“What gets measured gets managed.” If you’ve been through an operations class or received an MBA, then you’ve likely heard this quote before. Why’s it important? First, because it’s true. But mainly because if you’re an ecommerce brand, it could be the key to creating a more profitable business—without spending more money on ads, hiring 10 more employees, or achieving 200% year-over-year growth.
Ecommerce analytics are how you can understand your business more deeply and make better decisions based on data, not the most recent hype cycle on DTC Twitter. In this article, we’ll discuss a few different key metrics, plus three ecommerce techniques, including: how to utilize analytics in ecommerce to make your conversion funnel more efficient, how you can get better information about your customers, and how to tie all this together in your marketing strategy.
Understanding Ecommerce Metrics and Their Implications
More data and insights are great, but if you don’t know what means what, they’re more likely to confuse than inform your business tactics. So first, let’s get the most important metrics in ecommerce straight.
Conversion Rate (CVR)
Conversion rate measures what percentage of website visitors actually buy something. Of course, the higher the conversion rate the better. Shopify will show you what your CVR is, but you can also measure it with this formula:
(# of Customers / # of Website Visitors) * 100
For example, if you have 1,000 website visitors one month and 25 of them make a purchase, your CVR will be 2.5% (25 / 1000 * 100). CVR is an indicator of how effective your website, or landing page, is and if you notice a low CVR, then you know you need to improve a part of the site.
Customer Acquisition Cost (CAC)
Customer acquisition cost is how much you need to spend to get a new customer. The lower the better… most of the time (lower quality customers will be cheaper to acquire, but they won’t stay around for long). CAC can be calculated by:
$ Spent on Campaign / # of New Customers
If you spend $1,000 on a marketing campaign and get 50 new customers as a result, your CAC would be $20. A higher CAC typically means that some part of your conversion funnel isn’t optimized and a lower CAC means that your marketing strategy is running efficiently.
Lifetime Value (LTV)
On a different side of the same coin is lifetime value (LTV). LTV is how much the average customer spends with you over their lifespan. Accurately knowing your LTV will influence just about every marketing decision you make—the higher your LTV, the more you can spend to acquire customers. There are many ways to determine LTV, but the simplest is:
Average $ Spent per Customer per Year * Average # of Years a Customer Purchases from You
Say you run a children’s supplement brand that has a subscription of $30 per month. Parents buy from you for five years on average, spending $360 per year. Your LTV is $1,800.
When you have product-market fit, your CAC should be low and your LTV should be high.
Average Order Value (AOV)
Finally, how much customers spend each time they shop with you is your average order value. It’s found for a certain period in time by taking:
$ in Revenue / # of Orders
So, if your brand does $1,000,000 in revenue each year and you had 4,000 orders, your AOV would be $250 (1,000,000 / 4,000).
Maximizing AOV is a balancing act. The more expensive your product is, the longer the consideration cycle and most likely, the fewer the conversions. There are instances where increasing prices will lead to more purchases—such as in luxury fashion where premium quality and brand is more important than price—so it’s up to you to find the right balance between higher AOVs and a workable CVR.
Why These Metrics Matter
While these numbers measure different things, they all narrow down to one thing: how good your business is. CVR tells you how well your site is persuading potential buyers, CAC indicates how effective your marketing is, LTV lets you know if your product is good, and AOV measures a bit of everything (offer, checkout flow, upsells, product, etc.).
Use Ecommerce Analytics To Optimize Conversion Funnels
When you understand what each metric tells you, then you know what to diagnose and improve first. This is where ecommerce analytics truly come into play.
While there are plenty of ecommerce analytics tools you can use, it’s best to start simple with in-platform reporting:
Shopify Analytics will tell you pretty much everything you need to know when it comes to sales data from your website. Use it to keep track of things like:
- Conversion rate
- Sales of time periods
- Sales by traffic source
- Best selling products
- And more
Meta Ads Manager reports on your Facebook and Instagram campaigns. Check metrics such as:
- Customer acquisition cost
- Click-through rate
- Demographics
- Impressions
- And more
Google Analytics is your all-in-one traffic tool. It gives insights into what channels people are coming to your website from and how they interact with it. You can also use it for:
- Tracking the customer journey
- Monitoring activity on your store
- Getting a view of what actions visitors are taking
- And predicting what they’ll do next
At a high level, these three tools can be used in tandem at various stages of conversion funnel tracking.
