10 Critical Metrics

for the e- commerce marketer

kissmetrics.com
“Always trust your gauges.” Aviation pilots in training have these words of wisdom hammered into them.
Pilots also use visual reference, but only as a supplement to what their gauges indicate, and when visu-
als become independable, external tools become that much more important.

Metrics are the business equivalent, used instead by managers as success gauges for every aspect
of their company. There are financial metrics like revenue, income, EBITDA, and other metrics special-
ized to each industry. There are metrics that tell about the company culture. Attrition and employee
turnover can estimate employee satisfaction while data from organizational surveys can provide insight
into company culture. And of course there are plenty of qualitative data that managers use to evaluate
employee performance.

Each industry has its own metrics—for example, Software as a Service companies track things like
monthly recurring revenue, churn, free trial signups, and activation rates, while a developer for a mobile
app may track metrics like installs, time in app, and time between app opens.

eCommerce companies, however, have a much different set of metrics to live and die by. But what are
they? What are the gauges they live and die on? We’ll be covering what we feel are the most important
metrics for eCommerce companies.

Each metric will have each three sections. We’ll start with the basic definition, then we’ll move on to
providing a background with our how it works section. After that we’ll get into why it matters and why
you should be tracking it. Read on to learn more about the eCommerce metrics you should be tracking.

Average Order Value

Definition: The average dollar amount of each order placed. So if you had
3 orders combined that totaled $75, your average order size would be $25.

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Introduction
This is one of the most important eCommerce metrics because it is directly tied to revenue. The higher
you can encourage the average order value to be, the more revenue your store will get. It’s that simple.

How it Works
The formula for average order value:

(Total order amount) / (number of orders)

Let’s say we have had 350 orders that taken together were worth $8260. We divide 8260 by 350 and
find our average order value is $23.60.

A few simple ideas for increasing order size:

1. Recommendation-based Suggested Selling—Many eCommerce stores have a pop-up message or

suggest additional products in the footer with, “if you like this you may also like this” or “customers
who bought this item also purchase this.” If you go to the Kindle Fire TV page and press “Add to
Cart,” Amazon suggests items that go well with the Fire TV box:

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Amazon shows you a list of products similar to the ones already in your cart:

10 Critical Metrics for the eCommerce Marketer — KISSmetrics 4

2. Bundles—Giving customers the option to purchase two items together at a cheaper price than each
item individually. For example, buying jeans and a belt sold separately may cost $50, but if they
bundle the two items together,the seller may choose to offer them for only $40 to encourage the
extra sale.

The benefit of this for eCommerce stores is that they can coax a customer into purchasing two items
where he or she otherwise may have purchased only one, thus promoting a greater sale.

3. Free shipping on orders over $x—People respond to incentives, and free shipping is a great re-
ward. Some stores even offer gifts for orders over a certain amount. Bodybuilding.com offers a free
gift if you spend more than $75. They place this little box on in their shopping cart page:

10 Critical Metrics for the eCommerce Marketer — KISSmetrics 5

It’s smart of them to tell you the exact amount you need to spend to qualify for the free gift. By listing
the amount, customers think to themselves “I could just buy xx which will put me over the threshold.”

Why it Matters
You’ll substantially increase your revenue if you can manage to increase your average order value and
grow your customer base. Make an irresistible promise and watch your sales grow!

Conversion Rate

Definition: The percentage of visitors you convert to some action or event.

Frequently websites measure how many visitors convert to buyers. If you had
100 customers and 3 bought something, you have a 3% conversion rate.

Introduction
The conversion rate tells you how effective your website is at closing sales. According to Nielsen
Norman Group, the average conversion rate for eCommerce stores in 2013 was 3%. If you think about
what goals you want users to take in a store, you can then set up funnels and track how effective your
website is for converting people to these goals.

How it Works
To calculate conversion rate, simply divide the number of visitors who converted—or took the desired
action, in this case, who made a purchase -- by the total number of visitors. So in March if you had
150,000 visitors and 150 of them converted and bought something , your conversion rate would be .1%.

