11 Top Priority eCommerce Metrics for explosive growth

Growing a successful eCommerce business requires founders, owners and teams to be on top of their metrics. 

Running an eCommerce business without knowing key metrics, what they mean, how they’re calculated and how they apply to your business is like having your eyes completely shut driving behind the wheel. 

How can you possibly make good data-informed decisions?

Obsession about metrics is what makes the best entrepreneurs grow faster than their competitions. 

However, trying to optimise every single metric under the sun isn’t the right way to go about growing an eCommerce business. 

It’s about optimising for the top priority metrics - in other words, the metrics that actually move the needle. 

So, what are the top priority eCommerce metrics in our eyes?

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The top priority metrics include:

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👉 Cost per Acquisition

👉 Average Order Value

👉 Sales Conversion Rate

👉 Customer Lifetime Value

👉 Repeat Customers %

👉 Cart Abandonment Rate

👉 Return & Refund Rate

👉 Email-Opt In Conversion Rates

👉 Revenue by source, referral + more!

👉 Net Promoter Score

👉 Average Profit Margin

Are you across all of these? Need to work out strategies to help improve some of these key metrics below?

Here’s 11 eCommerce metrics you should be on top of with supporting action points to help improve, as well as selected resources to read further. 

1. Customer Acquisition Cost

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You can’t achieve a scalable eCommerce business that achieves high growth (or build an ecommerce growth engine) if you don’t know your Customer Acquisition Cost (CAC).

Simply put, Customer Acquisition Cost means the amount of money you spent in acquiring a customer to make a purchase. 

Formula:

Customer acquisition cost (CAC) = Total marketing expenditure / no. of customers acquired.

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As a business you can shed a lot of money if you’re not measuring this properly. 

What may surprise a lot of people and where founders can get confused is that CAC doesn’t just mean marketing advertising spend - it means total cost for marketing & sales efforts. That means tools, ad spend, salaries + more all under marketing divided by the numbers of customers acquired. 

One of the biggest causes of startup and eCommerce business failure is not getting your CAC measured correctly (that’s why it’s #1 on this list!). If your CAC turns out higher than expected, there’s a good chance you’re actually heading in the wrong direction, even if revenue is high.

Action Steps: How can you reduce CAC?

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#1 - Find ways on increasing referrals

#2 - Work out ways to increase up-sells or cross-sells 

#3 - Strategies to get customers doing repeat purchases (i.e. Subscription-based packages)

#4 - Improve sales conversion rates on site

#5 - Invest in improving CAC over time but exploring non paid media channels (i.e. SEO, content marketing, etc). 

Recommend resources to read: 

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→ eCommerce Guide to Improve CAC, LTV, and Conversions on Mobile

→ Ultimate Guide to Calculating, Understanding, and Improving CAC

2. Average Order value 

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Average Order Value (AOV) highlights the amount a customers spend on average when they make a purchase on a website. 

This means that the more products a customer orders in one session, the better the average order value.

What does this mean? It means more profit!

AOV is one of the top ways to ensure a high-growth business and if you can increase this over time for your business, you will grow your company successfully. Simple. 

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Formula:

(Total Revenue) / (# of Orders Placed) = Average Order Value

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Action Steps: How can you increase AOV?

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#1 - One of the best ways is to do upsells

#2 - Another easy way to increase AOV (and also at the same time improve conversion rates) is to do product bundles. These work great for remarketing campaigns from my experience. 

#3 - Offer them a freebie or discount on minimum purchases (also increase conversion rates)

#4 - Offer them free shipping if they at least spend “X” amount - e.g. $100 or more (also increase conversion rates). 

Recommend resources to read: 

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→ Average Order Value: How To Increase Your AOV by 75% [With Examples]

→ How to Increase the Average Order Value for Your Ecommerce Store

3. Sales Conversion Rate

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Another important metric if you’re an eCommerce owner is understanding your sales conversion rate. 

