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“What can't be measured, you can't control; what you can't control, you can't improve.”
Do you have a ecommerce? Evaluate your growth and the result of your efforts, metrics allow you to know about your customers, the level of compliance with your objectives, the “health” state of your business and much more.
Have you ever heard of KPIs?
Los KPIs or key performance indicators, are a measurement system for evaluating certain important aspects of your business; an X-ray that allows you to demonstrate your behavior and level of progress.
What KPIs can you measure in your ecommerce?
To evaluate if your strategies are on track and identify opportunities for improvement, we recommend the following KPIs. They are not the only ones! However, they are the most relevant to the ecommerce, determine and measure the most important ones for your growth record.
- Conversion rate
- Acquisition Cost per Customer (CAC)
- Customer Retention Rate/Repurchase
- Inventory rotation
- Average Order Value (AOV)
- Customer Lifetime Value (LTV)
Let's start by describing each of them and the aspects you should consider for their measurement:
1. Conversion Rate
What are you looking for for your ecommerce? Data about your potential customers (leads) to carry out marketing actions? , Completed purchase transactions? Catalogue or other PDF downloads? All of the above are conversion goals.
In this case, you should evaluate the total number of visitors you had in your store, how many converted? What, ultimately, is what interests us most for our business objectives.
The average conversion rate depends a lot on the economic sector. For the online sales channel in general, according to studies, it is between 1 and 3%, which means that, out of 500 people who visit your store, between 5 and 15 will buy from you.
What ecommerce industry do you belong to?
According to analyses carried out in 2020 by the Spanish company Flat 101, the following are the average conversion rates in ecommerce, by device and economic sector:
How much do you plan to sell? As you can see, you need to generate a lot of traffic to your ecommerce to achieve a certain level of sales. If you don't know how to do it, download our guide: Generate traffic to your ecommerce in 5 simple steps.
How to improve this indicator?
The ideal is to increase or keep your conversion rate stable, to do so, in addition to generating traffic, which as we have already seen, is essential, keep in mind the following 5 tips:
- Be different, it offers added value to the customer that is not provided by the competition.
- Convey trust, include positive testimonials from your shoppers in the store.
- Provide a pleasant and comfortable browsing experience (evaluate your UX).
- Post clear and concise product descriptions, along with images, payment method information, and promotions.
- Consider an easy and intuitive buying process, the fewer clicks the better.
2. Acquisition Cost per Customer (CAC)
Every time we develop a strategy, we must think about the objectives we want to achieve and the investment we require to make it a reality.
Social networks and Google, for example, allow you to set guidelines on their platforms to publicize your products and generate visits to your store. To do this, you must allocate a budget and at the end of the campaign, determine how much the acquisition of each customer cost you; this is where this indicator will be very useful to you.
To calculate your CAC, just divide the total amount invested in advertising by the number of visitors who converted you expected.
Example: If you invested $500 pesos in campaigns that generated 15 customers, you CAC It is approximately $33 pesos.
This way you will know how much it costs you to acquire each customer and make an investment projection, according to the number of customers you want to attract.
The following are other KPIs related to conversion and return on investment that will also be useful to you:
ROI (Return on Investment)
How much did your gain or lose ecommerce for the activities carried out? ROI is an indicator that allows you to measure the return on investment of your advanced actions. To calculate it and determine if a strategy was profitable or not, use the following formula:
For this case, the ecommerce invested $100 pesos in the purchase of the product, the execution of an advertising campaign on social networks and other associated expenses, for this strategy, it obtained sales of $225 pesos. This means that their return on investment was 125%.
Measure how much each of the advanced actions generated for you, define the most profitable channels and strengthen your strategies in them. Measure your ROI and make smart investments.
Cart abandonment rate
In case you didn't know, more than 70% of purchases that start with a ecommerce, end up in abandoned carts. Quite a disheartening figure, right? More so, if we think about their contribution to our sales objectives. But why does this situation arise? How do you know what your current rate is and how to lower it? Let's see:
According to studies by Statista, among the main causes that consumers attribute to abandon their purchases are:
- Shipping costs or taxes that are too high.
- Account creation requirement to complete the purchase.
- Too long or complicated payment process, which does not indicate the stages of the process, requires a lot of clicks, additional steps, is not clear or distracting.
- Very long delivery time.
- Lack of trust in the site to provide credit card details.
- Few payment alternatives.
You already know the reasons that may affect your customers leaving their carts abandoned, evaluate how your ecommerce face every aspect and take action to improve, only then can you reduce this indicator within your store.
In Google Analytics, you can configure and track your conversion funnel, showing at what stages of the process the most abandonments are taking place, information that will be very useful for rethinking your sales strategies.
In addition to the above, a good option to encourage conversion is to send a reminder email to the customer, stating that they have not finalized their purchase, it may be that lack of time or being distracted by another matter, have led to the departure of ecommerce. The ideal, in this case, is that it should be sent within the next hour, when the cart is abandoned, this time period has shown the best results, according to studies on the subject.
What is your current state?
Calculating your abandonment rate is simple, just do the following division:
3.Customer Retention Rate (TRC)/Repurchase
This indicator can tell you a lot about your online store, the service you offer and the level of loyalty of your customers. A high rate will speak highly of your brand and will be reflected in a greater number of repurchases, which is highly profitable for your business; acquiring a new customer costs 5 times more than retaining them.
