core ecommerce metrics

Nobody creates a winning website from scratch. They all start rough and improve with time. The key to this is metrics, because you can’t improve something you don’t understand.

The aim of this article is to give you the few simple metrics you need to measure, and improve, your online activities.

Success on the web requires getting people to do what you want them to when they visit your site. So the first thing you need to do is decide what it is you want them to do. This is called the Target Action. In most cases it’s buy something or fill in a form. Minor point here – does your site make it easy for people to engage in your Target Action? Ease of navigation is consistently one of the Top-10 complaints people have about web design.

The most critical number is your Conversion Rate. This is the percentage of visitors to your site who commit to your Target Action. If you want them to fill in a contact form, your Conversion Rate is the percentage of visitors who submit the form. If you’re selling online, your Conversion Rate is the percentage of visitors who complete the credit card payment process.

The overall average across the web is 2%. Amazon are said to have the highest rate at 9%, and well known travel sites can hit 7%. If your conversion rate is 2% or more, go get more visitors. If your conversion rate is less than 2%, put your money into improving the site.

If you do want to improve your site, you need to establish where it’s failing. If not enough visitors are committing the Target Action, work back from there. The first thing to ask is, “how many are getting to that point in the site?” This is your Prospect Rate. For example, if you want them to fill in a contact form, your Prospect Rate is the percentage of visitors who viewed the form. If you’re selling online, your Prospect Rate is the percentage of visitors who viewed product pages. You may want to establish different Prospect Rates for different sections, such as product pages and the credit card payment page.

Between viewing these pages and submitting them, the visitor has to do something. If it’s a form, they have to fill it in and hit the submit button. If it’s a shopping site they have to fill in a credit card page and submit that. People who look at these forms and don’t complete or submit them are said to have abandoned. Each form therefore has an Abandonment Rate, which is the percentage of people who got a page, but didn’t complete it.

The average Abandonment Rate for shopping carts is 40%. It can be worse. If you’ve never examined the Abandonment Rate for your contact forms, don’t be surprised if you find it is over 80%. You can easily calculate your Abandonment Rate for a form by comparing the number of views of the form with the number of views of the Thank You page, or whatever page they get sent when they submit the form. If you have no discrete, measurable page which is served when someone fills in a form, then change the site design so you have something to measure.

The basic rule for reducing abandonment on forms is – ask less questions. For sales the lesson is – keep selling. Don’t assume that once they’ve put something in the shopping basket they’re committed. They’re only committed when you’ve got their money.

If your Abandonment Rate is OK, but your Conversion Rate is too low, you need to look at the overall quality of your visitors. There are two related metrics here – Committed Visitor Index, and Bounce Rate.

When someone first arrives on your site and is scanning it to see if they’ll stick around, they are a Scanning Visitor. Once they commit to reading, they become a Committed Visitor. Your Committed Visitor Index is the percentage of visitors who stick around and read the site. Most people count Committed Visitors as those who read more than 1 page, or spend more than 1 minute, but you should decide from your site design what constitutes a serious visit.

It helps to separate Scanning and Committed Visitors when you’re looking at how people interact with the site. Getting people to stop scanning and start reading requires different design elements from selling to them once they’re seriously reading.

The percentage of visitors who merely scan the site then leave is your Bounce Rate. Bounce Rate is used for evaluating landing pages. It will vary according to source – the more people know about your site before they arrive the lower the Bounce Rate. Bounce Rates for forum listings can be as low as 25%, whereas Bounce Rates for banner ads are often 90% or more.

You can put all this together to determine your ROI for online advertising. You’ll either be paying for impressions or click-throughs. Either way the ROI calculation needs to be based on conversions. JupiterResearch has found that 75% of people buying online advertising don’t measure the return on investment. This certainly explains some of the prices people are bidding in Google. If you can measure effectively, you can outlast them. Multiply the Conversion Rate for visitors coming from each source by the cost per visitor. That’s your Cost Per Acquisition. Ask yourself if you can afford to spend that much to get the sale. In order to do this you need to be able to separate out your visitors according to their sources. For any given page, you need to know where those visitors came from.

So by working back from the Conversion Rate, examining the Abandonment Rate for each page between the Target Action and your landing pages, you can easily establish how well your site is performing, and where. Splitting your visitor analysis between Committed and Scanning visitors enables you to get a better handle on how your site handles people at different stages in the visit. With these metrics you can understand and improve your site’s performance.