8 eCommerce Metrics You Need to Be Tracking

This time, on the eCommercefuel podcast, eCommerce guru Bill D’Alessandro is back to discuss different metrics that you, as a store owner, should be tracking. These metrics can be anything from how much traffic you actually get from mobile vs browser, how many people who visit your site come back, and how much each one of those clicks are worth.

While Bill and I both admit we are not perfect at always tracking these 8 metrics consistently, we have surely tracked these metrics at one time. In a perfect world, I would love to have a report showing me these metrics on a monthly basis, but while we aren’t always tracking these consistently, we do keep an eye on them. We help you to break down each of these metrics and why you may be missing out on money and customers if you are not tracking and knowing your conversion rates.

Here’s What You’ll Learn

  • Three vanity metrics that people obsess over, but are poor indicators of success
  • The most important (and usually unmentioned) metrics you should be tracking
  • A quick-and-dirty hack for measuring LTV (life time value) of a customer

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The Full Conversation

(With your hosts Andrew Youderian of eCommerceFuel.com and Bill D’Alessandro of ElementsBrand.com.)

Andrew: Today, eight eCommerce metrics that you should be tracking, we’ll be really diving deep into some of the things you should be looking at on a regular basis as well as some of the metrics that get thrown around a lot but really probably aren’t as important or crucial, probably vanity metrics. So we’ll be talking about those as well too. And joining me to really dive into these, who I’m sure is tracking all of these religiously every month, on the first of the month, Mr. Bill D’Alessandro.

Bill: How’s it going? I wish I could say that. That would be great.

Andrew: It’s going well. Thanks, Bill. So we’re going to get into that in just a minute. But first, I want to do a first sale shout out.

And this one’s going out to Dave Zak from artresin.com. And he writes and says, “We sell epoxy resin, a thick, clear coat for pouring over artwork, photos, wood, etc. And my wife and I had a WordPress store for five years or have had, rather, a WordPress store for five years dropshipping. But now we’ve migrated and I manufacture my own products, have doubled the margins, and relaunched on Shopify.” Dave, do you do any consulting or coaching? I might want to take you up on that in terms of the migration from dropshipping to manufacturing. That’s awesome.

Bill: Very nice, Dave, good work.

Andrew: Yeah, very cool. Also, he writes in, “I quit my job. Today is my last day at work, and I’m actually listening to you while I’m in the final hours at my job. Thanks for the podcast and holding my hand along the way.” Dave, I don’t think I did much hand-holding, or we did, rather. But congratulations, man. That’s a really cool transition to make, and I wish you the best going forward. Fantastic. All right, let’s go ahead and get into today’s discussion on the eight e-commerce metrics you really need to be tracking.

Profit per Visitor

So I want to mention right off the top, all of these, or at least the vast majority of these, I have tracked at some point. I know Bill has tracked a good portion of them at some point. But we are by . . . well, I’ll speak for myself, Bill. I’m by no means perfect at tracking these on a regular basis. Some of them I do, others, I don’t, and so this is really, more than anything, it’s a wish list for if I could have an executive summary every month, the first of the month, these are what I’d like to see. And at the minimum, these are ones that at some point or another, you should be tracking and have at least a static idea of where they’re at. So the first one is profit per visitor.

When you think about an eCommerce business, ultimately, your goal isn’t to maximize revenue. It’s not to maximize orders. It’s not even to maximize your profit per order. But I think if I could look at one goal, one metric to track, and when I do price testing, this is the metric I use, is profit per visitor. Because it really brings into account your margins, your traffic, and really maximizing profit for people that come in. And I think it’s something that people don’t focus on enough.

Bill: This is also a really handy metric to know if you’re thinking about paying to acquire visitors. So if you’re going to pay for ads on a per-click basis, if you know how profitable one visitor is, you can know how much you’re willing to pay per click. If you are mistakenly tracking revenue per visitor, then you’re probably going to overpay if you don’t break it down to profit per visitor.

Andrew: Yeah, have you ever tracked this? When we were talking offline, Bill, where you said that you track revenue. And it tracks pretty closely because your margins are really high. But for someone like myself, I’ve got really low margins, or at least lower, definitely lower than yours. And so when we do price-testing, this is the number one thing we try to maximize for. But you were kind of making the argument that higher margins, it’s not quite as crucial, or at least you can use revenue maybe as a better proxy for it.

