If you manage an eCommerce, you know very well what it means to be surrounded by different metrics on a daily basis.

What makes the difference, in this case, is being able to identify the KPIs (Key Performance Indicators) that really matter to achieve the desired results.

The risk of making poor decisions based on irrelevant data is always around the corner.

So let's see together some of these indicators that have a very important impact on the final results of your ecommerce.

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Customer Lifetime Value (LTV)

The Customer Lifetime Value (LTV) is the value that an average customer has over time for your company.

In fact, every time you acquire a customer, consider the cost you had to incur to intercept them and convince them to buy your product.

But do you know how much this customer will spend on average over time in your store?

The definition of Customer Lifetime Value explains exactly that.

During “the customer's life”, that is, for the duration of the relationship that a person has with your company, this same person could buy different products with different pricing.

In this period of time, the CLV measures the profits generated by individual customers taking into account their purchasing behavior over time.

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Here you can find an interesting infographic by Kissmetrics which analyzes how Starbucks calculates the CLV of its customers.

There are different formulas that allow you to calculate the CLV of your customers, some decidedly complex, others simpler. For now, let's focus on the simpler ones.

You can start to get an idea of your store's CLV using this formula:

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CLV = Revenue/Number of Customers

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To make everything easier you can use a tool like Glew.io to analyze in detail this and other key metrics for your eCommerce.

Starting today, increasing the CLV of your business must become your mission.

Understanding how long the relationship with your customers lasts on average and being able to maximize the economic return of this relationship is of vital importance.

To do this, you must keep your focus on the quality of the relationship you want to establish with them and this will force you to have a long-term vision for your company.

But not only that, it will also help you understand how much you can spend to acquire new customers, a very important factor when you need to measure the performance of your Advertising campaigns.

It may seem obvious, but the success of an online business does not only lie in finding as many customers as possible but in increasing the average value of spending over time, working and offering an experience that allows them to be transformed into loyal customers.

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How to increase your LTV?

- Focus your energy on increasing the Average Order Value (AOV) within your eCommerce (the Average Order Value is one of the metrics that we will see later, in more depth)

- Segment your customers according to how much they spent in your store and create specific offers for each of these segments (an offer should not necessarily be understood as a discount, try to offer something that your customers will perceive as valuable)

- Work to increase the purchase frequency of your customers

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Cost of Acquisition (CAC)

The Acquisition Cost is the cost of each new customer that buys in your store.

This is a metric that allows us to evaluate the effectiveness of online advertising campaigns, thus determining the cost of completing a certain action.

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CAC = Total costs associated with advertising investments/Total of New Customers

So if a company spends €10,000 per month on marketing and acquires 100 new customers that same month, the Acquisition Cost is €100. Simple, isn't it?

Acquisition Cost is an important metric that depends on some variables, such as the target market, the positioning of your brand and the channels you use to bring traffic to your store.

How to improve the CAC?

- Improve on-site conversion metrics, so make sure your site is mobile-friendly, optimize the loading speed of your eCommerce and try introducing new payment methods to reduce the cart abandonment rate

- Think as if you were a user who enters your site, then try to make the browsing experience as easy and pleasant as possible, adding elements that customers have expressed particular interest in and look for new ways to get the most out of the current ones (most likely a customer's satisfaction rate has positive effects on the retention rate)

So keep this metric in check, but don't get obsessed with it.

Remember, the goal should not be to acquire the 'least expensive' customers but the most profitable for your business.

Retention Rate (CRR)

This is the percentage of customers who have placed more than one order in your store.

How to calculate Retention:

CRR = (Customers with more than 1 order/Total Customers) * 100

Acquiring a new customer costs an average of 6 times more than having someone who is already a customer buy again.

And that's not all...

On average, a returning customer spends more than 20% compared to the AOV (average order)!

You can see right away why this is a metric worth focusing on.

Creating a unique and recognizable brand, from which people can't wait to buy over and over again is certainly what everyone is aiming for, but to have a high Retention you must make your customers happy right away.

Here's what to do to improve your store's Retention:

- Specific retargeting campaigns for your existing customers who have not purchased for a certain period of time, trying to bring them back into your acquisition funnel

- Email Marketing campaigns to stimulate purchases: promotions, new arrivals, new product launches, emails sent based on lead interactions within the site and interests demonstrated over time

- Create a loyalty program for your VIP customers, those who have spent the most so far

Another factor you should pay attention to is the Cohort with respect to the products you sell, that is, how much a customer who purchased product X is worth compared to the person who purchased product Y.