It’s great to have a lot of visitors viewing your website, however volume doesn’t mean success unless people are converting. The real growth (or in many ways make or break) of an eCommerce brand is determined by its sales and conversions from visit to sale. 

Formula: 

Sales Conversion Rate = [No. of conversions (sales)] / [No. of Visitors/Users] x 100 

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If you can ensure a steady, healthy conversion rate, then you will be able to then focus on bringing in more traffic. If you can’t ensure a consistent healthy conversion rate, then focusing on improving your UX of your site will be required. 

An effective method to improve your UX is with the help of headless eCommerce platforms. They allow you to fully personalize your storefront in order to deliver exceptional eCommerce experiences and increase conversions.

So, how do you measure Sales Conversion rates?

Well, if you have Shopify, the dashboard does the work for you (it’s pretty good). 

However, if you’re not a Shopify user or have a custom site, Google Analytics is a great tool that lets you track conversion rates and revenue. 

You can read more here about setting up goals & sales conversion rates with Google Analytics.

Action Steps: How can you increase Sales conversion rates?

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#1 - Add as much social proof as you can within various parts of the website 

#2 - Use reviews, testimonials, trust badges + other tools. 

#3 - Ensure you have high quality product images 

#4 - Use live chat - helps with any potential customer queries. 

Recommend resources to read: 

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→ Ecommerce Conversion Rate Optimisation Guide: 41 ways to increase your store's conversions

→ An E-Commerce Marketer’s Guide to Conversion Rate Optimization

4. Customer Lifetime Value 

Customer Lifetime Value is a metric that every eCommerce founder needs to be on top of. 

In its simplest form, Customer Lifetime Value (CLTV) measures how valuable a customer is for your company across the entirety of the relationship. 

In other words, it’s about understanding how much a consumer will buy from your store over time. 

Understanding CLTV can help eCommerce founders make better business decisions for growth and key business decisions around product, UX & more!

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Formula

When it comes to calculating LTV for eCommerce, there are two main formulas: 

Historic CLV: 

CLV (Historic) = (Transaction 1+Transaction 2+Transaction 3…+TransactionN) X (Average Gross Margin)

Predictive (Simple): 

CLV (Simple) = ((Transactions x Average Order Value) Average Gross Margin) x Average Customer Lifespan

For details about each of the formulas, I highly recommend this post by Shopify. 

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Safe to say calculating LTV and getting the right metrics is hard if you’re not from an analytical background. 

At Cenario we’re making it easier to calculate LTV for eCommerce founders. Make sure to sign up today and ask us in the chat bubble how we can help your eCommerce business metrics. 

Action Steps: How can you increase Customer Lifetime Value?

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#1 - Focus on creating brand loyalty - how can you help your existing customers engage with your products + content more? 

#2 - Continuing point 1, consider starting a loyalty program. Make sure to reward your best customers since they will be the ones who champion you most.

#3 - Improve your UX/CX - get this right then people want to naturally come back again and again!

#4 - Increase your AOV - If your customers purchase more with every order, LTV goes up and up :)

Recommend resources to read: 

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→  Beginners Guide to eCommerce Analytics - Lifetime Value and Beyond

→ What’s customer lifetime value – All you need to know

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5. Customer Retention Rate / Repeat Customers

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Customer retention rate is another metric often overlooked in terms of priorities for eCommerce businesses. 

One mistake I see many businesses continue to make is having a larger focus on attracting new customers through acquisition, but forget or not prioritise existing customers. 

Understanding your customer retention rate is crucial to work out how often customers are coming back to buy more. That way decisions and strategies can be worked on to increase the rate of people coming back to buy. 

Formula:

Customer retention rate = (No. of returning customers) / (Total Customers) x 100

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If you can work out ways to increase your retention rate of customers, you will naturally see referrals and organic growth, in turn, increasing acquisition. 

Those who come back to buy again become cheaper! Ultimately, it’s cheaper to have existing customers buy again rather than focusing on new acquisition. 