You can set up conversions for any end goal, not just sales. Some eCommerce stores may be interest-
ed in tracking how many visitors convert to signing up for a newsletter, searching for products, viewing
products, and adding a product to a cart.

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Why it Matters
Marketers judge how effective their sites are by how well they can convert a visitor into a buyer. A ton
of things go into converting visitors, especially for an eCommerce site. Things like product copy, prod-
uct images, site design, pricing, product sales, and site reputability all play a role. Pulling some of these
levers (such as pricing) can have a huge impact on conversion, while some others won’t move the
needle. Experiment and test what works for your store. Because really, the site is your only salesper-
son. Make it the best salesperson money can buy.

Abandonment Rate

Definition: The rate of customers that put an

item in their cart but don’t complete purchase.

Introduction
When it comes to sales, large retail stores have it pretty nice. They get a reliable flow of customers
coming through their doors every day, and nearly every one of them leaves with bags in their hands.

It’s a much different story in the online world. Visitors come, they may or may not put something in their
cart, and they may not ever return again. It’s a particular struggle for eCommerce companies to identify
why they have such a high abandonment rate and understand what to do about it.

cloud.IQ has discovered that most eCommerce sites will have a 75% abandonment rate. But don’t de-
spair - this is actually an opportunity to remarket to them - but first you need to identify them.

How it Works
To calculate abandonment rate, you simply divide the number of people who placed an item in their
cart but didn’t complete the checkout process by the total number of people who placed an item in a
cart. So if you had 5 people who did not complete the order out of 100 people who put an item in their
cart, you’d have a 5% abandonment rate.

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A lot of people place an item in their cart to “save” it for a future purchase. I do this with a lot of my
Amazon orders—instead of buying one item, I’ll wait until I have more things I need to order and only
then will make the bigger purchase. It allows me to pay for or even receive all my items at once and
avoid the need to make dozens of small purchases.

How long a visitor officially abandons a purchase is arbitrary. If a customer puts an item in a cart and
leaves, is this considered an abandon right away? Or is there a certain grace period that they get be-
fore it should be declared an abandon?

Abandonment rate can vary a lot if you get a good amount of customers who simply add things to their
cart but come back 15 days later and make the purchase. You may want to segment your abandonment
rate by time (1 week, 2 weeks, etc.) to have a more precise measure on who comes back later to finish
the order and who never returns. You may notice that visitors place items in their cart but come back 3
weeks later and complete the purchase.

You can reduce cart abandonment by including time sensitive offers (ie a deal that expires in 72 hours),
offer free shipping on all items, or show the customer what day they’ll receive the order if they order
today.

Why it Matters
If you see a high rate abandonment rate, the first step is to examine your shopping cart page. Are your
shipping costs to high? Do you not allow the visitor to perform an important action ahead of time, such
as calculating shipping costs? Is the checkout process confusing? Or not secured? Do you give the
visitor enough reassurances about how long you’ve been in business, how satisfied other customers
are, or what kinds of security guarantees you make? If you can reduce your abandonment rate, you will
almost inevitably increase your revenue.

The second step is to implement a shopping cart abandonment program—essentially remarketing to

these abandoners and providing a valuable customer service reminding them that they have items left
in their shopping cart. By implementing a program such as this, you can lift your total online revenues
by 5%.

10 Critical Metrics for the eCommerce Marketer — KISSmetrics 8

New Subscribers/Registrations

Definition: Number of new subscribers and registrations.

Introduction
This is a very important metric for a couple of reasons: firstly it indicates whether your business is in a
healthy place and growing, secondly, it’s commonly known that new registrations are more engaged
with your brands and products and therefore, we should be making the most of this opportunity and
treating these customers differently.

How it Works
When calculating the new subscribers also calculate how many unsubscribes from emails you have
had in the month. Deduct one from the other will give you the number of new subscribers. If you see
that you’re attracting a great number of new subscribers, but are losing just as many out the other side,
then you have a leaky bucket and your email program needs to be reviewed.

Set up an email Welcome Program that aims to not only welcome the new subscriber but also aims to
motivate them to make their first purchase. These Welcome Programs are known to generate signifi-
cant revenue when implemented correctly.