Bill: Yeah, I mean higher margins forgive almost anything. But the reason I end up not doing the actual work to track profit and I focus more on revenue is because my margins are very consistent across products. So any one product may deviate 3 to 5% from my average gross margin. So I can pretty much apply that average gross margin to the revenue number and know what my gross profit was on that order. But if you are, for example, maybe you’re a dropshipper and you’ve got different margin structures or different suppliers, or maybe you stock some products, and they’re your own proprietary products, and you drop ship other products where your margins vary wildly, then you’re going to want to have to dig more into profit because just an average is not going to be representative.

Segmented Conversion Rate

Andrew: Yeah, definitely makes sense. So second metric, number two is track your conversion rate. And this is, of course, going to be an obvious one on this list here. But if we want to get a little more nuance, not just tracking your conversion rate overall, but really understanding how it breaks down because it gives you so much more data. For example, you should be able to know, how does your traffic convert by source? So the traffic from Google versus the traffic from Bing versus the traffic from social media, you really need to understand those because it can really impact, beneficially or negatively, where you invest in driving traffic.

Device type, what’s your mobile conversion rate look like versus your desktop? This is something I wish I would have had a beat on a lot sooner. And I probably would have gotten a mobile site implemented much sooner than we did. It probably cost us, in terms of not knowing how much traffic and how terribly it was converting on mobile, cost us thousands and thousands of dollars in terms of the fact that we didn’t get it up and running.

And then finally by browser type. If you’re looking at your browser type conversion rates . . . Bill, it would be interesting to hear if you have any anecdotes about this. But there’s been a lot of times where I’ve been like, “Whoa, what’s the deal?” Conversion rates on Firefox are terrible. Like when we just relaunched Right Channel Radios, I noticed that that conversion rate was, oh, probably half on Firefox as it was on the other browsers. Come to find out, there was some crazy, obscure SSL error that was only firing on Firefox. We got that fixed, and bam, upped the conversion rate a lot.

Bill: Nice, nice. Yeah, I think the nice thing about browser and device segmentation is you can see very quickly if anything is wrong in a certain browser or on mobile or whatever it might be. If something sticks out as a lower conversion rate, you’ve got something going on there that you need to fix. The other one that I think should be really the first first division you make in conversion rate is new visitors versus repeat visitors. This is an oversight I see people make all the time. They go, “Oh, my conversion rate is 3%.” And they use that in their calculations when they’re figuring out how much to spend on advertising and all of that. And then their ad campaigns aren’t profitable, and they wonder why. But you’ve got to break it out by new visitors and repeat visitors. And the conversion rate for a repeat visitor is going to be much higher. They already know you. They’re coming back to buy something else. Maybe they came from an email. Maybe they have a coupon.

For all of these reasons, they’re more likely to convert. They already know you, versus somebody who’s knew that just pops over to your website from a Google ad is going to convert much lower. So if you’ve got a repeat conversion rate of 5% and a new traffic conversion rate of 1%, that could average out to 3%. And if you use that 3% to calculate what you can pay for advertising and then they actually convert at 1%, you’re going to lose money. So make sure you use your new visitor conversion rate, your first time conversion rate, when you’re talking about acquiring new folks.

Andrew: Yeah, awesome point. Another thing that I’ve tracked in the past is something called core conversion. And I don’t know if this is actually a term. I just slapped the label on it. But it’s this idea of using Google Analytics to create a segment that can help you filter noise out of traffic spikes or people coming to your site or maybe decreases or increases in your rankings so that you can really get a sense for what your core conversion is, so you can kind of track the overall industry. So for example, you could create a segment in Google Analytics that only didn’t have any referral traffic, that only had organic traffic, and that only tracked people on maybe desktop that were searching for these 10 very core terms. And so it filters out a lot of the noise, and it just gives you more of a beat on the industry overall. For example, you get a huge spike of people coming to your site because it was featured on the Wall Street Journal or something, that gets filtered out, all these different things.

Bill: That’s a good idea. Another one that you should probably filter out is branded. You have a lot of people that just go to Google and search for Right Channel Radios. They just meant to go to rightchannelradios.com, but clearly, they already know your brand and your site, and they’re probably more likely to convert. So you should filter those out too, and you can get just the conversion rate for people that are doing CB radios or off-road radios or whatever it may be. And that would be a good measure of core conversion rate. I might start doing that.