Action Steps: How can you increase Customer Retention Rate?

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#1 - Customer Loyalty/rewards programs - similar to LTV, how can you make sure people can come back, buy more products and consume more of your content? Rewards programs to create incentives are great!

#2 - Newsletters - share newsletters of product updates and awesome, valuable content. It’s important not to directly sell your product all the time, but rather strategically find ways to include your products and engage your audience without always needing to push a hard sell. 

#3 - Within the product - can you include something clever as part of your packaging? I know one of my favourite clothes store includes lollies as part of their packaging. Whilst this seems really small and not the sole reason why I got back to purchase more, it’s a nice touch which leaves a lasting memory. 

#4 - Community events/Pop-up stores - run events, potentially exclusive events, and invite people to try new products, etc. 

Recommend resources to read: 

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→  Ultimate Customer Retention Strategy for eCommerce

→ Customer Retention Optimization for eCommerce

6. Cart Abandonment Rate 

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Now with Cart Abandonment, I can confidently say that many eCommerce business owners and founders pay close attention to this metrics, which is great :)

As the name suggests, it is the number of people who add products to your cart but don’t purchase them. 

Formula:

Cart Abandonment Rate = ((no. Of carts created) - No. of purchases) / (no. Of carts created) x 100

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When it comes to the calculation above, if you have a small amount of website visitors and not many purchases, then naturally this may look a little higher than intended. Once you build up more traffic + purchases, you will then have enough data to then make actions in improving your CAR. 

Now, if you have lots of traffic, decent/high volume of purchases and have a high CAR, then you’ve got lots of work to do! 

Action Steps: How can you decrease CAR?

#1 - Keep your checkout experience to the bare minimum (especially on mobile) - there’s no need to do any fancy designs, animations, pop-ups or anything around what could be distracting. Why would you? If people are checking out, it’s meant to for details and that’s it. 

#2 - Free Shipping/special offer - Free Shipping is a great way to ensure people don’t abandon their carts. If you can’t do free shopping, work out ways to incentivise any checkouts. Even a special “Hey here’s 5% on us” to ensure they complete their purchase may help. 

#3 - Remarketing Emails + Ads - this one is mandatory. If any adds to cart, then make sure they at least have dynamic remarketing or ideally emails if they didn’t complete their purchase. Again, a way to work out any incentives to win them back you should consider. 

Recommend resources to read: 

→  eCommerce cart abandonment demystified

→  The Complete Guide To Cart Abandonment

7. Return and Refund Rate 

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Now this is an important metric all eCommerce founders and owners especially need to be across. 

This is the rate at which customers return the products they bought as compared to the total purchases. Having any customers return products isn’t the best feeling in the world for any business. 

Formula:

Return rate = (no. of returns) / (total sales) 

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For context, items such as clothes and footwear are bound to return regularly due to changes in size, etc. Specifically, the footwear market is notorious for its high return rates, primarily due to fit issues that are hard to gauge online.

However, even despite items such as clothes or footwear which expect higher rates, having high return or refunds rates can really hurt a business. Almost like a disease and can kill your profits. 

So, what are the best ways to prevent or deter refunds or returns?

Action Steps: How can you decrease refunds and return rates?

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#1 - High quality images + photos - make sure you have images from as many angles as possible which help support the product descriptions. This way consumers should know exactly what they should be expecting. You can use a photo enhancer to enhance image quality, ensuring high-resolution images from as many angles as possible accompany product descriptions, providing consumers with clear expectations.

#2 - Measurements + Descriptions - more applicable for clothes and footwear companies, make sure to have detailed descriptions. 

#3 - Materials used - similar to both points above, again describing as much as you can about the product are great ways to ensure you communicate all the important information. 

#4 - Show off reviews - have reviews on product pages, at least your top performing products or even products which seem to have a high return rate. This helps provide reassurance to anyone wanting to purchase the product that other consumers are happy with it. Helps provide more credibility for you and in turn helps with conversions. 