You can also use these emails to plant offers/content that will help you to determine what products/
categories the subscriber is most interested in. If you combine these welcome emails with the products
that the subscriber has been browsing on your website, you’re well on you way to persuading them to
make a purchase as well as building loyalty and long term engagement.

Why it Matters
Stagnant growth is not a success metric - in fact it is a warning that should be detected early on so you
can review your advertising and marketing and your subscriber journey - review the whole journey

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including the positioning of the CTA, the sign-up form and process and the follow up emails they are
sent. This process needs to be regularly audited - I recently signed up to an online retailer and selected
male, yet have only received female-oriented offers to-date.

Customer Loyalty

Definition: The amount of time between

each individual customer’s orders.

Introduction
This is a metric that ultimately gauges the business-customer relationship. If the relationship is strong,
a business will enjoy loyal customers who frequently purchase. If the business fails to form a strong
relationship with it’s customers, this metric will reflect that weak loyalty.

Customer loyalty can also vary by store type. Stores like Amazon likely have a lot of customers who
make a few purchases every month, while more specialty stores, such as an auto parts shop, are likely
to have a much longer time lag time, as customers buy only intermittently, when their car is broken or
needs maintenance.

How it Works/The Details

Your eCommerce store software should have this feature built in. You can also track it with KISSmetrics.

Consumable products need to be purchased more often, and thus have a shorter time between pur-
chase. The problem a lot of stores run into is that there are a lot of places that sell consumable goods.
To combat this, many (like Amazon) have set up automatic recurring orders. Customers can purchase
something (such as dog food with relatively predictable reorder needs) and have it automatically sent
to them on a recurring basis. In most cases the customer receives a small discount for signing up and
pledging their loyalty to the store.

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It can be much more difficult for stores that don’t sell consumable goods. Time between purchase is
longer, so these companies need to work to be top of mind for consumers. One-time customers won’t
sustain the business.

Here are a few ideas to improve customer loyalty:

1. If you offer durable goods (items that do not need to be purchased regularly, such as furniture, ap-
pliances, etc), try selling accessories that go along with it. If you sell baseball bats, try selling batting
gloves and doughnuts. These accessories can be both durable and consumable goods (products
that do need to be purchased regularly, like food, gasoline, medicine, etc).
2. Keep your company top-of-mind for your target market. You can do this by creating an amazing
customer experience. Try surprising them, like sending an order overnight or mailing free samples
when they weren’t expecting it. You can also keep in touch with them via an email newsletter and
offer engaging content or something of value.
3. Anticipate when they might need to reorder. If you sell a 90-day pack of vitamin supplements, email
them on the 90th day after they receive their order. The subject line can say something like, “Need
to reorder <enter product name>?” The body of the email can be very simple. A product image, a
“helpful reminder” that they may need to reorder. Your call-to-action can be the order button, with
another button on the email linking to the product page.

Why it Matters
To succeed, a company needs loyal customers. And loyal customers can become vocal evangelists for
the company. One loyal customer may bring dozens of others.

Promo Code Tracking

Definition: View how successful a campaign was by

seeing how many people inserted a promo code.

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Introduction
If you listen to radio advertisements, you’re bound to come across an advertisement that sounds some-
thing like this:

“Go to <this website>, hit the microphone icon in the top right corner and enter <random promo
code> to get 15% off your order.”

This is common with flower delivery services like ProFlowers or 1800 Flowers. These businesses place
an ad buy on radio shows and use promo codes to gauge how successful the advertisements were. If
they spend $10,000 on a month of advertising but using the promo code only see that they got $300 in
orders, they know that the advertisement wasn’t successful and will probably pull the plug.

Promo codes are a great way to track the effectiveness of an ad campaign. You can leave a box on the
checkout page asking the customer where they heard about you, but without an incentive, many will
just leave it blank and leave you in the dark. You won’t know where to invest your advertising dollars if
you don’t know where your customers are coming from.

And it’s not just the quantity of customers that come from an advertising campaign. Sure, a campaign
may bring 1000 customers, but what if those are all one-time customers that will never repurchase?
Compare that to an advertising campaign that brings 100 customers, but those are lifetime customers
that will be making recurring purchases. Doesn’t that make it a better campaign?

