Ecommerce Analytics Metrics: How To Strategically Track Metrics For Maximum Profitability
Joy Sharma
Understanding your metrics is a crucial aspect of running a successful eCommerce business since these numbers provide an indication of how strongly your online store is performing in some areas and where you can optimize profitability in others.
Unfortunately, many eCommerce store owners struggle to effectively track metrics in a way that improves their profitability, leading them to make paradigm-shifting decisions about their business based on inaccurate information. That’s why having a strategy for tracking and evaluating your metrics is so important, whether you’re looking at Google Analytics, Shopify numbers, Hyross or social media metrics.
Here’s a good example of what we mean…
Let’s say you’re looking at your metrics and realize that your CAC (customer acquisition costs) numbers are not where you want them to be. This causes you to panic and assume your current marketing strategy is not working. So, you decide to hack your ad account in the hopes of improving this metric.
The problem with this type of approach is that it forces you to make decisions based on one singular data point rather than taking a holistic look at your overall performance. In other words, you could be missing out on a major piece of the puzzle by choosing to focus on just one metric at a time, making it difficult for you to improve your profit margins.
Now, the question is, how can you track your eCommerce metrics in a more effective way?
For our clients, we take a “bottoms up” approach to look at the key performance indicators impacting their business. Essentially, instead of analyzing one eCommerce KPI at a time, we create a flow sequence that allows us to assess each metric in order, allowing us to accurately determine where the “weak links” might be hiding.
This hierarchy system starts with their overall revenue goal, or as we like to call it, their North Star. From there, we can work our way down the flow chart, asking and answering questions about each metric along the way. This gives us a 360-degree picture of their eCommerce sales metrics so that we can make strategic adjustments that optimize profitability.
If that sounds complicated, don’t worry. In this blog, we’ll walk you through every step in our hierarchy system, so you can understand how to track your own metrics in a more powerful way.
- North Star Metric
- Revenue Targets
- New Customer Revenue
– Ad Spend
– aMER
– nAOV
– New Orders
– nCAC
– Returning Customer Revenue
– Ad Spend
– aMER
– rAOV
– New Orders
– rCAC
– LTV (CLV)
- Website Traffic Metric Targets
- Paid Traffic
– Revenue
– Orders
– AOV
- Organic Traffic
– Revenue
– Orders
– AOV
- Email Traffic
– Email Revenue
– SMS Revenue
– Click-To-Order Rate
– Revenue per Recipient
– Unsubscribe Rate
- Marketing Channel Metric Targets
- Revenue
- Ad Spend
- ROAS
- AOV
- CAC
- Thumbstop
- Average Play Time
- Click-Through Rate
- Other Major eCommerce Metrics
- NPS (Net Promoter Score)
- Bounce Rate
6. How To Track eCommerce Metrics
North Star Metric Targets
What the north star goal is, what is the definition of success for you, 3 types of North star goals exist in the DTC ecom world –
- Revenue Growth
- Profitability (Efficiency) Growth
- Profitably Growth
Basically, this is the guiding light that you’ll use to make decisions about your business. Since the goals can vary largely from client to client, you’ll need to take some time to really assess what your long-term goals look like.
We are taking profitable growth as the North Star for your eCommerce website as that is what 70% of our clients ask for anyways.
Most of the time, profitability comes down to your contribution margins. You can measure this by subtracting your eCommerce goods’ variable costs and ad spend from your sales’ order revenue. After that, you can start to track your metrics by looking at the specific revenue types that impact your profitability.
Revenue Targets
Looking at your total revenue as a whole can be dizzying. So, we break these numbers down into the two main categories of revenue that impact an eCommerce site; new customers and returning customers.
New Customer Revenue
New customer revenue deals with the revenue made from first-time Buyers.
Ad Spend
This number represents the total amount of your ad spend directed at acquiring new customers. When finding this number, we look at all our marketing channels, then subtract the amount spent on retargeting towards previous buyers.
aMER
In digital marketing, aMER (acquisition marketing efficiency ratio) is measured by dividing the total new customer revenue by the total ad spend. This will help you determine how effective your current marketing strategy is.
nAOV
Average order volume (AOV) shows how many products the average customer buys when they visit your online store. We break this metric down even further by looking specifically at new customer AOV. This helps paint a clear picture of which products are being sold more on the front end of the store versus the back end.
New Orders
Next, we look at the total number of orders first-time buyers place in your store. This number helps you understand how the AOV shifted and see how many new customers are placing orders versus returning customers so you can adjust your strategy accordingly.
nCAC/nCPA
New customer CAC (customer acquisition costs), also known as CPA (cost per action), refers to the amount of money you spend to obtain a new paying customer. This includes all of your marketing campaigns, including social media and email marketing, over a specific period of time.
Returning Customer Revenue
For most online businesses, returning customer revenue will make up most of your revenue. This includes repeat customers who return to your eCommerce site to buy new items or repeat purchases. Tracking this metric is essential to assessing overall customer satisfaction and improving customer retention.
