Chapter 4: What are the vital metrics for ecommerce success?

High conversion and low bounce rates.

In ecommerce, conversion rate is the percentage of website visitors who actually make a purchase and become customers. Naturally, the goal of any ecommerce business is to have a high conversion rate. Average conversion rates vary by industry and by channel (email, search, social), but in general seem to hover somewhere around 3%.


Bounce rate refers to the percentage of website visitors who visit a page briefly and then, well, bounce. The success of practically any ecommerce website depends upon visitors engaging with page content, browsing different products, and completing a purchase. As such, a high bounce rate is pretty bad news.


To improve conversion rates and reduce bounce rates, businesses must invest in an engaging, high-quality ecommerce website that provides personalized value to visitors from the moment they arrive on the landing page. 

Customer acquisition cost.

Without customers, there’s no commerce — online or offline. Customer acquisition cost is the amount of money it takes to create a conversion. It’s fairly easy to calculate — simply divide the total marketing expenses for a period by the number of customers acquired during that same period. It’s a vitally important metric for ecommerce businesses to understand the real value being generated by their marketing efforts. Of course, most businesses will want to keep customer acquisition cost fairly low.
Acquiring new customers is costly, and it’s very important for most ecommerce businesses to have a reliable stream of repeat business. Calculating customer retention rate — the number of customers a brand has retained during a period of time — is fairly simple. Just subtract new customers acquired during a period from the number of customers at end of a period, then divide that number by the number of customers at the start of the period. A high retention rate is highly desirable for just about every business out there.
In the end, we all are just numbers — at least in the eyes of ecommerce marketing analytics. Customer lifetime value is a figure that predicts how much total revenue a given customer can be expected to generate for a business. It’s a little bit complicated to calculate — first, customer value is determined by subtracting average order frequency rate from average order value. Then, customer value is multiplied by average customer lifespan. The resulting number is customer lifetime value, which businesses should aim to make as high as possible.

Average order value.

Average order value gives businesses a quick sense of the amount a given customer typically spends. It’s very easy to calculate — revenue generated from a customer divided by their number of orders. Knowing average order values allows businesses to more accurately market to customers with the most value potential.

Add-to-cart rate

Purchase metrics aren’t the only ecommerce figures that can give businesses insights about visitors’ shopping habits. For many shoppers, adding an item to a digital shopping cart is no guarantee that they’ll actually buy it. Add-to-cart rate simply tracks the percentage of visitors who add something to their shopping carts, not whether that product was purchased. Calculating add-to-cart rate is simple — total site visitors divided by total shoppers who added to cart. A similar metric is add-to-cart conversion rate — which is total converted customers divided by total shoppers who added to cart. These metrics can help businesses learn more about ecommerce customer journeys and identify potential hiccups in the checkout process.

Cart abandonment rate.

Often, for whatever reason, shoppers just don’t follow through. We’ve all been that shopper; it happens. Cart abandonment rate shows how many potential customers either forgot about, or intentionally left behind their shopping carts. Calculating it is a breeze — it’s the total number of completed purchases divided by the number of carts opened and added to. Knowing cart abandonment rates can help businesses understand ecommerce usability issues and work to develop more streamlined solutions for customers.



Getting Started with Ecommerce


Chapter 4

What are the vital metrics for ecommerce success?