Using tools like KISSmetrics, you’ll know exactly which campaigns brought the most valuable custom-
ers. We don’t just tell you which ones brought you the most customers. Our reports tell you which ad
campaigns brought the customers with the highest lifetime value. Here’s an example of what you’ll see:

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Why it Matters
You can hand out all the promo codes you want, but if you aren’t tracking how it’s impacting your busi-
ness, you’re really left in the dark. Use promo codes for your store, but don’t leave out the most impor-
tant part, which is tracking how they impact your company.

Single Order Customer/Multiple Order Customer

Definition: Single order customer (“SOC”) are those that have placed only one order.
Multiple Order customers (“MOC”) are those that have placed more than one order.

Introduction
In your head, run through a list of successful eCommerce companies. What do they all have in com-
mon? Good prices? Sure. Good service? You bet. Fast delivery? Absolutely. These are all precursors to
what really matters—repeat customers.

Every successful store has customers who return again and again because they know they’re going
to get the price, the service, or the quality they like. As a business, you want to maximize the amount
MOCs you have.

How it Works
It’s pretty simple—you have one-time customers that make a single purchase but you never see them
again. And then you have customers who make a second purchase, or who come back time and time
again. Of course all customers are initially SOCs and eventually some of them convert to MOCs. You
can segment your SOCs and MOCs by product type. Do certain products you sell bring customers back
or keep them away?

Why it Matters
Every business needs MOCs. Airbnb wouldn’t be the success that it is if it only had guests who booked
one stay and never booked again. Pharmaceutical companies wouldn’t last very long if their custom-

10 Critical Metrics for the eCommerce Marketer — KISSmetrics 13

ers only bought one supply and never renewed their prescription. Apple wouldn’t be as large as it is if
people purchased their devices but never installed any paid apps.

The list can go on and on. Strive for long term multiple-order customers. It’s integral to building a sus-
tainable business.

Lapsed Customer

Definition: A customer who used to purchase but no longer does so.

Introduction
Here you’ll want to look at your MOCs who haven’t come back. It’s the eCommerce equivalent of a
churned customer.

How it Works
Find the list of customers who have made purchases but have since stopped. Any clear sign that they
stopped purchasing with you is fine. If they usually purchase every 45 days but 90 days go by without
an order, take note that they’re a lapsed customer.

Find out why they lapsed. Send them an email with a promo code for 10% off their next order. Do com-
petitive research to see if your prices for the products they purchased are still competitive with other
companies.

Look for trends among your lapsed customers. Do they show any behaviors before they lapse? Support
emails gone unanswered? Shipment delays? Products they usually order go out of stock? Research and
try to uncover some clues. Of course, customers are also fickle and sometimes they change who they
buy their products from. The only way to reduce the odds of this happening is to create a great cus-
tomer experience.

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Why it Matters
Customers are like parts to a machine, where the business is the machine, and a lapsed customer is a
broken part. Too many broken parts and the machine will eventually stutter until it totally breaks down.

Lifetime Value

Definition: The total amount of money a customer

spends with you during their lifetime.

Introduction
One of the great struggles in eCommerce is not just acquiring a customer, but ensuring customers
come back. One bad experience and you’ve just lost a customer, not to mention everyone they tell
about it. Ensuring customers come back is critical.

How it Works
Calculating lifetime value is difficult, and even more difficult for eCommerce companies. Here’s a good
formula you can use:

(Average order value) x (number of repeat sales) x (average retention time)

We have a great infographic that illustrates how a company like Starbucks can calculate lifetime value.

For an eCommerce, let’s say you have 25 customers. Each customer spends an average of $36.25,
and 16 of those customers have come back an average of four times during the year. We expect these
customers to stay around for 5 years. Here’s the math we use:

(36.25) x (4) x (5) = $725

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Our average lifetime value for a customer is $725. We can improve this metric by working to increase
the average order size, improve the number of repeat purchases, and by making our customers stay
longer than 5 years.