PS. Make sure to look at your refund policies and spot anyone using loopholes to ask for refunds, etc. Have heard this happens a lot if you have generous refund policies. 

Recommend resources to read: 

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→  The Ultimate Guide to Ecommerce Returns

→  A Guide to Ecommerce Return Policies

8. Revenue by Traffic 

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Understanding Revenue by Traffic you need to be on top of so you can scale your business quickly. 

Revenue by traffic determines how many actual customers you get as opposed to mere visitors.

Whilst one channel may bring in a lot of visitors, doesn’t necessarily mean it’s the best channel for revenue. I see this often. 

You may get a lot of Google Organic traffic, yet Facebook Ads converts better and brings in more revenue, faster. 

So, what should you focus on. Facebook Ads! I’ve always believed in doubling down what works. This doesn’t mean sacrifice other channels but this should be the primary channel you should focus on if it’s bringing in revenue. 

Action Steps: How can you decrease refunds and return rates?

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#1 - Double down on profitable channels - work on channels that bring in the most revenue, fast. What I often see happen with many eCommerce businesses is trying to spread out in terms of wanting to acquire new customers on other channels, yet they neglect or don’t have enough spend for scaling on channels that work. 

#2 - Remarketing - Now if you want to spend or focus on other paid channels, focus on making sure you have a very strong remarketing funnel. That includes remarketing top rated products, product reviews, video reviews, content marketing + more. It’s all about providing a lot of value. Make sure to not give up on visitors who don’t convert right away, as they can convert overtime. 

Recommend resources to read: 

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→  25 Ways To Drive More E-commerce Store Traffic Without Buying Ads

→  30 Proven Ways To Drive Ecommerce Traffic and Conversions To Your Online Store

9. Net Promoter Score

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Why is Net Promoter Score important? It gives you an insight into understanding how your customers feel in relation to your products and services?

A Net Promoter Score ranges from a scale of one to ten and is typically conducted via surveys. 

It gives you a good understanding when you get the results of how customers feel about their experience with your product from visit, to sale, to usage. Ultimately, you then get information about how likely they are to recommend to their friends. 

Any rating of 8 or above out of 10 typically means you’re going to have plenty of raving customers who are more likely going to share your product. Anything less, you need to find out a way to improve your experience for next time. 

Action Steps: How can you increase your overall NPS score?

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Now for this section, I have personally past companies I have worked with do very well by structuring certain responses with certain actions. Here’s what I mean below. 

Score 8, 9 or 10/10 - If they click one of these numbers on the NPS survey tools, send them to a specific landing page asking them to leave a positive review on a review site of your choice. Or you can give them multiple choices. 

Score 5, 6, or 7/10 - If they choose one of these answers, send them to a specific landing page with asking to give specific feedback with the offer of a call from the company. This way, you van try give them an awesome customer experience and maybe a way to win them back for next time. 

Score anything less than 5 - then you need to contact them directly via email or via a phone call. This is crucial in order to keep a positive brand rapport and try to limit the opportunity for them to leave a bad review. After all, bad reviews can seriously hurt a business. 

Recommend resources to read: 

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→  Implementing Net Promoter Score (NPS) in eCommerce – Best Practices

→ The Smart Marketer’s Guide to Net Promoter Score

10. Email Opt-in Conversion Rate

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Email marketing is one of the best ways to market your brand. 

Surveys show that email marketing generates about 40 times more revenue than traditional social media marketing. 

The greatest benefit of using Emails is the flexibility it offers, not to mention cost-friendly too.

What should founders and marketing teams make sure to measure when it comes to email marketing?

Email opt-ins. 

Formula: 

Email Opt-in Conversion rate = (# of emails opted in) / (# of users) x 100

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With email automation tools, whether you use Mailchimp, ConvertKit, Active Campaign or whatever platform, they are all great in displaying key metrics for email marketing. 

On top of that, it’s important to check your analytics of which emails are contributing to revenue for your business. 

