You switch on your computer and realize that you have several new followers on Facebook. You smile.
However, when you check whether you have new orders or not… nothing. You are not worried about it because every day you get more and more followers. The sales will come.
An e-commerce is an online business whose main goal is to generate profits. That is crystal clear. Then, why are you checking metrics that have nothing to do with what you earn?
You are looking at the so-called “vanity metrics”. They are interesting, but not relevant – statistics that are nothing by themselves.
That is why in today’s post, we provide a guide about which e-commerce metrics you should check — no matter what. This is the information that will tell you if you are on the right path.
The main idea regarding web analytics for e-commerce
There is a fundamental idea that you need to understand before starting to check your website’s data:
Data alone, no matter how complete or varied it is, is useless. The key is to know how to extract real information out of it.
Here you have one example: imagine that you notice that the average bounce rate for the different browsers is 60%. However, one of them, let’s say Firefox, has a 91%. The figure by itself means nothing, but it hides a very important detail: it is possible that there is a design and usability problem with Firefox that is making visitors bounce.
Our web analytics’ job is to look at what’s hiding behind that information to notice problems to be solved or positive aspects to be improved upon.
Once you have understood all this, we can move on to the types of metrics that we should track and avoid.
Useful metrics vs. Vanity metrics
You can’t have too much of a good thing; it is normal to get excited when you see likes on Facebook or Twitter retweets.
The problem is when we focus the whole analysis on those metrics that mean nothing more than a pat on the back, a thankful glance to the audience.
This type of metric is known as a vanity metric in the e-commerce field. These are some examples:
- Number of followers of Twitter.
- Facebook likes.
- Number of visits to your website.
- Number of clicks on your products’ cards.
These metrics look awesome on paper, but don’t add any value to the analysis. What’s the point of knowing the number of visits to the shop, if we don’t know where they are coming from or the percentage that end up buying?
On the other hand, there are important metrics that actually interest us. The so-called actionable metrics:
- They help us make decisions.
- They have a clear cause-effect relationship.
- We have influence over the cause.
- They are relevant for our business.
We already know that the “vanity metrics” are dangerous and that what we really want to analyze is the information that gives us real value. Let’s find out then, what those metrics are.
Web analytics and actionable metrics for e-commerce
In order to be able to see everything that we are going to explain, you need to have Google Analytics (if you don’t know what that is, here you have a guide about it).
A. Basic metrics
Every online shop that sells products should monitor and analyze, at least, the following data:
1 . Conversion rate
The main metric for e-commerce is the percentage of visits that end up buying.
As we have seen, vanity metrics on their own don’t add any value, but when crossed with another, they do (in this case, visits/sales).
In Spain, the average conversion rate is about 1%, depending on the field. That is to say, one out of a hundred visitors ends up making a purchase.
We often spend too much effort on increasing traffic when the actual key factor is optimizing the conversion rate.
2 . Average checkout price
How much money does a person spend on average from your e-commerce?
This is a piece of data that not many people take into account, but it is crucial. For example, we need it to measure the return of marketing actions.
By crossing the average checkout price with the conversion rate and the cost of every campaign we can optimize the cost on advertising.
But, when this metric really becomes the star is when combined with the following one: the CAC.
3 . Customer Acquisition Cost (CAC)
This is what we pay, on average, to get a new client.
It is obtained by adding all the SEO, SEM, content marketing, and advertisement expenses and then dividing the figure by the number of new clients obtained through those strategies.
Acquisition expenses/New clients = CAC
Notice that all these metrics are even more valuable when combined. If we know both the average checkout price and the CAC of every traffic source, we can optimize the attraction expenses.
Let’s see an example so you can understand it better:
Imagine that the CAC for every new client that comes from Facebook Ads is €15 and the average checkout price is €20. It will depend on your profit margin and taxes but it seems like this is not the best traffic source since the clients are costing you more money than what they spend.
On the other hand, if the CAC for Google Adwords is €5 and the average checkout price is €20… it seems pretty obvious that you should invest more in Adwords than in Facebook Ads.
We want every cent we invest to generate as much as possible!
4. Cart abandonment rate
A buying process that takes too long or has hidden costs normally turns into an abandoned cart or, in other words, in a non-completed sale.
Even though the checkout is becoming easier and easier, there will always be someone who will not complete the purchase. We can’t avoid it, but we should know the percentage.
An abandoned cart rate that is too high may mean that the buying process is too difficult or that there are distracting elements in the way.
In addition to detecting this kind of problem, it allows us to implement remarketing actions. This is about sending or showing the clients a new offer to incentivize them to complete the purchase.
It is sometimes more profitable to invest in remarketing than in getting new clients.
B. Metrics depending on the e-commerce maturity
Although all the metrics that we have seen are very important, you will have to value some of them more than others depending on your e-commerce’s stage.
1. Young e-commerce
A newborn shop is unknown.
There are no sales without traffic, therefore it is time to grow and gain visibility. Growing strategies will mean social networks, content marketing, and so on.
Therefore, these are the metrics that you should take into account:
- Number of visits: we are looking for constant growth.
- Subscribers: if we offer that option. Remember the advantages of sending a newsletter in an e-commerce.
- Shared content: here you have ideas for Facebook and Instagram.
- Opinions and evaluations: social proof for e-commerce is especially important when you are still unknown.
Don’t forget that most of them are vanity metrics. We have to work on them at the beginning, but we shouldn’t forget the actionable ones.
2. Intermediate maturity
Once we have generated some good traffic, we have some sales, and we are tracking and analyzing the basic metrics, it’s time to add some new ones that will allow us to grow faster:
- Navigation flow: are the visitors landing on the Home page or in the categories? What’s the path followed up until the sale completion? Would an exit pop-up be useful?
- Duration of the session: how long do users stay in your shop? Which are the most read pages?
- New traffic vs. Recurrent traffic: it is important to know if the sales are coming from new visitors or users who had already visited the shop.
- Bounce percentage: what is going on to make users leave so fast?
As always, by using Analytics we will monitor all these metrics with the different traffic sources, devices, or even browsers. This way we will be able to get all the information hidden behind the data.
3. Consolidated e-commerce
Once our shop is already up and running and the sales funnel is working, we should focus on optimization. These are the metrics for this stage:
- Client satisfaction: through surveys or a follow-up after the sales (read this post).
- Lifetime value: it is used to calculate the total value of a client over time.
- Return on investment time: it allows us to know how long it takes to recuperate the money invested on a new client (CAC).
Google Analytics lets you analyze and combine hundreds of metrics, but don’t forget that you should first define which ones are relevant for your business. If you don’t, you will be wasting your time.
Last, but not least, we are going to take another step forward when analyzing an e-commerce by analyzing cohorts. A cohort is a group of clients that have some characteristic in common. For example, those who bought the same day, during a sale, on Black Friday,…
The cohort analysis is about carrying out a follow-up of that group of clients during a period of time:
- What did they do during the following months?
- Did they buy again?
Although this is just in the Beta phase, Analytics allows you to analyze cohorts by date of acquisition.
It is really useful to evaluate the offer you gave them.
Imagine that you offered a 40% discount on Black Friday, selling almost without a profit. The cohort analysis will let you know if the sales on that day brought new sales during the following year.
If the income obtained through those new clients is bigger than what you lost that Black Friday, it was worth it.
Conclusions on web analytics of an e-commerce
Having an online business and not measuring it is like going through the desert without a compass. You have no goal, no guide.
In order to know if your strategy is a good one, you should measure the results so you can make up for the possible mistakes.
If you don’t do that, you are spending money without knowing if you are making any.