Why it Matters
Lifetime value can be very useful if it is paired with cost per acquisition metrics. A sustainable business
needs to have its cost per acquisition below its lifetime value. You should be earning more from cus-
tomers than the actual cost it required you to acquire them.

Cost Per Acquisition

Definition: The average amount of money required to acquire one customer.

Introduction
The old adage “you have to spend money to make money” rings most true in marketing than perhaps
any other business department. To get new customers, you need to spend money.

Cost per acquisition (or CPA) is a critical marketing metric. It can tell you which campaigns need to be
cut and which ones you should put some more money into, and can help you understand your profit-
ability.

How it Works
To find your cost per acquisition, you need to add all your marketing costs together and then divide
that figure by the number of new customers who came within that time period. So if you spend $3500
on marketing in the month of March 2015 and acquire 23 customers, your cost per acquisition would be
$152.17. It’s good to know this, but it’s only half the picture. In order to see if this campaign was success-
ful, we need to take the long view.

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So let’s say by March 2016 these customers have come back to your store to make multiple orders
worth a total amount of $5500. Great, it seems like they paid back the $3500 it took to acquire them.

Not so fast.

We’re missing out on one important thing--margins. Just because you earned $5500 from them doesn’t
mean it was all profit. To find our profit from the $5500, we multiply our gross margin percentage by the
total order amount. So if we have a 60% gross margin, we would multiply that by the $5500 total order
amount. We find that our gross margin leaves us with $3300 of actual profit. We’re still $200 in the hole
after one year.

We can also drill our data down into a specific campaign. If you launch a $500 Facebook ad campaign
and get 3 customers, your cost per acquisition was about $166.66. Looking at specific campaigns is
often much more valuable as you can understand which campaigns needs to be axed and which cam-
paigns are bringing the most value to you.

Why it Matters
Marketing campaigns should not be judged by vanity metrics. Pageviews aren’t dollars. In the end,
does it really matter if a $500 Facebook campaign brought 1000 visitors but no orders?

To judge any campaign’s effectiveness, you need to understand the return on investment. It’s also good
to know what your general CPA is. Red flags should go up if you find yourself spending $500 to acquire
a customer, but each customer only buys $15 worth of goods during their entire customer lifetime.

Again, to build a sustainable eCommerce business, your marketing campaigns need to be effective at
bringing long-term, multiple-order customers. One off small purchase customers won’t cut it. The life-
time value of customers has to exceed to cost per acquisition.

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Other Insight-Rich Data

Search Queries

Definition: The keywords a visitor has searched for on your

website. Applicable only if you have a search function.

We’ll need to mention that it’s important to look at the most common queries. It’s also kind of hard
to call this a “metric.” Also note that this should be for more than just product searches. If people are
frequently searching for keywords related to returning an item, you know you may want to make it a
little clearer. You can also check search results for those keywords to ensure they bring visitors to the
correct pages.

Google AdWords
If you have an AdWords account, you’ll want to be sure you set up tracking properly. If you don’t, your
paid traffic may show up as organic traffic in Google Analytics.

If you don’t have much experience with AdWords, it may be best to either find a good mentor or hire an
outside firm. The key is to get your tracking set up properly so you know which campaigns are render-
ing success.

A good place to pick up some helpful tips would be the KISSmetrics blog posts that cover AdWords.

Bounce Rates

Definition: The number of visitors who come to one page

of your site but who “drop off” and don’t visit another one.

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Bounce rates can be helpful in giving you an idea of how a web page is performing. If the layout is poor
or doesn’t give the user enough information, visitors will “bounce,” or leave the site altogether.

If your product pages have a high bounce rate, look into what could be causing it. Is the layout clunky?
Are your prices too high? Does your page lack product images or reviews, or is it just too cluttered?
Tools like Crazy Egg can help provide some insights as well.

About the Authors:

Zach Bulygo is a content writer for KISSmetrics.

You can follow him on Twitter.

Kath Pay lives and breathes marketing, she is not only a world renown
speaker and trainer but practices her art in the senior management team
and as the Marketing Director of e-commerce conversion experts—cloud.IQ.

10 Critical Metrics for the eCommerce Marketer — KISSmetrics 19

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