Key eCommerce Metrics ... and Airplanes?
You’ve seen the inside of an airplane cockpit: it’s covered wall to wall and floor to ceiling with dials and instruments. Ever wondered how pilots keep track of it all? They don’t. At least not constantly. They use six key instruments—the six-pack—to monitor what’s most essential in real-time, including speed, altitude, climb/descent, etc. When something looks off, that’s when they turn to the other instruments for additional information.
That’s how we recommend you monitor your eCommerce business: track key eCommerce metrics that are equivalent to a pilot’s six-pack. Why do we recommend the six-pack approach? As you know, there’s no shortage of data—you have it coming out of your ears. There also are myriad ways of slicing and dicing your data. It can get complicated. But it doesn’t have to.
A simple, clear way to start using your data to monitor your business performance, drive better business decisions, and empower your team is with a handful of KPIs. Monitoring these six eCommerce metrics daily will help you keep a finger on the pulse of your business and your customers’ behaviors. They will tell you immediately if something’s not right.
Flight Indicators: The eCommerce Metrics Six-Pack
Here’s how we recommend you use your six-pack. Spend 15 minutes each day to copy and paste numbers from your marketing platforms and your eCommerce site into a spreadsheet and run some calculations. As you grow, you can invest in an eCommerce performance analytics platform to do the calculations for you (like Daasity’s Daily Flash Dashboard).
However you crunch your numbers, the key metrics to track that we recommend for the six-pack include:
- Average order value (AOV)
- Return on ad spend (ROAS)
You need a certain amount of traffic to your eCommerce store to hit your numbers, so this is an important metric to monitor. However, it’s important to note here that while traffic might look great, if your conversion rate is low (i.e., consumers aren’t buying), it probably means you’re not getting the right audience coming to your site. Time to review your customer acquisition strategy! Traffic is a primary lever you can impact via marketing and advertising.
Conversion Rate (CVR)
The number of visitors to your site who purchase can be affected by many factors, including your site’s user experience, the products you’re featuring and your marketing efforts and promotions. Conversion rate is a primary lever that you can impact. Your conversion rate is calculated by dividing the number of conversions (aka purchases) by the total number of visitors to your site and multiplying by 100.
To improve your conversion rate, run a conversion funnel analysis to identify where optimization opportunities may exist in your conversion funnel. The conversion funnel includes the following steps: 1) customers entering your site, 2) going to product pages, 3) adding product(s) to their carts, 4) reaching checkout, 5) making purchases.
Orders are a function of traffic and conversions (traffic x conversion rate = orders). Therefore, to increase orders, you need to increase traffic and/or conversions. A common mistake is to focus on orders as a primary lever and decide, for example, to try and increase orders by 10% next month. You don’t control orders; instead, focus on traffic and conversions.
This metric is straightforward; pull your daily gross sales from Shopify daily. You’ll want to monitor sales to make sure your daily, weekly, and monthly sales numbers are on track to hit your goals. If you notice sales are down on a typically high-performing day, investigate further. For example, you could discover you ran out of inventory in a top-selling product. Your six-pack provides the nearly-real-time red flag indicating that you need to fix the issue quickly, versus potentially letting it linger for days.
Average Order Value (AOV)
Your average order value (AOV) is the average amount a customer spends per order and is directly impacted by what products you’re selling on your website. Calculate it by dividing your total revenue by total number of orders. There are many ways to increase AOV. For example, by offering complementary products that are compelling to purchase together (bundles), offering upsells ("Would you like a 10-pack instead of a 5-pack"?), or nudging customers to get free shipping or a gift with purchase by adding one more product to their cart.
Return on Ad Spend (ROAS)
Your return on ad spend (ROAS) is the number of dollars you make for every dollar spent on marketing. Calculate ROAS by dividing the sales (associated to your marketing campaigns) by your marketing budget. It’s a great high-level indicator of how effective your marketing is and what return to expect from your investment. There are many factors that can impact your ads and site that determine your ROAS. Keep an eye on this metric to get ahead of any potential issues or opportunities with your ads.
Takeoff: Making the Six-Pack eCommerce Metrics Actionable
Now that you’re regularly monitoring your KPI six-pack, you’re in tune with what to expect on a typical day. That’s great. But what can you do with the eCommerce metrics now that you're tracking them? You can use them to take action—make adjustments and track progress towards achieving your business goals.
Seize New Opportunities
Monitoring the six-pack not only helps you flag problems, it can help you identify opportunities to increase revenue. For example, if you notice that one metric, such as AOV, is outperforming expectations, you could try throwing more fuel on the fire: you can add new product bundles, upsells, or a different free shipping promotion.
Tracking your numbers closely prompts you to ask, “Why are we seeing such a huge spike in X?” and dig deeper to identify and possibly replicate or build on whatever is causing the change in performance.
Plot a Different Course
Don’t get caught off guard with missed goals at the end of a month or quarter. If you stick to a daily review of the six-pack, you’ll have a longer runway to identify and fix issues so you can keep your numbers on track. For instance, knowing that your sales are going to be lower than expected in the first half of the month indicates you’d better change tactics before the month is out to get as close to your goals as possible.
As you get used to tracking your metrics on a daily or weekly basis and seeing the results of different promotions, over time, you will begin to recognize patterns. Then, as you test new promotions, you will be able to estimate how you expect a new initiative will perform, based on similar results you observed from the performance of a previous promotion.
Prepare for Turbulence
When everything’s going to plan and you’re on track to hit your sales goals for the year, you’re flying high. No one’s asking about the details. Unfortunately, that’s not reality—there’s always unexpected turbulence somewhere.
When that happens, be prepared to troubleshoot using your eCommerce metrics and determine how to get back up to altitude fast.
Monitoring your daily six-pack eCommerce metrics gives you powerful tools to rapidly figure out the problem and then know what levers you have under your control—from advertising to drive more targeted site traffic, to promotions to increase AOV—to keep your business airborne.