Action Steps: How can you increase email opt-in rate?

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#1 - Have an offer - this is one of the easiest ways to build an email list and make it easy for people to opt-in. 

#2 - Exit intent pop-ups - These are great to have as a “last chance” before anyone decides to leave your website. It’s a clever way to ensure you give yourself the best chance to at least take away something from a recent website visitor. 

#3 - Make sure it’s a good email + have social share buttons within your email marketing - it’s one thing to just collect emails on your website, but it’s another strategy all together to try and increase referrals. Get your subscribers to help you do the work. 

Additionally, here are some clever email marketing strategies to help you with reactivation and increase the numbers of past customers or signups purchase more products. 

• Reward old customers/Top Customers: Your shoppers deserve some love from time to time since they have already been invested in your brand. Offer them special rewards or “Thank you” gifts to show your appreciation. 
• Send newsletters regularly - Keep your customers engaged and remind them that there’s always something interesting they can look forward to. 
• Add a personal touch - Go the extra mile in keeping your customers close by surprising them with personal cards and messages!

Recommend resources to read: 

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→  A Practical Guide to E-Commerce Opt-in Forms

→  Ecommerce Email Marketing: Industry Performance Benchmarks

11. Average Profit Margin

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I put Average Profit Margin Last because it’s certainly a critical metric that any eCommerce business needs to be on top of, constantly. Increasing your profit margin leads to scalable growth. 

Understanding your profit margins in real time is a tricky one to understand and keep on top of. You can get lost trying to understand profit margin ratios, operating margins, etc. 

How can you calculate profit margin?

There’s a few ways to calculate profit margin and increase profitability for your business, however a standard way to calculate margins is through the Gross Profit Margin calculation. 

Gross Profit Margin (%) is the difference between Revenue and Cost of Goods Sold (COGS). 

Formula: 

Gross Profit Margin (%) = (Total Revenue – Cost of Goods Sold) / Total Revenue

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Here’s an easy to use calculator to work out your rough Gross Profit Margin. 

Working out the ideal Profit Margin for a single product can help you determine what needs to be done to increase it. Higher profitability = greater chance for faster scaling and growth. 

I won’t go into what’s an ideal profit margin for your business, industry averages, etc. - However, they say as a baseline that 10% margin is an average, 20% is high and 5% is low. Again, very much depends on the industry you’re in, maturity of your business, brand and other factors. 

This is a wonderful resource by Stern NYC that highlights average margins by sector. 

Action Steps: How can you increase email profit margins?

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#1 - Reduce Operating Costs - This seems like a no brainer, but it’s important to keep on top of your operating costs and identify opportunities where you can reduce costs. 

#2 - Raise your prices - This is a complex topic and needs a lot of research and modelling on your end if you’re considering raising prices. The last thing you want is having to high of a price per product, even for your best sellers. However, get this right then can seriously be a fast track to higher profit margins.

#3 - Focus on increasing Sales Conversion rate - seems like a no brainer, but if you can ensure you get the most out of every dollar you put into ads and marketing, and ensure you do your best to optimise your store, then you will naturally see margins increase. 

#4 - Increase Average Order Value - working out strategies to get more from each total purchase should be something to strive for continuously. 

#5 - Custom Loyalty/Increase customer retention - As mentioned earlier in this article, once you’ve made the sale and done the hard yards to get that initial first purchase from a new customer, the work doesn’t stop there. It’s important to have strategies in place to get customers to buy and buy again from your store. Customer loyalty programs are one way. 

Of course, there’s many other factors and strategies that can influence an increase in profit margins, but these initial strategies to consider and look into further is a great step forward. 

Recommend resources to read: 

→  How to Set Healthy Ecommerce Margins

→  How to Increase Profit Margin for E-Commerce

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Final thoughts

Keeping on top of these metrics will ensure you're giving yourself the best chances of success with strong scalable growth.

Any other metrics you use which are a top priority? We would love to know your thoughts :)

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