Conversion Rate by Product

Andrew: Yeah, that’s a good point. I haven’t thought about that. So number three is conversion rate by product. And this is going to be more important for companies that have a lot of SKUs. If you’ve just got a handful, probably not as crucial. And this is something, a really cool feature that got rolled out in enhanced eCommerce Google Analytics. If you’ve got that hooked up, it shows you that by default. So conversion rate by product, well, just like it sounds. It’s what percentage of people who view a page actually go through to purchase it. And why is it useful? Well, if you can look at a bunch of different products on your site, you can quickly spot products that, hey, people are landing on. They click through either on a category page or from a search, a Google page. So they’re obviously, at least someone, interested in it. But for whatever reason, they’re not buying in. And maybe it’s because your price is way too high. Maybe it’s because the description or the details of the product are terrible or the image is awful. But you can quickly identify pain points, try to figure out what those are, and hopefully try to really strategically increase your conversion rates on those products.

Bill: And that’s a good idea. I don’t track that one. But that would be helpful, especially when you talk about knowing which ones are overpriced like, which should be selling at X percent of your sales but they’re too low?

Andrew: Yeah, and a ghetto alternative to that is page value. It’s not quite the same. But if you’re in Google Analytics and you look at the page value, which I think is like the revenue generated by that visitor divided by . . . or the average revenue divided by page views for that. It can give you a rough sense of it, not perfect, because it doesn’t take into account like product price and things like that, skews towards higher-priced items, but definitely a good ghetto alternative.

Gross Profit Margin

Andrew:  Number four, and this is one that, Bill, I’m jealous because your business has more of it, and then mine at least on a percentage basis and maybe absolute is all probably as well, but gross profit margin. So gross profit, for people who don’t know, is your growth profit margin is your gross profit, which is your revenue minus cost to get sold, divided by your revenue, what margin of every order do you actually get to keep. And I think this is something. It’s so easy to track revenue. And just the last month or so, I started diving back into the day-to-day individual order margins. And man, that’s really important to do. It’s something I’ve been neglecting recently. It has enormous implications for the business, obviously. Because if you can get those margins higher, it’s one of the best ways you can grow the bottom line of your business. And also the higher your gross margin, the easier it is to increase the bottom line by growing the top line.

Do you do that, Bill? It’s a little different because I know you have a fewer number of SKUs, and you probably know them better than I do. But are you regularly going in and looking at pricing and margins per order?

Bill: Yeah, well, so we look at gross margin basically every month. And then I also look at when we introduce new products, if we’re going to do a new scented shampoo or lotion or something that we don’t have, I always look at the gross margin and think, “Is this going to be in line with what we already sell? Is this going to drag my gross margins down?” And then at the end of every month, I look at our cost of goods versus our revenue for a month and see where our gross margin was. And if it’s deviated, it makes me wonder why. And a couple of the reasons where it does deviate is sometimes our gross margin goes down if we give away a lot of product, so that ends up in cost of goods or if we discount. That’s one way to get your gross margin up, by the way, if you can keep your sales in the same place but stop discounting, you’re going to make more money. So yeah, I look at it about once a month.

Andrew: Yeah, I look at it once a month too. If you see it creeping down, you need to understand why. And if you’re ever going to sell a business or buy a business, for that regard, and you see the top line increasing but the gross margin decreasing consistently over time, huge red flag. Make sure you have a good answer for that or make sure that you get a good answer from whoever you’re buying it from.

Revenue by Traffic Source

Number five, detailed traffic composition versus revenue contribution. And this’ll tie it a little bit to the conversion rate in terms of knowing what traffic converts well. But it’s really easy to look at your traffic numbers and aggregate number and say, “Oh hey, we’re getting tons of traffic here. It must be contributing to revenue the most.” But that’s not always the case. A lot of times, you’ll get a lot of revenue . . . Do you remember, it isn’t as popular anymore, but do you remember StumbleUpon, Bill?

Bill: Yeah, yeah.

Andrew: Oh yeah, sometimes that would drive a lot of traffic or if you get on the front page of Hacker News or something. But those numbers would be enormously misleading in terms of how much revenue they contribute to your bottom line, because usually, they just don’t contribute any. They’re hit and runs. People stop by and take off. So looking at not just the traffic but the revenue, so how much of mobile is converting versus desktop? When you look at organic versus email versus referral, which one of those are driving the most revenue?

