Revenue per visit: A crucial e-commerce KPI

In the hyper-competitive world of e-commerce, it is imperative to keep a vigilant eye on your metrics. Knowing the subtleties of how your website traffic translates into revenue is important. This knowledge empowers your business with the ability to pivot on a dime and optimize the way you target your customers. Having this kind of analytical know-how allows you to adjust your marketing and other initiatives on the fly and can yield significant competitive advantages. Improving these KPIs, even by what may seem like a marginal percentage or dollar value, can often have an exponential effect on your bottom line.

In Sitecore Discover’s 2020 E-commerce Personalization Report, we asked e-commerce leaders what the most important metric for measuring the success of their personalization efforts. 37% of survey respondents said conversion rate, followed by 26% saying average order value, and 21% customer lifetime value. In last place, only 16% chose revenue per visit. 

 

Download the full 2020 E-commerce Personalization Report here. 

Despite these insights into the minds of e-commerce leaders, one of the most powerful measures of an e-commerce shop’s health is revenue per visit (RPV). While many online retailers focus on conversion rate (CVR) and average order value (AOV) to judge the effectiveness of their marketing strategies and website performance, RPV tells a much more complete story. By adding RPV to their analytic mix, leading retailers are maximizing revenue performance in their online stores uncovering new opportunities for growth.

What is revenue per visit?

RPV is a measure of the monetary value generated by each unique visit to your website. It is a composite measure of CVR and AOV—and helps balance out the shortcomings of each of those common metrics. To understand RPV, let’s take a look at these two components and where their limitations lie:

 

Conversion rate = conversions/visits

CVR gives you vital information about what is likely to happen each time a consumer visits your online store. It measures the percentage of your website visitors who ultimately purchased your products. For example, if 77 out of every 1000 visitors to your site last month ended up buying something from you, you could say that month’s CVR was 7.7%.

What this number can tell you is how often customers visiting your site find something they need and how good your website is at persuading customers to complete a sale. What it does not tell you is the dollar value that is earned from those purchases. CVR treats all sales equally, whether they are low-dollar or high-dollar.

 

Average order value = revenue/conversions

AOV addresses that limitation by totaling revenue and dividing it by the number of sales you made. The result is an important number to know. Putting an average dollar value on your orders and knowing your conversion rate, however, still doesn’t provide a complete picture of what is happening in your online store.

RPV yields a deeper insight into your store’s performance than a simple CVR or AOV because it quantifies the amount of money your site is making for every unique visitor—which is an actionable data point when it comes to optimizing revenue and deciding what promotions might work best for your products.

How to calculate revenue per visit

One way to calculate revenue per visit is implied in the name: You simply take the revenue your site generated during a given time period and divide it by the number of visitors. Keep in mind that you should only be measuring unique visitors to your site, because the total number of visits, including repeat sessions, can be deceiving.

 

Revenue per visit = conversion rate x average order value

If you are already measuring CVR and AOV, RPV offers a balanced way to understand the interaction between increasing or decreasing conversion rates vs average order value.

Let’s say, for example, that you have a pet supply business and in September, your 3/$10 cat toy promotion performed well. The price point appealed to cat owners from all walks of life and encouraged adding more items to carts. Compared to the previous month, your CVR went up—from 7.7% to 10%. Your average order value was $40. In that case, your RPV would be:

10% (CVR) x $40 (AOV) = $4 (RPV)

In October, you decide to promote a new product: a deluxe cat castle. It’s a bit pricey at $100, so it attracts only the most serious cat connoisseurs. CVR falls dramatically by 50%, but enough cat castles are sold to boost your AOV by 175% and RPV by 38%:

5% (CVR) x $110 (AOV) = $5.50 (RPV)

 

This 38% increased RPV puts October’s CVR decline into perspective. 

In November, as you prepare to capitalize on the holiday rush, you decide to bundle your most popular cat toys with your cat castle. The bundle is a successful one for both your business and cats everywhere. It bolsters a moderate AOV while attracting enough interest to bring CVR back up a bit:

8% (CVR) x $90 (AOV) = $7.20 (RPV)

 

In this case, the 18% decline in AOV is offset by the 60% improvement in CVR. This is demonstrated by the 38% increase in RPV.

RPV provides a more holistic picture than either CVR or AOV in isolation, and it makes clear that a drop in either value does not always have to spell disaster for your business.

RPV is a multi-dimensional metric that balances the dueling pressures of converting more customers whilst preserving AOV. Knowing your RPV can help you decide how you will promote your product mix and can tell you whether your efforts to acquire new visitors are working across segment channels.

Having a high-performing, AI-driven customer experience platform powering your site helps greatly to drive RPV because personalizing each session supports both CVR and AOV across all types of user segments and marketing channels. A highly personalized customer experience does this by highlighting your most relevant products for each shopper, whereas it also improves AOV because of its finely tuned ability to upsell and cross-sell through recommendations. In short, if your website is actively working to understand the intent and meet your customers’ needs, RPV will reflect this.

Sound complicated? Sitecore Discover’s AI makes it easy

AI virtually eliminates the need to maintain dozens or hundreds of rules to serve the right content to various different audiences. Stronger yet, Sitecore Discover automatically maintains a balance between CVR and AOV, but when needed, A/B tests can be performed to validate new business requirements to measure the impact of shifting and reranking results based on these requirements — without having to rewrite numerous rules. This allows retailers powered by Sitecore Discover to balance the needs of the most basic comparison shoppers to the most dedicated loyal customers.

Sitecore Discover does not expect all e-commerce professionals to be analytical wizards who have the luxury of sitting around running statistical models to grow their business. The good news is that with the right technology in place, metrics like RPV, CVR, and AOV (and more) are available instantly in an at-a-glance dashboard or sent via email notifications.

 

Sitecore Discover has deep analytics built into its personalization engine with an interface that is highly intuitive, interactive, and easy to use. RPV is just one of the data points it provides that you can use to track how your strategies are translating into real business growth—without hiring specialized personnel to conduct analyses and generate reports. Using Sitecore Discover, you can explore “what-if” scenarios and A/B test them to create the just-right promotions and strategies to boost your sales and uncover exciting new areas of opportunity. Sitecore Discover also gives you a first-hand view of the direct value that personalization adds to your bottom line. 

 

These are the advanced analytic capabilities that leading brands are using to maintain their competitive edge in an increasingly unpredictable e-commerce landscape. With Sitecore Discover, your business can provide superior customer experiences while giving you the agility to navigate the uncertainties inherent in the online retail business.