Data Analytics

Ecommerce Analytics: From Data to Decisions

Customer expectations are high. They want the best, and rightly so - there are plenty of options out there, which makes it easy for them to go elsewhere if their needs aren’t met. So, as a merchant, you need to give shoppers the best online experience to attract them in the first place and keep them sticking around. 

Here’s the problem: how do you know what customers want or what a good experience even looks like for them? The key is to use data to paint a picture of the customer journey and use that to drive any decisions you make moving forward. 

Understanding the ecommerce analytics you have at your fingertips is crucial to discovering trends and any changes in shopping behavior. 

Here’s how you can make better decisions with data. 

The key ecommerce analytics that lead to data-driven decisions

Average order value 

What it is: Average order value is the average amount customers spend when they place an order with you. 

How to measure AOV: Divide the total revenue over a specific timeframe by the number of orders placed in that same timeframe.

Total revenue / number of orders = AOV

For example, if you made $50,000 in revenue over a month which was made up of 750 orders, your AOV would be $66. 

How AOV drives decisions: The goal is always to increase AOV, since the more people spend on one purchase, the higher your revenue will be. A low AOV means you can start experimenting with different tactics, like upselling and cross-selling products at the point of sale. 

This brand offers a product upgrade right before checkout. 

Profit / gross profit margin

What it is: Gross profit margin shows you how much money you have left from sales after subtracting the cost of goods sold (COGS). 

How to measure gross profit margin: Takeaway the COGS from your net sales during a certain timeframe and divide the total by your net sales. 

(net sales - COGS) / net sales * 100 = gross profit margin 

For example, if you made $20,000 in net sales and the COGS came to $7,500, your gross profit margin would be 62.5%. 

How gross profit margin drives decisions: If you have a low gross profit margin, chances are you need to up your prices which can be hard when you haven’t yet cemented your position in the market. However, knowing this means you can work on brand awareness by:

  • Increasing perceived product quality
  • Marketing to existing customers who already know and love you
  • Offering loyalty rewards and referral perks
  • Decreasing your inventory, manufacturing, and shipping costs 

Monthly churn rate

What it is: Monthly churn rate refers to the number of customers you lose over a month. 

How to measure monthly churn rate: Divide the number of customers you lost over a month (or the number of customers that didn’t come back) and multiply it by 100 to get a percentage. 

Customers lost / customers at the start of the month * 100 = monthly churn rate

For example, if you lost 50 customers out of 700 over the course of a month, your churn rate would be 7%.

How monthly churn rate drives decisions: By understanding what your churn rate means you can start to identify where the gaps are and why people are leaving. Then, you can apply strategies to lower it, like engaging post-purchase campaigns to re-attract buyers, well-timed and personalized product recommendations, and loyalty programs. 

Jimmy Joy has a comprehensive loyalty and referral program to keep customers coming back for more. 

Customer lifetime value 

What it is: Customer lifetime value is the total worth of a customer over their entire lifetime with you.

How to measure customer lifetime value: First, work out the value of a customer by multiplying the average purchase value by the average number of purchases a customer makes. Then, multiply the total by the average lifespan of a customer.

Customer value * average customer lifespan = customer lifetime value 

For example, if the average customer spends $50 three times a year for five years, your customer lifetime value would be $750.

How customer lifetime value drives decisions: Knowing your customer lifetime value can help you see how long customers stay with you and also help you identify what your best customers look like. Increasing CLTV can include using tactics like upsells, product recommendations, and engaging post-purchase campaigns to maintain customer interest and loyalty. 

Crate & Barrel send personalized product recommendations as part of their order confirmation emails. 

Customer returning rate

What it is: Customer returning rate is essentially how many customers come back and buy from you again over a certain timeframe. 

How to measure customer returning rate: Divide the number of returning customers by the total number of customers over your chosen timeframe and multiply it by 100 to get a percentage.

Returning customers / total number of customers * 100 = customer returning rate

For example, if you had 1,000 customers buy from you over a period of a month and 600 came back, your returning rate would be 60%.

How returning customer rate drives decisions: If you don’t get many customers coming back for more, you might need to put extra measures in place like retargeting campaigns to capture shoppers who have bought from you but may have forgotten about you. 

Madewell retargets past shoppers with ads of products they might like based on their previous browsing habits. 

Repurchase rate

What it is: Repurchase rate is the percentage of a cohort that places another order with you in a certain timeframe. 

How to measure repurchase rate: Divide the number of customers who made more than one purchase in a certain timeframe by the total number of customers in the same timeframe. 

Customers who made 2+ purchases / total number of customers * 100 = repurchase rate

For example, if 40 customers out of a total of 100 made more than one purchase with you in a month, your repurchase rate would be 40%. 

How repurchase rate drives decisions: Knowing your repurchase rate means you can identify the kind of customers that come back and buy from you again, as well as the marketing campaigns that resonate with them. 

To increase the percentage, you can set up retargeting campaigns and send well-timed product recommendations.

Kasemakers sends out regular product recommendation emails to past customers to lure them back. 

Days since the first order

What it is: Days since the first order does exactly as it says on the tin - measures how many days go by before a customer makes another purchase with you. 

How days since the first order can drive decisions: This metric determines the average amount of time until someone buys from you again, which can help you figure out the timeline of your email marketing campaigns and other marketing efforts. It means you can identify exactly when to send out order reminder emails or replenishment offers. 

How to make better data-driven decisions 

Data can open up a world of possibilities for your ecommerce store. Understanding your key metrics and using them to dig into your customers’ behavior, interests, and preferences means you can provide better experiences moving forward. 

For best results, do the following: 

  • Identify the metrics that mean the most to you: Your business goals will drive the metrics that are most important for your brand. For example, if you want to build brand loyalty, you should focus on metrics like repurchase rate, customer lifetime value, and customer returning rate
  • Track and monitor metrics regularly: Things can change quickly in the ecommerce world, so it’s important you stay on top of your data so you can spot any patterns as soon as they emerge
  • Identify trends and find solutions: Don’t just monitor your chosen metrics, dig into what they mean for your business. Could they be improved? Then come up with solutions that will increase (or lower) them 

Start making data-driven decisions by tapping into Peel’s powerful insights.