Bill: Yeah, I think this one ties pretty nicely into monitoring conversion rate by traffic source, because conversion rate will tell you what percentage of them, but what conversion rate doesn’t capture is order value. You might have a certain segment of traffic that’s converting really well, but everybody buys one thing. But you might have one source of traffic that converts less well, but it’s always $400 orders. And so this is a metric, revenue by traffic source, that will show you that.

Funnel Abandon Rates

Andrew: Number six, your funnel abandonment rate. I think probably the cart abandonment funnel is probably most well-known by a lot of merchants, what percent of people make it through the add to cart, to checkout, and though all the way through a purchase. But if you can look also and just see how many people get to your category page, get to a product page, and then go through the process, great way to figure out where people are dropping off and how you can fix that. Traditionally, you had to set this up in Google Analytics manually. But again, going back to enhanced Google Analytics . . . Man, we’ll have to do maybe whole podcast on that. That’s something that’s built in by default.

Bill: Mm-hmm. This is one thing I’m really terrible about tracking. I do checkout abandonment but I don’t do the pre-checkout funnel as much.

Andrew: Yeah, and we did a poll in the private forum about people’s drop-off rates. And man, I posted it up just thinking everyone was going to have drop-off rates in the 70%, 75, 80%, because that’s where we’ve had ours in the past. And man, some people have got this dialed. There’s a decent a number of people who were like in the 50, 60% range, or even lower, which was really impressive and gave me a kick in the butt.

Bill: That’s pretty good. I would also love to see that coupled with some sort of metric, some sort of conversion rate to begin checkout metric, like it could be that is it the same number of people end up completing checkout? Or like more people end up completing checkout, but fewer people enter checkout in the first place. I would love to see both of those together. Maybe the site is awesome, like it’s a really heavy sales site. So by the time they go to checkout, they’ve already decided to buy.

Andrew: I see, you’re doing more pre-qualification upfront.

Bill: Yeah, I wonder, that’d be interesting to see.

Percent of Returning Customers

Andrew: That would be interesting. Number seven is your percent of returning customers. So, Bill, you were touching on returning visitors and figuring out what percent they convert. This is slightly different, though. Instead of returning visitors, we’re talking about returning repeat customers. What percentage of people purchase from you at least more than once? I don’t know if Google Analytics tracks this, and this ties into lifetime value, which we’ll talk about in just a minute. But a really easy way to be able to figure this out, because even on a shopping cart, sometimes that can be tough to know, is if you go into your cart and you can export all your orders. I know, like Magento and Shopify, I think you can do that.

Scrub that data and pull out email addresses. You can get a sense of what percentage of orders have duplicate email addresses. And that’s going to give you a almost, not spot on, but a real darn close sense of what percentage of your customers are buying from you over and over. And, Bill, is that something that you track?

Bill: It is not only something that I track, this is one of the most important things I look at when I’m evaluating a business to buy. I always, always, always look at the percentage. I do just what you talked about, I export from their cart and look at the percentage of their orders that are from people who have ordered from them before. Because it’s a great metric of just, overall, how you’re doing. Is your pricing good? Are your products good? Is your customer service good? Do people like you? Is this a sustainable business? Because these returning customers, these are the core. These are the people that drive your business. These are the people who you don’t have to pay to acquire again. You don’t have to pay a CPA on Google Analytics to acquire again. These are people that are really profitable.

So tracking this over time, if you see this start to decline, you should start to get real worried. This would be a screaming problem to me if I saw this going down.

Andrew: And it’s odd that this isn’t baked in on a Google Analytics dashboard, and that might be a little harder. But in shopping carts, have you ever seen a shopping cart that has this as on the dashboard as this is one of the metrics?

Bill: Never. I’ve never even seen a shopping cart that makes it easy to pull without an export to Excel.

Andrew: Yeah, it’s odd because that’s just, like you said, it’s such a crucial metric. Maybe we can see that in the future if we . . .

Bill: Maybe our sponsors at Shopify should consider adding that.

Andrew: Yeah, Shopify, and you’re an AmeriCommerce guy, so maybe we could lean on some people to hopefully see if we can get that happening.

Bill: Yeah.

