Of all the available tactics to grow a business, ecommerce analytics is taking the lead.
While most companies praise ecommerce data as key, the truth is that 80% of marketing executives struggle to make data-driven decisions, despite all the information at their fingertips.
This guide will get you comfortable with the language of analytics and help you start tracking the right ecommerce metrics. That way, you can understand customers’ actions, better serve them, and increase sales.
Table of Contents
What is ecommerce analytics?
Ecommerce analytics is the process of discovering, interpreting, and communicating data patterns related to online business. Ecommerce analytics helps measure customer behavior, performance trends, and ROI.
Understanding ecommerce analytics
Marketers use analytics to show return on investment (ROI) for campaigns and make better decisions to increase sales, reduce costs, and make business improvements.
Ecommerce analytics helps centralize and manage data. Siva K. Balasubramanian, associate dean and professor of marketing at Illinois Tech’s Stuart School of Business, explains that the onset of multiple data sources to gather and merge data about customers, products, and markets is a common problem for today’s businesses.
“Analytics offers useful techniques to handle this problem by organizing data to develop metrics that are most useful for continuously monitoring business performance,” Balasubramanian says. “The focus of analytics is on issues that matter most to the business, and the performance metrics are helpful in identifying and solving problems in real time.”
Data points can tell you a story about the total number of visitors to your site in a given week. For example, maybe only 50% enjoyed your website enough to spend more than even a few seconds on it. And maybe only half of those who stayed actually made a purchase, while another 10% got stuck in the checkout process, became frustrated, and left.
That’s the story of a group of individuals who took very different actions on your online store.
Until you know the whole story, you can’t change the ending. Once you understand why visitors to your site behave the way they do, you can do something about it.
The focus of analytics is on issues that matter most to the business, and the performance metrics are helpful in identifying and solving problems in real time.
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Benefits of ecommerce analytics
Now that you know what ecommerce analytics are, let’s look at the most important reasons why an ecommerce business should leverage them.
Understand marketing data
A good marketing analytics software keeps all your data in one place. You can keep tabs on all your campaigns, from social ads to emails to marketing automations. You can also see real-time stats, so you can know what’s working quickly and make better decisions about where to put your marketing dollars.
Craig Hewitt, CEO of podcast analytics software Castos, feels that analytics solves the problem of not knowing how to use marketing data to drive ecommerce growth. “Marketers often have a lot of data about their customers, but struggle to use it effectively,” he says. “Without the insights offered by ecommerce analytics, they’ll struggle to create a marketing strategy that brings consistent results.”
Analytics help you measure marketing performance and improve decision making, so you can become a more strategic business.
Modern ecommerce data analytics platforms treat your data as an interconnected system, allowing you to uncover trends and patterns in your business. It gives you the ability to understand how your business is performing, now and in the future.
To condense data and make it visible in as little time as possible, you can rely on marketing analytics to show:
- The number of visitors to your website by referrals and marketing campaigns
- The actions visitors take on your website over specific periods of time
- Most-visited pages during busy shopping seasons
- What devices people visit your store on
Use customer data
The beauty of marketing analytics is that brands can collect, manage, and use customer data. Customers can take certain actions in your store and your marketing analytics will pick up each interaction. Without proper marketing analytics and reporting, you can’t figure out who is on your site.
Growth, engagement, and revenue reports help you understand customer behaviors. You can easily find out who interacted with your content and if they clicked, bought, or downloaded something, so you can create content that resonates with them.
“Marketing analytics can help brands reach the right audience at the right time with the right message,” Craig explains. “By focusing on data points and using marketing analytics tools, teams can garner insight into their ideal prospects to optimize their messaging. By creating more relevant content that will generate more engagement, brands can address their audience’s needs faster and better than their competition.”
For example, say you see that more sales come from an Instagram campaign that features your shoes in an urban street environment versus one that features them in an office setting. You can position your products toward streetwear buyers in the future to attract the right customers. A merchant could work with more relevant influencers or adjust their ad targeting to build more product awareness.
