profitability.
Some commonly tracked metrics are
- Retention Rate – The ratio of repeat customers to total customers
- Long-Term Value (LTV) – the total revenue from a customer. Keeping the customer coming back helps improve this.
Many factors influence customer retention including
- Customer service,
- Follow-up actions after a transaction (for feedback, surveys, emailers with offers),
- Reaching out to customers who have not transacted for a while,
- Loyalty or rewards programs,
- Changes in pricing or more.
So you should seek to learn which factors are positively affecting business, and which actions are not. Some things to consider are
- How is customer service affecting revenue? How likely is a customer who avails customer support to make a transaction? You should look at this over a longer time period (perhaps every month or quarter) to gain insight.
- For every action that you do to retain customers, you should track conversion rate. For example, you could track how many customers who received an emailer converted within 7 days.
- You can compare the average revenue for loyalty program customers (segmented by tiers) and normal customers to understand whether the loyalty program is effective. Compare the revenue gained to the cost of running the program to decide whether to continue or tweak it.
A referral is simply a recommendation. Someone (not necessarily a customer), recommends your website to another person and an action (not necessarily a purchase) is performed.
You can gain understand how your referral process is working for you, by tracking referral traffic to your website and referral revenue.
Note : Referrals rarely result in a direct transaction and there can be several days, or months before a transaction occurs. This creates an issue while tracking referrals – it isn’t always easy to understand that a referral has resulted in a visit or revenue, and you’ll never get an accurate figure.
It is possible, however, to understand enough to make decisions.
Gather information by following these 2 principles –
- Tag the referral source – This could be a referral program, a blog, shared content or something else. You could tag the referral source by a unique code for the source. You could even set up a unique referral code for each person in order to track referrals.
- Track referred visitors – After a visit, tag the referred visitor as a referral and monitor their behaviour over a period of time.
You can understand how useful a referral source is with metrics like
- No of referrals made
- No of referrals converted (to revenue)
- Behaviour of referred visitors (by source)
- Conversion Rates
- Purchase behaviour (e.g. which product they purchased, how long did they take to purchase)
- Engagement (This includes actions that indicate interest in your product/service such as subscribing to alerts)
Well, that’s about it for now.
While we’ve discussed a lot of metrics, not all will apply to your business. Take a good look at what influences your business in each of AARRR stages to figure out which metrics are the best for you.
And try to keep it as simple as possible – you are much more likely to use them if you’re looking at 10 metrics as opposed to 100.
If you’re looking for more information, or need help in tracking metrics for your website – we can help. Get in touch!