Lifetime Value of a Customer (LTV)

Andrew: So number eight, and this last one probably potentially could be classified as the number one metric to track. So it’s ironic we’re putting it at number eight. But lifetime value of a customer. And of course, if you’re not familiar with that term, it’s an important one to know. It’s the entire value that you can reasonably expect a customer to bring to you in terms of revenue over the life. If an average customer order size is $100 and, on average, a customer will order from you three times, your lifetime value of a customer in terms of revenue would be $300 bucks. We, personally, we don’t have an enormously high . . . Sadly, a lot of our customers, they end up needing our product once, then we don’t hear from them for a while. So our repeat purchase rate isn’t enormous. So it’s not something we track regularly.

But, Bill, for someone like you, you’ve got a lot of consumable products. Is this something that you track? Have you sat down and really calculated this out so you can get a good sense of what you’re paying, and do you track it on a regular basis?

Bill: So this metric, LTV, is such a massively important metric, but it’s also a real pain to calculate, because you’ve got to know the lifetime of a customer, and you’ve got to know when they’ve really left. Maybe they haven’t bought for a year and then they come back. It’s really hard to figure out what the lifetime is. So I’ve seen a lot of people that just throw up their hands and they don’t do it because the math gets rather complicated. It’s much harder for an eCommerce business where purchases are sporadic. If you have a software as a service business where they pay every month, it’s much easier because then you can take the average number of payments that all of your customers make and say that’s the average life. But for eCommerce, it’s a lot harder because the amounts vary, what they buy every time varies, their frequency varies.

So I have a ghetto way of backing into this that I can do off-the-cuff that makes it a lot easier to do LTV. And I try to do it conservatively because LTV is really the number you should be using to compare to your CPA. You should be willing to pay up to your LTV in cost per acquisition when advertising to acquire a new customer. So if your LTV, if the number that you think is your LTV is higher than your actual LTV, it basically means you’re going to lose money on all of your advertising. So this is a number you don’t want to overshoot, right? Because you’re going to be doing your calculus wrong. You’re going to be thinking they’re worth more than they are. So this number you don’t want to overshoot. So my method is a conservative one. But I think it gets you pretty close, and it ties into the metric we just talked about, which is percent of returning customers.

So every so often, I’d pull my percent returning customers, and let’s say it’s 30%. And what that tells me is about . . . And I know this is not statistically correct, but it’s ballpark correct. That tells me roughly 30% of people will come back again and buy. And then I always assume that they only buy from me twice in order to be conservative. So if I get 100 sales, that will really be 130 sales, because 30% of those people will come back and buy again. And then I take my average cart value, so I basically say, “I’m going to get 100 sales.” For example, if my average cart value is 100 bucks, there’s a 30% chance of that person coming back to buy, and they’re going to spend 100 bucks again. So that’s 130 bucks. So I’ll consider that my L.T.V.

Andrew: Ah, okay.

Bill: Not scientific, I’m sure the statisticians in the audience will poke a zillion holes in that, and I know that they are there. But the important thing is it’s a very back-of-the-envelope quick metric that you could do that is directionally correct.

Andrew: I’m trying to think through if a shopping cart would have all of the data needed to be able to do this. You’ve got the customer history, revenue, frequency of purchase. Is there any reason why you couldn’t program this formula in and put it on your dashboard or make it accessible via shopping cart?

Bill: No, all you really need is you need that percent of returning customers, then you need an average order value. And then you need an assumption for how many times they purchase. Those are kind of the three inputs, right?

Andrew: Right, well I’m thinking not even make the assumptions because a shopping cart would have that. It would have what their actual order value was, how many times they repurchased it. I’m just trying to think through. Could you actually write a plugin? Or could some of the carts put that as a dashboard computation? Or is there any data that would be needed? I don’t think there is, I think they could do it.

Bill: Yeah, they could absolutely do it. The big statistically invalid thing here is that you assume, if 30% of your orders are from people who have repeated, that doesn’t take into account if people are represented more than once. If somebody comes back and buys three times versus somebody that comes back . . . If you take a period of time, there might be three orders from one person and one order from lots of other people. And that would really only be one person that was repeat, but it would look like a higher percentage. So that’s the slight statistical incorrectness in this method, but it’s close.

Andrew: Man, Bill, maybe you and I should start a Shopify app company for Lifetime Value and Repeat Customers.