How you price products is the most powerful lever to improve profitability.
For every product, you should have an optimal price customers are willing to pay. With marketing analytics, you can better understand how price affects purchasing amongst different customer segments. It will help you discover the best price points at a product level, so you can maximize revenue.
Types of ecommerce analytics
This guide will look at many analytics indicators, but if you’re just beginning your journey as an ecommerce entrepreneur, this is the place to start.
There are five metrics you can objectively follow to make sure your store avoids the problems faced in the example above and scales at the right time:
- Customer lifetime value (CLV). How much you will profit from your average customer during the time they remain a customer. For example, if your typical client comes back to your store three times to buy something, spends, on average, $100 per purchase, and your profit margin is 10% ($10), that customer’s CLV is $30.
- Returning visitors. The percentage of users who return to your site after their first visit. This number is a clear indication that people liked what they saw.
- Time on site. The average amount of time users spend on your site per visit. If people are spending time on your site, it shows they’re having a good customer experience.
- Pages per visit. The average number of pages users navigate on your site in a single visit. A high number of pages per visit (around four) indicates people are interested in what you’re selling.
- Bounce rate. The percentage of users who visit a single page on your website and leave before taking any action. A high bounce rate (usually higher than 57%) means your site is not giving a good first impression. A user may bounce because of poor design, unmet expectations, or slow page-loading time.
With the exception of CLV, which you need to calculate yourself, the above metrics can easily be accessed through Google Analytics. They appear on the first page, as soon as you log in.
If any of your metrics are below average, try putting yourself in the shoes of your customer, brainstorm ideas for improving your site, and test solutions until you see those numbers start moving up.
Analytics for customer acquisition efficiency
For an online business, becoming more cost efficient means better managing of marketing efforts. Your goal during the customer acquisition efficiency phase is ensuring your website is easy to navigate and quick to load so visitors have the best possible user experience.
The main metrics to watch while improving your customer acquisition efficiency are:
- Conversion rate. The percentage of people that visited your website and either signed up or made a purchase is called the conversion rate. This is an important number, because the lower your conversion rate, the more expensive and time consuming it will be to make a sale. On average, the ecommerce conversion rate for stores is between 1% and 4%.
- Page load time. When your pages take too long to load, conversion rates will be affected, which will have a negative impact on your customer acquisition efficiency. With more competition and lower attention spans, users get frustrated after waiting just two seconds for a page to load.
- Customer acquisition cost (CAC). CAC measures the amount of money you’re spending to acquire each customer. Since customer acquisition is the main expenditure in ecommerce, if your CAC is higher than the lifetime value of a customer, you will be operating at a loss.
Analytics for scaling growth
In ecommerce, scaling refers to growing sales. There’s nothing wrong with running a slow-growing company that simply helps pay the bills. But if you have a popular product that a lot of people want to buy, why not try to sell as many as possible?
As you’re scaling growth, the key metrics to watch are:
- Transactions. Make sure growth is steady by improving your number of transactions weekly or even daily.
- Average order value (AOV). Selling more items or higher-priced products per transaction will help you improve your overall business performance.
- Revenue. Make sure your monthly revenue numbers are going up.
- Unique visitors. If all your other metrics are trending up, then your unique number of visitors will naturally reflect more sales and revenue. Just be careful not to pay too much attention to this metric before the above numbers are also positive. Make sure to manage your CLV/CAC ratio while you grow unique visitors so you remain profitable.
In the next section, we’ll talk about the different acquisition channels—places where you can reach out to your potential customers and invite them to buy from you—and the most important metrics related to each.
Customer acquisition metrics
Now, you’re ready to use acquisition metrics to optimize your ecommerce store for future growth.
- First, you should invest a small amount of resources in marketing, through low-budget advertising campaigns, to bring in just enough traffic to generate data.
- Then, analyze that data to gain actionable insights on the best ways to optimize the core metrics of your product.
- Once you’ve done that, you can move to the scaling phase and invest more heavily in the channels that have worked best for you.
