They are the second greatest gift any ecommerce merchant will receive in the holiday season, after the cold, hard holiday cash that can make or break an ecommerce retailer’s entire year, of course. But, surprisingly, in the rush of business that consumes them from Thanksgiving through the New Year, a lot of retailers overlook the valuable ecommerce metrics that flow in along with the cash. And that’s an oversight that can cost heavily in the long-run.
The reason is that every one of those all-important purchases is accompanied by data that can be captured and integrated and analyzed, and then turned into actionable insights that can remake those one-time holiday shoppers into long-term, loyal customers with a lifetime value many times greater than the initial purchase.
The question is which ecommerce metrics to track, and how, in order to foster a high rate of customer retention.
Six essential ecommerce metrics for holidays and every day
If you can think it, you can count it. The reality is that businesses can incorporate a seemingly open-ended range of metrics into their data collection and analysis, especially with the customizable, integrated dashboards now at their disposal. But, if the goal is enhanced customer satisfaction leading to increased customer retention, not all metrics are created equal.
Keeping an eye on the customer retention prize, key ecommerce metrics such as conversion rate, shopping cart abandonment, churn rate, repeat rate, and customer lifetime value can shine a light on what’s right and what’s wrong about the customer experience, and point the way to refining and improving it. And with the assistance of the right tools for the job, tracking key ecommerce metrics no longer has to be the onerous task it was in the manual age.
Before a business can take steps to retain customers, it has to acquire them. The conversion rate reveals how well that’s happening. Arrived at simply by dividing the number of site visitors who make a purchase by the number of visitors overall, it’s a metric that undergirds all the rest.
When potential customers enter an ecommerce website, what are the chances they will make a purchase? Across industries, a target rate is three percent, although specific industries will have rates that vary. If it varies significantly in the wrong direction, though, it may be a strong indication that the customer experience is not what it should be. Because conversion rate is a big picture ecommerce metric tracking large numbers of site visitors, it’s one that is often fully monitored and assessed on a monthly basis to review bulk data, but daily checks are also essential because they can pinpoint unusual fluctuations in the rate that may reveal problems with the website itself.
Shopping Cart Abandonment
It’s disconcerting to see a customer get all the way up to the cash register and then change his mind, leaving behind merchandise in which he was clearly interested. But it’s far from an unusual occurrence. Research from the Baynard Institute shows an average abandonment rate of an eye-opening 68.8 percent. Much of that simply reflects the way in which people surf the web, and the propensity most of us have to “window shop.”
But in other instances abandonment points to more serious buyer resistance, perhaps over price or concerns about quality that weren’t laid to rest at earlier touchpoints. Technical issues, too, are common reasons potential buyers leave – too many hurdles to jump in the checkout process, complicated navigation, and concerns about the security of payments among them. For many businesses, an abandoned shopping cart is an opportunity to reach out to would-be customers in the hope of learning why they left and gleaning information that can reduce the rate. Because the metric is closely related to the conversion rate – reducing the abandonment rate will increase the conversion rate- tracking tends to follow the same monthly cycle.
Like conversion rate, churn rate is expressed as a percentage, in this case the percentage of customers who make a purchase and don’t return, the flip side of customer retention. Given the high cost of acquisition and the acknowledged need for companies to develop long-term, high-value relationships with loyal customers, it’s a must-monitor ecommerce metric.
For ecommerce businesses, knowing what percentage of customers can be expected to churn within a given period becomes both a measure of how successfully it’s giving customers the experience they expect and a powerful predictive tool for balancing acquisition and retention efforts. Churn rate is typically measured in months or quarters, depending on the average time in which the overall customer base will make a repeat purchase.
Repeat Purchase Rate
Repeat purchase rate simply tracks the percentage of customers who make a repeat purchase within a given period. It is one of the strongest indicators of the quality of the customer experience and the success of retention efforts.
As with other important metrics, repeat purchase rate is one piece of the data puzzle that, as the various elements are integrated and analyzed, provides a periodic snapshot of whether targets are being met or missed. It can provide either a bird’s-eye view of how successfully customers are being retained or, thanks to modern, real-time dashboards, home in on specific elements of a marketing campaign by tracking a promotion or other initiative daily or weekly to gauge its success.
Customer Lifetime Value
This is the brass ring, for any business, because the path to business success is lined with loyal customers, as an article in Forbes makes clear. If online retailers manage to retain ten percent of their customers, the author noted, they will double their revenue.
Tracking customer lifetime value (LTV) on a continuing basis provides the ecommerce metric that can put such goals in reach. It’s a projection of the revenue a business can expect from a customer over time, grounded in his or her past behavior as well as the average lifetime spending of the larger customer base.
LTV can guide decisions about budgeting for customer acquisition – how much should a business spend to gain a customer? – and also help calculate ROI. The cost of not knowing LTV can be enormous, as an article on For Entrepreneurs emphasizes. The number one reason startups fail, the author argues, is that it costs them more to acquire a customer than that customer’s LTV will prove to be.
‘Tis the season to begin tracking ecommerce metrics
There’s no better time than the busy holiday season, which sees a large inflow of new and repeat customers alike, to begin tracking these valuable ecommerce metrics. The information gleaned can be a priceless gift for any merchant.