Bill: Yep, yep.

Vanity Metric #1:  Revenue

Andrew: That would be cool. If someone else steals that idea and runs with it, we won’t be offended. I think it would be great. So those are our eight metrics. I want to touch quickly on a few vanity metrics that may be less important than you otherwise think. And the first one I got to call out is revenue. And I think I mentioned this in one of our past episodes about big regrets. And one of my big regrets, like I mentioned, was tracking revenue and really focusing it on more and not focusing on bottom line quite as much. So a lot of times people really fixate on that. And it’s less important if your margins are enormous, much more important to maybe not focus on revenue if your margins are smaller. But it’s tough. Even though it ultimately doesn’t represent what you bring home at the end of the day, it’s such an emotional number. It’s such an easy-to-track number. And even if you know you’re making 20% more but your revenue is cut in half at the end of the day, even just quantitatively knowing that, there’s something hard about that reality. I don’t know if you feel that way, Bill.

Bill: Yeah, it makes you feel like your business isn’t as big.

Andrew: Yes, it does.

Bill: But at the same time, if you only track revenue, this will predictably lead you into the same trap every time, which is discounting. If revenue is your metric, very quickly you realize, “Wow, I can send out coupons, and my revenue goes through the roof.” And you’ll feel real good about yourself, and then you’ll continue to do that. You’ll do daily deals. And you’ll go, “Why am I not making any more money? My revenue is doubled.” And now you’ve hooked your customers on discounts, so you can’t go back. I see it all the time. People who focus on revenue, the trap they always fall into is discounting very rapidly, because discounts drive revenue.

Andrew: Yeah, in pricing experiments that we’ve done, again, we sell existing products, and in the past, we found selling at a higher price point, it brings down the conversion rate. It brings down the gross revenue, but it increases that all-important profit per customer. There’s a lot of places online where you could probably buy stuff cheaper than what we sell. But ultimately, we’re willing to take that revenue hit, because at the end of the day, even though I haven’t been perfect about doing this throughout the whole time, ultimately it gives us more money at the end of the day to keep.

Vanity Metrics #2:  Pageviews

Andrew: The second one is page views. This is one that’s always been a little odd, in my opinion. How many pages do people view when they come to your site? And here’s one of the reasons why I think this is a little bit of a vanity metric, really not that important, is when we relaunched the new Right Channel Radios website going from Magento to Shopify, we hit about a 41% conversion increase. But our page views fell off a cliff by almost half. I don’t know why. There may be a chance that our old Magento site fired . . . It would open up a new window when images were clicked. That might be part of it. But regardless, it illustrates that it had almost an inverse association with conversion. So rarely I think that’s a really important metric to focus on.

Bill: Related to page views I think is traffic, where people say, “Man, I got featured on the Wall Street Journal, and it sent half a million people to my site.” And they’ll go out chasing things that do that, write-ups on blogs, press, all kinds of this like, “I want to be profiled in Inc. magazine.” And yeah, that’s great. You’re going to hang it on your wall, and you feel real good about yourself. But a lot of times, you’re like, “Man, 500,000 people saw my website, and three of them bought anything.” People get so fired up or they go chasing press all the time just to drive page views. And unless you’re selling ads, page views don’t matter at all. All that matters is whether people buy something.

Vanity Metrics #3:  Number of Orders

Andrew: Third one is number of orders. This kind of goes along with revenue, right, depending on your margins and how you’re doing. All things equal, more orders is better than fewer orders in most cases. But again, it all ties back into your gross margin and your profit per visitor and how much. You can definitely juice your orders by discounting, like you said, Bill. But again, it’s just a tough one because, the same kind of thing. I don’t know about you, but I have a little app on my phone for Shopify. I check the order count every day. And you know, seeing that order count that’s a lot higher one day than the other makes me feel great. I get a little dopamine hit or whatever it is. And what I’m not seeing is, the margins there, I’m not taking into account all of those unless I really dive in. So I think it’s another one that could be misleading, potentially.

