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Shehnaz Abdul Jabbar
Shehnaz Abdul Jabbar June 16, 2022

Ecommerce is a cutthroat industry, and thanks to the pandemic, it’s only getting more competitive.

As an eCommerce business owner, you might spend a lot of time working to make your eCommerce business run as smoothly as it possibly can. Analyzing, refining, and improving processes to help your customers have the best experience they can have, all the while hoping to increase your overall sales. But how do you know if those changes you have made are actually helping the overall success of your eCommerce store?

Metrics.

Running a D2C eCommerce business requires you to make decisions that have a significant impact on your business. And, the most successful ecommerce businesses are the ones that can harness metrics to make informed decisions. 

In this article, we will cover the key eCommerce metrics that you need to track. 

By understanding why these metrics matter to your business, you will have the foundation to start implementing them yourself and see the benefits within your own business’s success. 

Important ecommerce metrics for you to track and measure

The key ecommerce metrics listed below will give you the overall picture of your business performance.  

#1. Engagement Metrics

Customer engagement refers to any interaction a customer has with your business. Engaged customers are more loyal, make fierce brand advocates, and generally are great for business.

Engagement metrics tell you how invested customers are in your business. 

Measuring Active Users

Active users are the number of unique users who engage with your eCommerce store during a predefined period.

Measuring active users of your product can show you how many unique customers log in to use your eCommerce store. This metric is typically monitored over a temporal window: daily, weekly, or monthly.

  • Daily Active User (DAU): A daily active user is someone who interacts with an app over the period of a specific day (e.g. January 1st).
  • Weekly Active User (WAU): A weekly active user is someone who interacts with an app over a period of seven days (e.g. January 1st-7th).
  • Monthly Active User (MAU): A monthly active user is someone who interacts with an app over a period of 30 days (e.g. a user who opens the app in January).
Product Adoption Rate

Product Adoption Rate (PAR) measures new usage. This metric determines the popularity of your product among new signups. By calculating your product adoption rate, you can directly see how many of your new user signups have adopted your product and are actively using it.

Product Adoption Rate = (No. of New users / Total No. of Users) x 100

User Activation Rate  

Activation rate is a measure that helps you figure out how quickly new customers are engaging with your eCommerce application. 

It measures the number of new users that have performed a predetermined “key action” within a set period of time, where the key action is assumed or known to deliver initial customer value.

How it’s calculated: Divide the number of users who have performed the activation event by the total number of users who have interacted with your product.

Activation rate = Number of activated users/ Total number of users

#2. Conversion Metrics

Conversion Rate

Conversion is basically how successfully you turn visitors into customers. Conversion rate is the number of customers that complete a sale after visiting your eCommerce store and viewing a product. It measures how effectively your product guides users to make a purchase or any other action that matters to you.

Conversion rate = number of conversions / the total number of visitors

Average Order Value 

Obviously, you want your customers to spend as much as possible on your eCommerce store.

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. 

You can easily increase your total revenue by increasing the average order value. So why is it one of the most important ecommerce metrics to track?

Because it’s an insight into how mad people are about your products. 

Calculating this is simple. To find your average order value, divide your total revenue by the number of orders you received. 

Average Order Value = Total Revenue / No. Of Orders Received

Customer Acquisition Cost

The Cost per Acquisition metric measures how much it costs to acquire a new customer.

This metric gives you an idea of how much effort and money it takes to actually get a paying customer. CAC is useful for measuring the efficiency of marketing and sales activities, and for knowing if the amount your company spends to acquire new customers is worth the revenue they bring in.

It should be compared to a number of other metrics, including average order value, traffic volumes, customer lifetime values, and more to understand how much it costs to earn a customer.

CAC = Total costs associated with acquisition / Total no. of new customers

Cart Abandonment Rate

Are people adding items to their cart, then turning around and not buying? The cart abandonment rate lets you see the percentage of customers that add an item to the cart and then abandon the purchase. 

Cart Abandonment rate % = [1- ( Total No. of Completed Purchases / Number of shopping carts created)] * 100

This metric gives you insight into how many customers are interested in products but do not proceed to buy. By comparing this to other metrics on this list, you can develop strategies to reduce the abandonment rate and get more customers through to sales.

