3 Essential Metrics for Generating Ecommerce Growth
How do you know whether you are making a profit or not with your online shop? How do you know which strategies to execute and which online marketing tactics you need to eliminate?
Learn the three essential metrics to watch for to generate e-commerce growth for your business:
- Cost per Acquisition
Cost per Acquisition (CPA) measures the rate you are willing to spend for a new order or customer. It is usually the amount you pay for an order referral from a third-party website or channels, like paid ads and affiliate marketing.
You don’t want to ignore CPA because it is an important metric to determine your real ROI.
What to Do
You can decrease your customer acquisition costs by applying conversion optimization strategies (CRO). Work on the CRO of your paid ads by testing new message copies, calls-to-action, and landing page designs to determine your ad effectiveness. You can also employ CRO techniques in your email marketing campaigns.
Analyse which channels and campaigns are successful and which are not generating positive results. Identify poor performing promotions that can be fixed and the ones that needs to be stopped. Be wise by investing a huge portion of your budget to campaigns that are tested and proven to produce huge sales and profits.
Another way to generate free advertising is by tapping into your loyal customers. Turn your trusted clients into your brand ambassadors. Invite them to special events and reward their efforts with exclusive offers and promotions.
- Average Order Value
Average Order Value (AOV) is the average amount your customers pay when they place an order on your website. It is calculated by the total value of all orders divided by the order quantities.
AOV is an essential metric to generate e-commerce growth for your business because an increase in AOV signifies an increase in profit per customer.
What to Do
Analyse your customers’ buying habits and look for opportunities to cross-sell and upsell. Create easy or flexible payment options to engage your customers to make additional purchases.
- Customer Lifetime Value
Customer Lifetime Value (LTV) is the estimated revenue that a customer will produce in their lifetime of purchasing products and services from your company. It is computed by projecting the profit (revenue minus marginal cost) you expect to get from a customer over the duration of your entire relationship. Finally, get the net present value of those projected cash flows.
Just like CPA, this is a significant e-commerce metric because it helps you learn how much each customer is worth to your business. LTV data gives you insights on where and how much to invest to raise your profits. It’s important to know that your customer acquisition spend does not surpass your CLTV, as this would be considered a profit loss.
What to Do
Find ways to increase your Average Order Value (AOV). Implement cross-selling and upselling strategies to encourage your customers to buy extra items. Offer discounts or free shipping service for customers with large purchases. Create exclusive promotions for your loyal customers to ensure repeat business.