Ad Spend
Just like with new customers, isolating your ad spend for returning customers can help you determine how effective your current eCommerce marketing strategy is. Start by taking your ad spend, then subtract the total amount of money spent on ads targeted towards new shoppers.
rMER
Returning customer MER (marketing efficiency ratio) is calculated the same way as your nMER. Take the total revenue from repeat customers and divide it by your total ad spending.
How much money we spent on remarketing and much much money we made .
rAOV
Now, the AOV for repeat purchases will likely be very different from that AOV for new customers. That’s because these customers are likely to be buying many of the same products again, and possibly some more back-end products that you offer them through upselling.
Returning Orders
This metric refers to the total number of orders placed by returning customers in your store over a specific period of time. Customer loyalty is a major factor for eCommerce success, so monitoring this metric will give you a good idea of how well your store is performing in this area.
LTV (CLV)
Customer lifetime value, or CLV, is the total amount of money you anticipate a customer will spend in your store over their entire lifetime. LTV is crucial for all retailers but especially important for eCommerce brands selling niche products and CPG (consumer packaged goods.)
After we look at all these key eCommerce metrics in sequence, we can start to look at them all together. This includes:
MER
The overall marketing efficiency ratio for all of your marketing channels combined
The amount of money we are putting in and how much we are making out.
Weighted CAC
The average CAC for both new and returning customers. The efficiency at the business itself is acquiring customers
Conversion Rate
The number of conversions, or sales, made divided by the number of people who interacted with a specific ad.
When we add all of these eCommerce metrics together, it will tell us whether or not we are on track to achieve our North Star goals.
Website Traffic Metric Targets
Obviously, as an online business, website traffic is of the most important eCommerce metrics. That’s why we take extra time to look at the specifics of your website visitors, including the amount of money they spend in your online store, where the traffic is coming from, and what these eCommerce conversion rates mean for your profitability.
Paid Traffic
Paid traffic is just that, traffic generated from your paid advertising efforts. These are people who come to your eCommerce website through social media ads on Facebook, Tik Tok, and other platforms. Most of the time, these ads will drop them on landing pages or product pages unique to the ad, which makes it easier to analyze your metrics.
Revenue
Instead of looking at the total website revenue, we separate the paid traffic so that we can get a better idea of how effective our marketing campaigns are. This includes revenue from online ads on platforms like Facebook, Google, and Tik Tok.
Orders
Being able to optimize your conversion rates starts by knowing how many orders are being placed from your paid traffic sources. So, it’s important to look at the total orders that come from all of your current advertisements.
AOV
You might not realize it, but the AOV for customers coming through paid ads can be slightly different than repeat customers or organic traffic. That’s why we separate the AOV for paid traffic sources as well.
Organic Traffic
On the other end of the spectrum, organic traffic refers to website visitors who discover your eCommerce business on their own rather than through paid advertisements. Organic traffic includes things like SEO (search engine optimization) on platforms like Google and Bing. Organic traffic is also more profitable than paid traffic since it requires little to no spending, which is why it’s so important to track the metrics for this type of traffic.
Revenue
Again, we separate the paid traffic so that we can get a better idea of how well your eCommerce website is performing on popular search engines. This includes revenue from online ads on platforms like Google, Bing, and Yahoo.
Orders
Next, we look at how many orders are being placed from your organic traffic sources. The more orders that come from these sources, the more you’ll be able to increase your profitability and minimize your costs.
AOV
Since the AOV for customers coming through organic traffic can be slightly different than paid traffic, we always recommend looking at these numbers separately before making any decisions about the effectiveness of your marketing efforts.
Email Traffic
If you’re not already using email campaigns as part of your marketing strategy, you could be missing out on major revenue opportunities. Email marketing is one of the effective ways to improve your customer experience by using your email list to promote exclusive offers, sales, referrals, and new product releases. It’s also a good way to build lasting relationships with your customers, leading to stronger LTV.
Email Revenue
This is the total revenue generated directly from your email campaigns, whether that means prompting a customer to complete the checkout process or offering exclusive deals to repeat customers.
SMS Revenue
Similarly, SMS revenue is generated directly from the SMS notifications you send to customers. When used together, SMS and email create a powerful sales tool that has a huge impact on your bottom line.
Click-To-Order Rate
You’re probably familiar with click-through rates, but click-to-order rates are slightly different. This represents the number of visitors who decided to make a purchase after opening one of your emails, and it’s an essential metric for conversion rate optimization.
Revenue Per Recipient
This metric, also called revenue per customer, shows exactly how much money was spent by every person on your email list. Looking at this metric can help you determine if your current email list is of good quality or if you’re wasting your marketing dollars on customers who aren’t buying.
Unsubscribe Rate
It’s inevitable for some detractors to unsubscribe from your email list. However, maintaining a healthy unsubscribe rate helps prevent you from losing potentially lucrative customers. This is calculated by looking at how many people unsubscribe from each batch of emails you send, which can tell you what types of emails are causing the problem.