Bill: I think it can be misleading, but I will disagree with you as to it being a vanity metric. There’s actually a lot of value in number of orders for a few reasons. One, it’s the flip side of average order value, right? As average order value comes down, number of orders come up. You’ve got more orders for the same amount of revenue, your average order value is down. If your average order value is down, you know that’s a lower margin of order, because you do have a fixed cost of shipping and fulfillment for that order. So all things being equal, yes, larger orders are better. Fewer orders with the same amount of revenue is better. But the one thing that’s the silver lining on a high number of orders is, especially if you have a high number of repeat customers, I always feel really good like, on a day, if I had a bunch of small orders, at the very least I know these are all people that bought something from me. Now, they’re on the email list. Now, they’re getting a package with my name on it. Now, X percent of these people, they are going to come back. So it’s good to watch. More orders is not necessarily better, but if you’re good . . . I guess what we should drive home is the importance of getting people to come back. The importance of, if somebody comes and places a small order, getting the big order from them later.

And maybe, also, if you’re really good, you’d segment those people. People who order one thing, and they’re the dinky orders, maybe they go on a different autoresponder campaign to try to get them to juice their orders, come back and try something else, try a related product, something like that, which is different than your standard autoresponder. That’s a pretty good idea.

Andrew: It is, it is. Yeah, one thing with orders too is thinking through what it takes to service those people, because, of course, you want more people on your list and things. For orders, the downside, of course, yeah, you lose more revenue. If you can make twice as much per customer and you have to service a lot fewer customers in terms of maybe your pre-sale process is really demanding or maybe there’s a lot of time involved with post-purchase support. All things equal, I would rather serve fewer customers but make the same amount of profit, because it’s the overhead in your customer service requirements are smaller.

Bill: I totally agree with that. But then I’ll borrow a phrase from Louis C.K. and say but maybe if you have more people out there in the world, especially if you’re building a brand, like for me, what I want is many people out there in the world using my products and telling their friends about them. But maybe in the early days, you want as much of your stuff with as many people as possible and maybe they tell a lot of people. And I guess it depends a lot on your brand. If your brand is one that is conducive to people going, “Oh, what’s that? Can I try it?” And then their friend buys one. At that point, I’d be less bummed about a higher order count because I’m just trying to spray my product all over the world. I imagine for you at Right Channel Radio, people are going to go, “Oh, that’s a cool radio.” And what they’re probably going to talk about is what kind of radio it is, not necessarily where they bought it. So it’s probably less beneficial to you to have more orders. You would just rather have fewer customers and make better margin.

Andrew: Yeah, and there definitely is a small part with the branding and reputation. But, yeah, I think you get a lot more of that word-of-mouth and that brand equity if it’s your physical product. You can always do it being through retailer, but it helps so much more if it’s your name on the actual label of the product.

Bill: Yep.

Andrew: Yeah, 100%.

Bill, this has been great. It’s good inspiration for me to get off my laurels and get some of these tracking on a little bit more of a regular basis, as opposed to knowing them and checking in with them two, three, or four times a year, getting the executive summary every month. That sure would be nice.

Bill: Yeah, me too. It’s helpful to talk about, “Wow, these things really are valuable. I should start tracking more of them.”

Andrew: “All the Metrics That We Don’t Track, but You Absolutely Should,” is that what we should title this episode, maybe?

Bill: That’s right. That’s what we should title this episode.

Andrew: Bill, thanks. It’s been fun as always, man.

Bill: Thanks, man. Talk to you soon.

Andrew: That’s going to do it for this week. But if you’re interested in launching your own eCommerce store, download my free 55-page e-book on niche selection and getting started. And if you’re a bit more experienced, look into the eCommerceFuel private forum. It’s a vetted community for store owners with at least $4,000 in monthly sales or industry professionals with at least a year or more experience in the eCommerce space. You can learn more about both the e-book and the forum at ecommercefuel.com. Thanks so much for listening. And I’m looking forward to seeing you again next Friday.

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3 Comments

  1. I’ve seen some good template for Google Analytics reporting and was curious to know if there is a favorite or favorites from Bill? From my time spent with GA it seems that getting the right reports is key to measuring your success.

  2. Awesome podcast, it was a great listen!

    On the side of lifetime value and repeat customers, we’ve already built a Shopify app for that 😀

    Vantage (http://gotvantage.com) calculates over 100 metrics for your store, including customer lifetime value and repeat customer rates!

  3. Hi Andrew,
    How can I increase the lifetime value of a customer to boost my online business? I am trying to integrate all the attractive things in my website and also redesign my website. What else should I do to maximize profit?