On Oct, 8 2019
We’ve said it before, and we’ll say it again: data is a gold mine. Business leaders who make e-commerce strategy decisions based on analytics do far better than those who leave it to guesswork.
You can use e-commerce intelligence to supercharge your up-selling efforts, develop your products, improve your customer experience and, ultimately, drive sales. But until you learn how to interpret data and turn it into actionable insights, it’s gold that hasn’t been pulled out of the ground yet.
To become a pro at data analytics you first need to understand which metrics you should be monitoring in Google Analytics or your online store platform. Then, you need to draw conclusions and start implementing solutions.
Here are the five key data points every e-commerce marketer should keep an eye on and how analyzing them can help you boost your sales.
1. Average order value (AOV)
Your average order value is a number that tells you how much your customers are spending per purchase. You can calculate it by simply dividing your revenue by the number of orders you processed.
Increasing your average order value month on month is crucial to growing your online store. It’s up to you to take action and incentivize your customers to spend more on your site. You can achieve an increase in AOV by cross-selling, up-selling, offering bundles and discounts, giving out coupon codes or gift cards, and offering free shipping for orders over a certain amount.
Amazon does a great job of increasing AOV by using a recommendation engine to share products that combine well - for example, books on a similar topic, or related sports equipment. This can encourage customers to add more to their basket before finalizing their order.
Screenshot Amazon.com: When browsing, Amazon suggests related products.
2. Customer Acquisition Cost (CAC)
Of course, we all want lots of customers, but sometimes they just cost too much to acquire. That’s where your CAC comes in.
The CAC is how much you paid for a customer to find your website and purchase a product. To gain valuable insight from this metric, calculate it by traffic source: divide the amount you spent on advertising on one specific marketing channel by the number of customers who made a purchase on your website coming from that channel.
Once you have an average number for each of your main channels, you’ll know which ones are the most lucrative and which ones are costing you money.
You can lower your overall CAC by prioritizing and investing in the channels that work best for you, finding sources of free traffic (social media, organic search and email campaigns) and optimizing your paid ads.
3. Conversion Rate (CR)
Your conversion rate (CR) is perhaps the most important data point in e-commerce data analytics. It is the number of users who make a purchase divided by the total number of users who visit your website or landing page. So, if 500 people visit your unicorn socks website and 3 of them make a purchase, you have a CR of 0.6%.
While this is an essential metric that can give you a good overview of your performance, you should look into your conversions in more detail.
In the case of an e-commerce website, the macro-conversion, which represents the primary objective of your website, will be when a customer completes a purchase by placing an order. This is when a sale is made - and it’s the ultimate goal of your e-commerce store.
Your sales funnel will also involve certain micro-conversions, which are important steps in the path towards the macro-conversion. These could be, for example, when a user clicks on a product, adds an item to their shopping cart or clicks through to checkout.
Tracking these metrics will allow you to identify where customers are dropping out, so you know which stage of the funnel you need to work on. For example, if you’re losing a lot of customers at the add-to-cart stage, you may want to look into why that is. A simple on-page audit, followed by some good old testing, can show you what’s putting users off. Is it the quality of the image, the positioning of the buttons, or the pricing that’s causing the problem?
4. Cart Abandonment Rates
If your goal is to win back lost customers, you should be looking at the cart abandonment rate (CAR). You can track it by creating a Google Analytics e-commerce funnel or logging in to Carts Guru, which will give you the percentage of users that are exiting your store without finalizing their purchase.
Once you identify these customers and what products they’ve left in their carts, you can send them retargeting emails or text messages prompting them to complete the purchase and recover as much as 20% percent of those sales.
If your cart abandonment rate is alarmingly high, you will have to do more than run retargeting campaigns. Look for the root cause of the problem. Why are your customers abandoning their carts? Are they having issues navigating your website? Maybe you need to improve your UX. Is shipping too slow or too expensive? Maybe you have to offer them better options. Analyze your cart abandonment rate together with other metrics - such as conversions - to try and find the right solutions.
5. Site searches
Does your website have a search bar where users can type in their queries? If it does, keep an eye on the data it generates. It’ll tell you exactly what your customers are searching for and whether they can find it on your website.
There are two important things that you can learn from site searches. If customers are often searching for a product that you don’t stock, you might want to consider adding it to your inventory. Shopify gives you a report on “top online searches with no result” - you can use this to address customer needs that you’re not meeting and find new ideas for in-demand products to sell.
Secondly, if you do have the product that users are searching for but they can’t find it in your store, you might want to consider changing the name and the description of the product to match customer queries. In other words, the data will help you speak the same language as your customers.
Now that you’ve mastered e-commerce data analytics, go out there are show the world what a data-savvy business looks like!
For more information on how to use data to drive sales, book a demo with us!