Now, let’s look at how companies that are ready to scale can use analytics to manage each marketing channel and invest more in their growth.
There are dozens of acquisition channels out there, but for the purpose of this guide we’ll focus on the current, most popular channels for ecommerce: SEO, SEM, Facebook ads, and email marketing.
1. Search engine optimization (SEO)
If you have a product people regularly search for online, such as airline flights or shoes, search engines can be a great free channel for growth. When you’re optimizing your site to gain more organic traffic (traffic from search engines), the metrics you should be looking out for are:
- Search volume. You can only grow with SEO if there are a lot of people looking for your product on search engines like Google or Bing. Understanding keyword research is useful for learning if the keywords you want to be ranked for can generate enough traffic for growth. If they can’t, you’ll never be able to use them to scale.
- Average ranking position. In your Google Analytics SEO report you can see the average position of the keywords that are bringing you traffic. Position 1 means you’re the first result in Google for that keyword—the one that generates the most traffic.
- Bounce rate. If someone comes to your site through a Google search result and their expectations aren’t met, they’ll leave and your bounce rate will increase. Google uses bounce rates as a measure for ranking too, so high bounce rates are not only bad for ecommerce sales, but for SEO as well.
- Conversion rate. If you have a steady volume of visitors coming from organic traffic, you want to make sure you’re converting them into buyers as frequently as possible. Optimize your entire conversion funnel, from landing page to payment, to better leverage ecommerce SEO to grow sales.
- Revenue. You want to generate sales and revenue from visitors finding you through search. Monitoring revenue from organic traffic is the best measure to see if your SEO improvements are having a positive impact. You can do this directly in Shopify with our built-in analytics tools.
2. Search engine marketing (SEM)
Advertising on search engines can help attract the right audience to your site. Work on both SEO and SEM strategies—they complement each other well. The metrics listed below are based on Google Ads, the search engine’s advertising solution:
- Search volume. If you’re investing in search engine marketing you want to make sure, as with SEO, that the keywords you’re targeting have high traffic volume. Research through Keyword Planner before you start investing in SEM.
- Cost per click (CPC). You can control how much you’re willing to pay per click in SEM by adjusting your CPC in your Google Ads dashboard. The more you pay per click, the higher your ad will show in your prospective customer’s search results, which will generate more traffic.
- Average ranking position. This metric, shown in your Google Ads dashboard, is directly related to CPC. The more you spend on your keywords’ CPC, the higher your ranking position will be, which will generate more traffic.
- Click-through rate (CTR). Your ad may get shown to a lot of people, but it will only be effective if the right people click on it. Make sure your ad copy is enticing to your target customer. This will raise your CTR (also shown in your Google Ads dashboard) and generate more traffic.
- Bounce rate. If people are clicking on your ads but you’re still seeing high bounce rates, work on your landing pages and ads to make sure the message you’re telling is consistent. Monitor bounce rates for every SEM campaign in your Google Ads dashboard.
- Conversion rate. Optimizing your SEM conversion rate will have a big impact on your profits. Be sure your entire conversion funnel, from the landing page to payment, is optimized to better leverage SEM for sales. You can find the conversion rate of each campaign in your Google Ads dashboard.
- Customer acquisition cost (CAC). In Google Ads, CAC is calculated based on your average conversion rate and average cost per click. For example, if your conversion rate is 10%, that means you need 10 clicks to make one sale. If every click costs $2, your CAC will be $20. If a customer acquisition cost of $20 is too high for you to make a profit, you’ll be losing money while you generate sales.
3. Facebook and Instagram ads
Leveraging advertising on social media can be tricky—people use social networks to connect with friends, not buy products. Still, social media is where people spend most of their time online, and Facebook is the most popular platform, so it’s worth experimenting with Facebook ads to grow sales. The main metrics used in Facebook advertising are:
- Impressions. If your ad has a low number of impressions, it’s not being shown to enough people. This means your target market is too narrow. Widen your audience by including more relevant interests or demographics.
