Overwhelmed and bamboozled. These are the things you might feel when tracking cart conversion metrics. With an abundance of metrics you could potentially track, it’s easy to get lost in the sauce.
We like keeping things simple around here, so we’ll give you 5 key metrics that you need to track and optimise to improve your cart conversion. So whether you’re on WooCommerce, WordPress or Shopify, it all applies.
Customer lifetime value (CLV) is one of the most critical yet highly underrated metrics. Your CLV indicates how profitable your customers are throughout their relationship with your business (from first purchase to churn). Keeping on top of your CLV helps you clearly define marketing goals, improve retention, reduce customer acquisition costs, and improve customer lifespan.
The most straightforward way to calculate your CLV is to multiply your annual revenue per customer by the average customer lifespan minus the acquisition cost. We’ll chuck an example below for you:
Supposing a clean beauty brand generates $300 annually per customer with an average customer lifespan of 2 years and a customer acquisition cost of $200 for each customer.
The brand’s CLV calculation would be: $300 x 2 - $200 = $400. In other words, their customers' value is $400 over 2 years.
Here are some ways to optimise your CLV:
- Spoil your loyal customers.
- Make sure you’ve got A1 customer service.
- Keep your customer journey fresh and relevant.
- Build stronger connections with your customers.
- Stay on top of community management (ask for and listen to customer feedback).
Vilfredo Pareto, an Italian economist, came up with the Pareto Rule, aka the 80/20 rule. The 80/20 rule explains that 80% of consequences come from 20% of the causes in many instances. Today, the principle still applies even through an eCommerce lens and demonstrates that most of your profit (80%) comes roughly from 20% of your customers.
We all love new things, and new customers are always exciting, but your repeat purchasers (the 20%) are as important as the new customers you acquire. According to RJMetrics, repeat customers represent an enormous amount of value. Hence, you want to think about strategies for retaining those returning customers as they’re less likely to churn.
To calculate your repeat purchase rate, divide the number of return customers by the total number of customers, and multiply by 100 to convert it to a percentage. Although benchmarks vary from business to business, most eCommerce businesses have a 25-30% repeat purchase rate. And, going back to Pareto’s Principle, anything over 20% is fantastic.
Some ways you can improve your repeat purchase rate:
- Email marketing campaigns with targeted messages to encourage repeat purchases.
- Gathering customer feedback from first buyers to gain information about how you can get them to buy from your site again.
- Loyalty and referral programs that reward repeat purchasers.
Average basket size (ABS) or average order value (AOV) is the average amount of money your customers spend when ordering from your eCommerce store. By tracking this metric, you’ll better understand your bestsellers and gain clarity of strategies to employ that’ll increase your ABS.
“Why would I want to increase your ABS? Shouldn’t the fact that orders are coming through be enough?”. Well, here are a few reasons why you should look into incorporating this metric into your KPIs:
1. Remember how we talked about Customer Lifetime Value earlier in this article. Increasing your ABS also increases your CLV.
2. You’re able to recover your customer acquisition costs.
3. You increase your overall profit.
If you want to increase your average basket size, try these strategies:
- Upsell, upsell, upsell!
- Offer time-limited promotions at checkout.
- Use free shipping minimums to get customers to add more items to their cart to qualify.
Geolocation is a technology that allows websites to see where a visitor is located. When visitors are provided with localised content, they're seven times more likely to convert to a sale. Once you’ve got the geolocations of your customers, you can gain essential insights into visitor motivation and buyer motivation.
Suppose you’ve got many visitors coming in from east Sydney. You can target them specifically through marketing, paid ads, or site merchandising.
Your best-performing products are your winners in terms of total revenue. And we promise this is the last time we’ll bring up the Pareto Rule, but your best-performing products (bestsellers) are usually your top-selling 20% of products, so you want to champion them on your eCommerce site.
Along with championing your best-performing products, your online store categories are vital to improving your cart conversion. Online shoppers love shopping intuitively. Therefore, your customers can sort products on category pages (price, alphabetically, price ascending/descending etc.) In this case, you can set the order default to bestselling.
And that’s all, folks. Whether you’re on WooCommerce, WordPress or Shopify, these metrics are ones you don’t want to forget. Track them, understand them and optimise them to improve your cart conversion and contribute to the overall success of your eCommerce business.