You can analyze month by month how many of your customers were returning and how many new, this will allow you to determine your retention rate. Una TRC low, may indicate dissatisfied customers, ask about their shopping experience and consider their comments as opportunities for improvement. On the other hand, a TRC High, reflects loyal customers who not only buy from you again, but also help promote your product and attract more customers.
To calculate your repeat customer rate, you must define a measurement period, for this example we'll take the month of August of ecommerce Z, and consider the following aspects:
- # of returning customers (200)
- # of total customers at the end of August (600)
Ideally, your retention rate should be 100%, however, that's a pretty ambitious figure. Whatever your current rate is, focus on improving it every day. Next, we'll show you how to do it.
How to improve this indicator?
Take the consumer experience beyond the buying process, ensuring that every interaction you have with your ecommerce becomes a moment of satisfaction, this will help improve your retention rate and increase the customer lifecycle. A higher number of sales means better revenues for your store. Keep these tips in mind:
- Request feedback about your product and service, read the reviews and comments left by customers, conduct surveys.
- Improve your customer service, humanize your brand and make the buyer feel close to it, allow them to have direct contact with an area that listens to them and answers their questions and needs in a timely manner.
- It offers different benefits to your customers, they will perceive them as an added value and they will stay with your brand.
4. Inventory Rotation
This KPI allows you to measure the number of times you renew your inventory in a given time, a useful aspect for considering aspects such as the number of times the inventory needs to be replenished to avoid out of stock products, the greater the amount of turnover, the higher the sales level of ecommerce.
How to measure your turnover?
To find out what your inventory turnover level is, add up all the products sold in a given period, and divide this quantity by the number of products available in inventory over the same period. Some ecommerce they calculate their turnover by weeks (WOS), others, by months (MOS). For example:
Un ecommerce It sells depigmenting sunscreen brand 123, at the beginning of the month it has 50 Und in its inventory, during the first week it sells 25, to replace them, the ecommerce buy another 25, and in the following weeks of the month, repeat this process 3 times, resulting in 100 protectors sold and 50 in inventory.
If you add up the total number of protectors sold = 100 and divided by the average inventory held during the month = 50, the inventory turnover will be equal to 2.
Inventory turnover should not be so high as to affect product availability, nor so low as to mean having products in storage for a long time, due to lack of sales.
This last point is quite important, because depending on the turnover times that each industry manages (it is not the same in a ecommerce of cars than in one of shoes), a product that stays in stock for a long time means losses, so that this does not happen, your inventory turnover must be greater than 1.
Efficient inventory management is not only measured in numbers, it also depends on having logistics processes that ensure availability and speed of delivery. This is where a shipping platform in Mexico makes a difference, helping ecommerce businesses to maintain real-time control over stock and distribution, avoiding inventory failures and improving the customer experience.
5. Average Order Value (AOV)
Average order value. It's the amount of money your customers spend when they make a purchase from your ecommerce. This indicator allows you to know the purchasing behavior of your buyers and evaluate how it impacts your profitability; if your AOV increases, so will your profit level; if you have more purchases in a single order, it will be more profitable for you ecommerce.
6. Customer Lifetime Value (LTV)
Customer lifetime value. It refers to the total revenue that a customer will generate for your ecommerce during its “useful life” (during the time of relationship with your brand). This indicator is especially useful for growing businesses.
If you don't know how to get this data, here's what you need to know:
Determine the average value of your ecommerce purchases. Consider the following example: customer A spends an average of $500 pesos per month for purchases in your store, while customer B makes purchases of an average of $800 pesos per month.
If we add up the average purchase of both customers ($1,300 pesos) and divide it by 2, which is our number of sample customers, we have that the average monthly purchase value of your ecommerce It's $650 pesos.
Calculate the average purchase frequency index. How many purchases does the customer make at ecommerce per month. For our example, customer A makes 4 purchases, while customer B purchases at your store twice a month. If we add the number of purchases made by each customer (6) and divide it by 2, we find that the average purchase frequency index is 3.
Average length of time the relationship with the customer lasts. For how long, on average, do customers keep shopping at your ecommerce? For this example, let's look at 2 years.
Now you know how much the average customer spends per month and how many times they shop at your store during this period, let's calculate the LTV, taking into account the above data:
Important: contrasting your LTV with your cost of acquisition per customer (CAC), will allow you to determine the financial health of your ecommerce, never, the value of attracting a customer can be higher than the value of the income they will generate during their useful life.
Having a higher LTV allows ecommerce save on the expenses incurred in attracting new customers. Focus on improving your retention strategies so that your LTV grows.
Make measurement your best tool
As you may have noticed throughout the text, the measurement of KPIs it's not something complicated, not a field just for mathematicians, all the ecommerce they can do it and boost their results.
When setting your growth objectives, make sure they are consistent, taking into account and as a basis, the results of the measurement indicators of previous months and set credible and attainable goals.
Measure and control, only then can you make intelligent and informed decisions for your ecommerce!
Are you looking for an ally to help you improve your delivery process, enhance your compliance and customer satisfaction? , do not hesitate to contact us, we are the best Fulfillment center for ecommerce in Mexico and Colombia, you just have to click Here.
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