Marketing Channel Metric Targets
The final eCommerce analytics category in our hierarchy is the marketing channels or any platforms you use to advertise to your customers. Now, in your own flowchart, you’ll want to look at each channel on an individual basis, like Google, Facebook, and other popular eCommerce platforms. But for this blog, we’ll just break down the primary metrics for this category.
Revenue
First, it’s important to look at the revenue generated from each of your marketing channels. For example, suppose you’re spending the same amount of advertising dollars on Facebook and Tik Tok, but Facebook is consistently yielding more total sales. In that case, you can strategically decide to move more money to the most profitable platforms.
Ad Spend
This number represents the total amount of your ad spend directed at acquiring customers. You can easily calculate this for each individual marketing channel as well as the total ad spend for all of your marketing efforts.
ROAS
ROAS, or return on ad spend, shows how great of a return you’re receiving for all of your ad campaigns. On platforms like Facebook, ROAS can also be used as a benchmark that dictates how the automated system can spend your money. For instance, if you set a target ROAS for all of your campaigns, Facebook will only spend money on the ads that meet those targets.
AOV
Average order volume (AOV) shows the average amount of products purchased by customers coming from any given platform. It’s important to distinguish so that you can see if customers from Google are buying more than customers from Facebook and which parts of your ad strategy might contribute to that outcome.
CAC
As we’ve mentioned before, CAC refers to the amount of money you need to spend to acquire one new customer. Most of the time, CAC varies greatly from one advertising avenue to another. So, we suggest looking at the CAC for every platform you run ads on.
Thumbstop
Now, this is a key eCommerce metric that doesn’t get discussed nearly enough. That’s because it has less to do with your sales conversion rates and more to do with the way your ad creatives impact potential customers. A “thumbstop” refers to how often users pause to look at your ads while they’re scrolling through their feeds. Even if this doesn’t result in a sale, these types of ad interactions are crucial to determining how effective your creative strategy is.
Average Play Time
This metric refers specifically to ad creatives that use video, whether that be pop-up ads on YouTube or more authentic methods like user-generated content. It allows you to analyze how much of your ads the viewers are actually watching and at what point they decide to exit the video, allowing you to adjust your creatives accordingly.
Click-Through Rate
Finally, you need to look at the click-through rate of your ads. This metric is measured by dividing the total number of clicks your ad receives by the number of times it’s been shown. CTR is highly effective at determining how compelling your ad creative is and whether or not it’s achieving the desired result.
Other Major eCommerce Metrics
While these metrics might not fit into the categories in our flowchart, it’s still worth mentioning just in case you want to add them to your metric tracking process.
NPS (Net Promoter Score)
If you have a customer loyalty program, you’ll definitely want to add NPS to the metric flowchart. This eCommerce KPI was specifically created to measure overall user experience. It’s calculated using surveys that allow customers to rank certain aspects of your online store. You can solicit these surveys using your email list or as a pop-up option for the customer’s shopping cart.
Bounce Rate
When it comes to evaluating your website performance, knowing your bounce rate is extremely helpful. This metric shows you how many people leave your website without taking a single action. If you have a high bounce rate, you might want to look into changing your web design to create a better customer experience.
How To Track Your eCommerce Metrics
Once you have all of your eCommerce KPIs in place, you might be wondering what to do with all of this information. The beauty of using a flowchart is that it allows you to seamlessly follow the numbers until you discover your issue’s root cause. We do this by asking questions at every stage in our hierarchy, ultimately leading us to the metric that needs to be addressed.
Here’s what that looks like in practice:
“Where am I missing my revenue targets?”
As always, we start by looking at the North Star or the profitability goals. While you move through this part of the hierarchy, you can start to assess whether your revenue struggles are coming from new customers or repeat customers.
“Which traffic source is struggling the most?”
Let’s say your metrics show that new customer revenue is where your brand is struggling. That leads you to the step in the hierarchy, which is where your traffic is coming from. If your paid traffic sources fail to yield results, that gives you a good idea of where to make changes.
“Is that traffic coming from a specific marketing channel?”
More specifically, if you find that your paid traffic sources are the issue, you can dig even further by looking at which marketing channels are the weakest link. This allows you to move money away from less effective platforms and into the ones yielding better results.
“Which of these metrics needs the most work?”
Finally, you can start to break these issues down by specific metrics. For instance, if your Facebook paid traffic is struggling, you can look at your flowchart to ask yourself a series of platform-centric questions. Is the CAC too high? Is my ROAS target off? All of these metrics can have a huge impact on the overall outcome of your marketing efforts.
Final Thoughts
Tracking eCommerce metrics doesn’t have to be complicated and shouldn’t leave you going around in circles trying to figure out where the problems lie. With our flowchart approach, you can start making better strategic decisions for your brand and maximizing your profitability faster than ever. For more insight on how to use this process to your advantage, connect with our team today.