Commerce

7 Ecommerce Metrics that Accurately Measure Business Performance

Alexandre Dubugras

LatAm Business Expert
November 1 2016

Ecommerce success can be accurately measured using seven metrics: Conversion Rate, Shopping Cart Abandonment Rate, Cost of Acquiring Customer, Repeat Customer Rate, Average Order Value, Customer Lifetime Value, and Payment Approval Rate. Learn what these metrics measure and simple strategies on how to improve them.

Conversion Rate (CR)

A high conversion rate should be a major focus for any ecommerce business, because a high conversion rate means that a large portion of people visiting your site are finalizing a purchase. Many factors can lower your conversion rate, but arguably the most frustrating factor of a low CR is Shopping Cart Abandonment.

Shopping Cart Abandonment Rate (SCAR)

Shopping cart abandonment is when a customer adds items from your ecommerce site to their online shopping cart but never finalizes the purchase. Conversion rates lowered by shopping cart abandonment are likely to be caused by a poor checkout experience or an inability to process the customer's payment method.

Cost of Acquiring Customer (CAC)

Cost of acquiring customer measures the total cost of driving a customer to convert throughout the acquisition funnel, anything from promoting clicks or impressions on Facebook to purchasing ad space on Google. If this measurement is anywhere close to your CLTV, you should rethink your marketing strategy to lower costs and increase effectivity by targeting the right audience.

Repeat Customer Rate (RCR)  

Repeat customer rate is the percentage of customers that return to your site to make another purchase. A higher RCR means you have more loyal customers that will help promote your good or service and ultimately bring in more consistent revenue. If the RCR is too low, this could be a sign that people are dissatisfied with the final product and are unwilling to return.

Average Order Value (AOV)

Average order value is the average price of an order on your website per customer. This metric helps you keep track of incoming revenue from current traffic and conversion rates. You can raise the AOV by increasing the average ticket price of your product; however, you should consider how much customers are willing to pay for your product.

Customer Lifetime Value (CLTV)

Customer lifetime value measures the value of an average customer throughout their entire relationship with your company. Conceptually, CLTV incorporates the metrics of Average Order Value, Cost of Acquiring Customer, and Repeat Customer Rate. The AOV directly affects the purchase value of the customer, the CAC affects the total revenue you attain from the customer, and the RCR affects the timespan that the customer remains loyal to your business. When calculating CLTV you must consider your AOV, CAC, and RCR performance.

Payment Approval Rate (PAR)

Payment approval rate is important because it measures the health of the business payment engine. Generally approval rate is low (about 10-30%) for cross-border ecommerce merchants that sell to Latin America because they are unable to process local card payments. With local payment methods and local/multiple acquiring, the approval rate trends to increase by up to 80-90%.

What are some simple strategies to improve your ecommerce performance?

Improve CLTV & RCR: Focus on Retaining Customers

According to the White House Office of Consumer Affairs, it costs 6-7 times more to attract a new customer than to keep an existing customer that has already purchased from you before. Placing more focus on delighting returning customers can help your business retain a steady revenue without having to spend extra money on acquisition strategies.

Lower CAC: Target Potential Customers Accurately

Acquisition of a customer can be costly, especially when considering the many strategies used across social media and search engine platforms such as Facebook and Google. Lower these costs by targeting your audience accurately. Know what platforms your potential customers use more often, what topics they search for on the internet, and how to commucate to them best.

Lower SCAR & Increase PAR: Optimize Payment Methods and Checkout Experience

Shopping cart abandonment usually occurs because the potential customer is dissatisfied with their experience toward the bottom of the funnel. Make sure your checkout process is smooth, easy, and secure. A great example is the one-click checkout feature offered by Amazon. Other major cause of a high cart abandonment rate is a lack of payment options; consider offering local payment methods to accept more payment types and increase conversion rates.

Increase CR & CLTV: Improve User Experience

Work on continuously improving your user experience, by doing so potential customers will be attracted to your website, stay on your webpage longer, and will be more likely to convert. A positive user experience coupled with a positive product experience, will achieve higher CR & CLTV values.

Many ecommerce leaders use EBANX payment solutions to improve their checkout experience, expand their cross-border sales in the fastest growing markets, and increase conversion rates. EBANX can improve your business performance with alternative payment methods.

Optimize your Ecommerce Performance