- CTR. This is the percentage of people clicking on your ad after seeing it. If your CTR is too low, the messaging or design of your ads need some work, or you’re showing your ads to the wrong audience.
- Cost per click (CPC). On Facebook, a click will cost more depending on the type of audience you’re targeting. A high CPC will translate into higher CAC.
- Bounce rate. Bounce rate works the same with Facebook as it does with SEM.
- Conversion rate. Conversion rate is an important metric, and each advertising campaign may have a different conversion rate. If you identified a particular campaign with a bad conversion rate (in Google Analytics, go to Acquisition > Campaigns to find out), work on your landing pages and ads to make sure they both have a consistent and clear message, highlighting the value of your products.
- CAC. CAC also works the same with Facebook as it does with SEM.
4. Email marketing
Email marketing is, on average, the best performing channel for sales in ecommerce. The challenge is building an email list, which takes time. The main metrics you should be watching for when leveraging email campaigns are:
- Number of email subscribers. If you want to grow sales by using email, numbers matter. The bigger your list, the better your chances of making a sale. Work on getting as many email subscribers as possible from your potential clients.
- Sales from email. Simply having a big list of email addresses isn’t enough—you need to be able to sell to them. There are two aspects to this. First, you need a list of people who will be inclined to buy from you. Second, you need to work on the content of your emails to make that happen. Read more about these two metrics below.
- Conversion rate from visitors to email subscribers. Building a list requires adding forms to your website and asking people to subscribe. The conversion from visitors to subscribers will depend on how well you can convince visitors to sign up.
- Conversion rate from subscribers to sales. Once you have built a list of people interested in your products, you want to send them regular emails that are interesting and entertaining, and that will convince them to buy from you. Work on the designs of your emails and your selection of products to make sure you sell to your list.
- Open rate. If people don’t open your emails, there is no chance of you selling to them. A quality email list can generate open rates of 20% to 30%. Test your email subjects to make sure they are enticing and can convince people to open them.
- Click-through rate. Once your subscribers have opened your emails, you want them to click on a product, promotion, or piece of content and go back to your site to buy from you. The percentage of people that click on a link in an email is the click-through rate.
- Unsubscribe rate. If you’re not careful with the type of content you send to your list, people may unsubscribe. If too many people (more than 1%) unsubscribe, it’s a sign you’re not sending them what they signed up for.
In the next section, we’ll look at how to tie together everything we’ve discussed so far and incorporate ecommerce data analytics in your company’s routine.
Tips for ecommerce analytics success
- Set your objectives beforehand
- Establish benchmarks
- Optimize your campaigns
- Incorporate data into your company’s routine
Set your objectives beforehand
Setting your objectives and goals before diving into analytics is a must. It’s the best way to ensure your team is working toward a common goal, while increasing the odds that you’ll hit your key performance indicators.
Your marketing team’s main objective needs to relate to overall business goals. What’s the top profit generator for your business? That’s one place to start.
Marketing objectives might be:
- Generate high-quality leads at scale
- Improve checkout conversion rate
- Increase profit margins
- Boost sales through upselling and cross-selling
- Increase customer loyalty
- Reduce cart abandonment rate
Use the SMART goals framework when deciding on objectives. For example, yours can be “Reduce abandoned carts by 5% in Q1.” Goals don’t need to be complex, but they have to be clear.
Then break down your goals into actionable steps and send them to your teams:
- Decide on the goal you want to achieve.
- Prioritize the tasks you need to fulfill to get there.
- Specify how to fulfill each task.
- Send those marketing objectives to decision-makers and managers.
A benchmark is the set standard at which you compare something to. When used for digital marketing and web analytics, it involves taking note of a distinct metric (abandoned cart, customer acquisition cost, etc.) over a period of time, then using the benchmark to infer conclusions during decision making. Benchmarks provide valuable content and help you set meaningful targets and find out how you compare to yourself over time.
For example, say you are working on an SEO campaign to improve website traffic in November. You may track metrics such as pageviews, average time on page, bounce rate, and exit rate. November will act as the test period for your changes, so you decide that October site metrics will be your benchmark.
