E-commerce and analytics have an intricate relationship. E-commerce companies have burgeoned in the past decade and so did their investment in analytics platforms and resources. In 2016 alone, e-commerce companies spent nearly 1.6% of their revenue on analytics.
With this growing importance of analytics in the e-commerce business, we thought it might be a good idea to reiterate the role of analytics today. i95Dev is a Magento expert and specializes in implementing integrated (with various ERPs and POS systems) Magento e-commerce stores.
Role of Analytics
In the era of big data and machine learning, fundamentals of analytics have remained the same, to help improve business by extracting insights from, otherwise complex, heaps of data. The four top uses of analytics include:
- Analysis – Tracking traffic to a website from multiple sources gives e-commerce players a picture of what is working and how users are interacting with their web assets. Website numbers also help in ideation of new discounts, vouchers, offering exclusive products, etc., which in turn help boost business.
- Measuring Effectiveness – A typical e-commerce provider will need insights into the things like the effectiveness of a marketing campaign, visitor engagement with an ad, conversion ratio by channel, and more. This information helps them make informed decisions.
- Increasing Conversion – Numbers like cart abandonment and source of the customer can help marketers understand what works and what does not. Companies need visibility on various parameters to understand how conversions happen in order to optimize their business.
- Optimization – While revenue maximization is a key objective, optimizing the storefront to meet this objective is not always easy. Revenue distribution among your customers is a critical aspect in maximizing their lifetime value.
Key E-commerce Metrics you should Measure
Some of the key metrics that every e-commerce business must measure are:
- Conversion Rate – You might want to know out of all the people coming to your website, how many are actually buying. This gives you a clear picture on your website performance. A further channel-wise bifurcation of conversion data helps you prioritize the channels you should further invest time and money in.
- Average Order Value – An important metric for e-commerce merchants to understand their customers’ purchasing habits. This also helps them build effective promotional offers and campaigns.
- Traffic (total users or sessions) – A fundamental metric for every business that gives you a view into the overall health of the e-commerce store (or a website). Bad traffic numbers indicate the need for attention to the website.
- Value per Visit – A difficult metric to track, value per visit this by dividing the total value created by the number of visits. What makes this metric difficult to track is the nature of a visit – not all visits lead to a purchase and there intangible benefits associated with other visits (like leaving a comment, sharing a product, etc.).
- Cart Abandonment – It is a very common practice for customers to add products to the cart and leave. While some return to buy, others usually do not. Studying cart abandonment can help businesses identify the reasons for abandonment and help in getting more customers back to the store.
- Mobile Visits – Mobile revolution had led companies to increase their focus on mobile as a medium. With rising popularity of the mobile devices, most e-commerce players have a separate mobile strategy in place – they offer mobile only discounts and more.
- Returns – Returns are an online retailer’s biggest nightmare that can leave a huge dent in their profits. There are, a number of reasons, why customers return a product, and keeping track of them goes a long way in reducing them and improving the overall profitability of the business.
- Customer Lifetime Value – Customer lifetime value is the lifeblood of an e-commerce business that helps brand measure the overall sustainability of the business. This metric lies at the heart of any business as it determines the profitability of a customer and gives insight into how much money should be spent in acquiring a customer.
With the growing popularity of e-commerce and increase in customers shopping across multiple platforms, the amount of data businesses are accumulating is growing in size. Enterprises are sitting on heaps of unstructured data accumulated across multiple systems. This data is potentially a gold mine of information if used properly.
Analyzing and visualizing such data sets can help e-commerce companies understand patterns in customer behavior, identify potential problems in supply chain, and more. A number of tools exist today that help merchants consolidate data from multiple systems and make sense out of them – like RJMetrics. For businesses who do not understand this or do not have the bandwidth to take this internally, can collaborate with agencies like i95Dev to drive this.