You will discover that there are products that attract hit and run customers, others that allow you to acquire much more loyal customers over time.

My advice is therefore to advertise more the products that allow you to reach the most loyal and profitable customers for your eCommerce.

As you may have understood, knowing the retention rate is essential to measure the market fit of the products you sell and the quality of your customer acquisition strategy.

Improving this metric will not only allow you to grow faster, but it will also significantly increase the profitability of your business.

Average Order Value (AOV)

The AOV (Average Order Value) is the average value of an order in your store.

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AOV = Total Revenue/Number of Orders

Can you increase your revenue simply by increasing this value?

Sure! Here's how:

- Try testing a higher threshold for free shipping: people prefer to pay more for something they can own rather than for something intangible like shipping costs (I recommend that you don't increase it by more than 15/ 20% compared to your current AOV)

- Study specific cross-selling and/or upselling offers

Return Percentage (RRr)

Your acquisition method can be studied in detail, but if the return rate is high it means that there is a problem in your logistics network or, even worse, in your product...

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RrR = (Returns/Total Orders) * 100

Could there be an error in the communication, perhaps you are giving too high expectations to your users, who are then not fully met by the product?

Remember that before marketing comes the product, which must necessarily be of quality and, in most cases, solve an existing problem for your target of customers.

Promise 70 and deliver 100, always.

Or there could be a problem of a slowdown in deliveries. Check if your returns have a specific region, state, or time frame in common. The courier you have relied on is probably not meeting the agreed delivery times.

A high return rate is definitely a symptom of something not working...

Your goal must be customer loyalty, only then can you make the most of your business.

But how can you achieve this goal if the products you sell don't meet your customers' expectations?

Conversion rate (CR)

If traffic to your site continues to increase but conversions don't, you clearly have a conversion rate problem.

CR = (Customer Numbers/Unique Visitor Numbers) * 100

If only 0.5% of your visitors place an order, you are probably attracting the wrong visitors, or you are not doing enough to convert them, or there may still be some deficiencies within your eCommerce.

Here's how to increase the conversion rate of your store:

- Do you want to increase revenue immediately? Don't look at the homepage, start your analysis at the bottom of the funnel, in the steps closest to the order confirmation page

- Activate Retargeting campaigns on those who visited your store, and more specifically your product page, but did not complete the purchase. Remember that 98% of traffic doesn't convert on its first visit

- Use one or more email sequences to recover abandoned carts.

How to create a truly effective Trolley Recovery Sequence?

Here's an example:

About 1 hour after abandoning the cart, remind the user that they have forgotten something very important...The open rate of this first reminder email tends to be very high, and this is undoubtedly a positive sign. If the opening rate is low, try testing new objects and different descriptions for your email. Remember that this is the first factor that will bring your potential customer closer to the purchase, it is your opportunity to use the right words. In addition to this, you also monitor the click rate (i.e. how many people click on the Call to Action link to return to the cart and proceed with the order) and the total revenues attributed to this first Reminder email. These numbers will tell you if the direction you have taken is the right one or if perhaps it is better to intervene to optimize further.

‍After 24 hours, remind him again that his products are safe, but not for long.In this case, urgency plays a fundamental role, since your potential customer has already chosen the product and has already added it to the cart, now you just have to make them feel the risk of losing what they had already demonstrated an intent to purchase.

After another 24 hours have passed, if it hasn't converted yet, try to sweeten it with an offerFor example, you can try free shipping, limiting the offer to those who have never purchased in your store, to help them take the first step and take them to the checkout

And after 48 hours... Hey! The user is about to forget about you for good!This is the moment to remind him that you exist, perhaps creating a bit of urgency again and showing him the product he was about to buy but that for some reason has not yet made his own.

(Obviously, remember to exclude from Flow those who have purchased since they entered the email sequence)

To summarize, we have seen some of the key metrics for the growth of your eCommerce and the easiest way to calculate them.

The 6 KPIs (Key Performance Indicators) that can make a real difference are:

• Customer Lifetime Value (LTV)
• Acquisition Cost (CAC)
• Retention Rate (CRR)
• Average Order Value (AOV)
• Return Percentage (RRr)
• Conversion Rate (CR)

Do you want to grow your eCommerce and make it a truly profitable business in the long term?

Look at the right numbers and focus on the metrics that matter. You have the data at your disposal, it's up to you to interpret them correctly and understand what they are trying to tell you.