Each campaign will have a different benchmark. If you’re running ads, it may be the previous CTR or CPC. The important thing is to set a timeframe and specific metric to benchmark, so you can understand if your campaigns are successful or not.
Optimize your campaigns
“Analytics is focused on measuring business performance and the variables that assist such performance,” Siva says. “Optimization is the next step because it attempts to improve performance by incrementally tweaking marketing variables and their levels such that they are configured more appropriately or optimally.
“For example, a business may spend on variables such as advertising to new customers, devote resources to improve channel relationships, and other promotion efforts as part of its marketing campaign. All these factors drive performance metrics such as sales, profits, and market share.”
Siva adds that to make sure that resources devoted to each variable are configured, “ecommerce businesses often use simulations and experimentation to identify optimal resource allocation decisions across variables that drive performance.”
Incorporate data into your company’s routine
You can really see the difference in performance of companies that incorporate data into their weekly routines. Merchants in the habit of analyzing data, getting marketing insights from their analytics, and putting those insights into action are the ones who become the most successful.
Making data analytics a habit is simple. Whether you’re a solo entrepreneur or part of a team, all you need to do is implement weekly check-ups.
Successful companies focus on solving their biggest bottlenecks first. Start every week by opening your analytics and taking a clear view of what your priorities and marketing initiatives need to be for the coming days.
By understanding, for example, that your average page load time is high in comparison to your peers (or your previous week), and that page load time directly impacts conversions, you’ll know that its reduction should be a top priority for you.
As you can see in the example above, conversion rates are a big problem for this store. It should be focusing its efforts on optimizing its landing pages, store experience, and sales funnel to improve its conversion numbers and sell more.
You can also simply keep track of your metrics in a spreadsheet or on a whiteboard. The important thing is to prioritize. If you want to improve your numbers over time, always compare your data with the previous week.
Once you identify your biggest problems, brainstorm ideas that can positively impact the red metrics on your dashboard. Put these ideas into action and follow the same checkup the next week to verify if your numbers have improved. Repeat this process every week until all of your metrics are green.
That’s it. When you’re fluent in analytics and incorporate ecommerce data into the decision-making process of your company, nothing can stop you.
Common challenges around ecommerce analytics
Here are a few challenges you might face when doing ecommerce data analysis:
- Data inconsistency. Combining data from different sources can make analysis tough. Imagine using different channels like Facebook Ads, Google Ads, and email marketing. Each platform provides data in different formats and standards, which makes it difficult to consolidate the information for a comprehensive analysis. Route all your data into one platform and format to better understand and act on your data.
- Data privacy. Ensuring data privacy and security is critical. Failure to do so can lead to legal consequences and break trust with customers. Make sure you use secure data storage and do regular compliance checks to guarantee ongoing protection.
- Data quality. Poor quality data, like incorrect, incomplete, or outdated information, can misguide your decisions. Imagine making inventory decisions based on inaccurate sales data. You’d be over or understocking products and negatively impacting profitability.
- Cherry-picking data. Cherry-picking data means focusing on data points that support a particular conclusion, while ignoring or excluding other relevant data. Imagine you're running an online clothing store and analyzing sales data to decide what products to promote. You might cherry-pick data to focus solely on a successful winter jacket sales week, ignoring the overall decline throughout the entire season.
Addressing these challenges lets you improve the efficiency and effectiveness of your ecommerce KPIs. Once you become fluent in analytics, you can tell your own stories from the numbers you see and improve them.
Using the best ecommerce analytics tools to improve your store
Most businesses don’t fail due to lack of work or dedication—they fail due to executing the wrong things. The trick is to understand which data points are important for each development stage and to use that knowledge to make changes that will actually have a deep impact on your bottom line.
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Ecommerce analytics FAQ
What are the most common types of data in marketing analytics?
- Customer data
- Competitive intelligence
- Market research
- Customer feedback
- Preferences and interests