Maximize Your Conversion Rates Based On Your Analytics
Now that you have a few tools that are handy (and remember, there’s plenty more you could pay for), it’s time to go deeper:
Meta’s analytics will tell you how well your campaigns are performing so you can make tweaks to creative, copy, targeting, and more (top of funnel). Shopify Analytics lets you see how your site is performing when people actually land on it from your marketing campaigns (middle and bottom of the funnel). Google Analytics can provide valuable insights during each stage.
Here are the steps to take at each stage of your conversion funnel:
Step 1: Top of Funnel - Understand Your Customer
Before you can offer someone a solution, you need to know what their problem is. Effectively conducting customer and market research—truly knowing your target demographic—will pave the road for more seamless operations across every aspect of your brand.
And the best part is, you can do a lot of the upfront work without spending a dollar on ads, inventory, or fancy software. Speaking with people who match your customer persona, evaluating the competition and what benefits they offer, and reading current product reviews will all give you a head start before you put pen to paper and create a brand, product, and marketing strategy.
Once you’ve found the niche you’re going after, you’ll have a better idea of what things people actually care about. Now it’s time to find them.
Step 2: Middle of Funnel - Match Your Messaging
Between identifying customers and getting them to pull out their credit card in your checkout flow is the hard, important work. Creating awareness, generating demand, and invoking action happen with your paid social efforts. Thankfully, with the use of ecommerce data analytics tools like Meta Ads Manager you can measure how well these things are performing.
Once your ad campaigns are live, you can quickly gather data on what phrases, images, and graphics are good, and which ones need to go. A few key metrics can help you know what you need to tweak:
- Impressions: How many times your ad has been shown to users. It tells you if you’re targeting the right audience. some text
- Tip: Change your demographics to help Facebook show your ad to the right people.
- Click-through rate: How many people click on your ad. It shows if your creative and copy is engaging enough for people to want to learn more. some text
- Tip: A/B test different hooks, storylines, colors, formats, and more to encourage further engagement.
- And finally what we covered earlier, cost per conversion (or CAC): how much you need to spend to get a new customer. There’s no one, guaranteed variable you need to change to get a lower CAC, but if you’re reaching the right people and they’re clicking on your ad, then chances are that your improving landing page is what will move the needle.
The first step is to ensure that the content of your ads (featured product, touted benefits, its price and promotion) matches the content of your landing page. How confusing would it be to click on an ad for protein powder only to land on a website that tells the story of how beneficial creatine is to bodybuilders?
It must be a complete, succinct journey that connects the ad to a landing page that gives all the details on what’s included, how much it costs, and relevant shipping information.
The easiest way to make quality, profitable pages is with Replo landing page builder. With Replo, you can easily create ecommerce landing pages without spending unnecessary money on developers or expensive designers. Our no-code editor helps you take the feedback you get from your Shopify analytics dashboard and A/B test new variations to increase your conversion rate—and decrease your CAC.
Step 3: Bottom of Funnel - Boost Your Profits
Now that your marketing is working and you’re getting sales, it’s time to pick up extra dollars you may be leaving behind. Profitably acquiring a customer is great, but getting them to spend more is even better.
Levers like creating a more compelling offer (bigger quantities with larger discounts, free gifts, etc.), subscriptions, and complementary product upsells allow you to increase your AOV and LTV without increasing your ad spend.
Use analytics tools like Google Analytics and analytics for Shopify to get a better grasp on where customers are coming from, what the highest quality traffic is, and what your best selling products are to know what items to recommend next. Some analytics apps can track your post-purchase flows and feed that data back to Google Analytics so you can tell what actions people are taking and why.
Closing Thoughts: Use Replo To Build High Converting Landing Pages With High AOV and Low CAC
While your marketing strategy involves so many moving pieces, landing pages are the best way to convert cold traffic. Changes in landing pages can result in significant reductions in acquisition costs and increases in order values.
Replo is the best Shopify landing page builder to create, and edit, landing pages. Our tool comes with a dedicated community of ecommerce experts available for hire and a 24/7 support team to make sure you get the most out of your pages.
Go from disjointed ecommerce conversion funnel to a profitable marketing machine with Replo. Check out our blog for helpful information and resources or schedule a demo with us. Also, join our Slack community and follow us on X to get the latest news and tips to help scale your ecommerce brand.