#3. Retention Metrics

Retention describes your product’s ability to keep users engaged over a longer period of time. 

Customer Retention Rate

Customer retention rate is the share of repeat customers (with more than one order) out of all your shoppers. The higher this number, the better you’re doing in servicing your customers. 

For instance, if a thousand customers shopped during the period of 12-24 months ago and 200 of those customers shopped again in the last six months, then your retention rate would be 20%.

Customer Retention Rate = (Number of customers with more than 1 order / Total Customers ) * 100

Returning customers are far more profitable than acquiring new ones. Tracking customer retention rate is an indicator of whether your efforts at improving customer loyalty are working or not.

Customer Lifetime Value

Customer Lifetime Value (CLV) is the amount of revenue on average that you earn per person throughout their entire lifetime as a customer for your company. 

Customer lifetime value is important because it shows customer loyalty. The more people shop from you, the better, obviously. This metric on its own gives you insight into how valuable each customer is to you. 

If you want a successful eCommerce store, driving CLV up should be on your to-do list. Identify your high-value customers and examine their customer journey. Then, try to replicate it for other potential customers. Look at how they discovered you, what incentives converted, and what products make them come back again.

CLV = Average Purchase Value * Average Purchase Frequency * Average Customer Lifespan

Churn rate

Churn rate is a metric to track the turnover of your customers. It measures the number of users lost over a given period. 

The simplest formula to calculate the churn rate is:

Churn rate % = (number of churns during a certain period) : (number of customers at the beginning of that period) x 100 

The churn rate can be one of the defining metrics (non-vanity metrics) that shed light on the actual growth of your business. It is so vital because it allows for building a predictive model for the business. 

Sudden changes in a company’s churn rate can provide feedback on customers’ responses to new pricing, products, competitors, and policies. A robust and holistic churn prevention strategy will help you ensure your efforts are laser-focused on retaining and growing your customer base.    

#4. Advocacy Metric: Net Promoter Score

Net Promoter Score (NPS) measures overall perception of and/or satisfaction with a brand, product, or feature.

There are two NPS questions you can ask your users:

  1. How likely are you to recommend our product to a friend or colleague?
  2. What is the reason for your score?

The first question is always measured on a scale from 1-to 10 and is used to segment users based on answers. The second question is used to get feedback on the customer’s high or low scores. Based on the answers to the first question, your customers are divided into three different segments:

  • Promoters – Customers who answered the question with 9-10. This group is more than satisfied with your product and will be pleased to spread the positive word about it.
  • Passives – Customers who responded 7-8. This segment is satisfied enough with your product to use it. Usually, they will not churn, but they will also not promote it.
  • Detractors – Customers who replied 0-6. Detractors are customers who will likely churn and spread negative words about your product.
How is NPS calculated? 

Net Promoter Score is calculated when you subtract the percentage of detractors from the percentage of promoters. A company’s NPS score can vary from -100 to 100.

For example, if you have:

  • 30% detractors
  • 20% passives
  • 50% promoters

So, the formula for calculating NPS would be- 

NPS = % of Promoters – % of Detractors

Not only does NPS help you see what percentage of your customers have adopted your product so that they would recommend it to others, it also lets you measure the satisfaction of these customers with your eCommerce application and gives you the opportunity to engage with users that have different scores.

Final Thoughts

Metrics are more than numbers; they’re critical views of your customers and their behavior. They help you pinpoint what your customers are looking for and adjust accordingly with personalization through a metrics-based understanding of customer behavior.

Through consistent tracking and use of the above-mentioned metrics, you will be able to identify and highlight those areas in which you can fine-tune your strategies and tactics to improve your eCommerce store’s performance and bottom line.

The Upshot.ai Advantage

Upshot.ai offers product teams a powerful behavioral analytics platform that automatically captures everything that users are doing in your product. You can look at multiple metrics, iterate on them over time, and run experiments to improve different parts of your eCommerce business.

Armed with this information, you can make intelligent product decisions across the customer journey.

Interested in a demo of the Upshot.ai platform? We’d love to chat with you!

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