There’s one thing I’ve always loved about commerce: At the end of the day, it all boils down to simple math.
Revenue will always come down to 3 key metrics multiplied: traffic, conversion rate, and average order value. Your cost of customer acquisition can be calculated by simply dividing your ad spend by the number of customers acquired for a given period. And the most import number of all, Lifetime Customer Value, combines that of average order value, conversion rate, visit frequency, and customer lifespan.
The 5 key metrics
What this means is that when it all comes to a head, there are 5 key metrics you need to focus on for improving your commerce performance:
- Conversion rate
- Average order value
- Visit frequency
- Customer lifespan
Any time we manage to increase any of the above, it will directly impact either revenue, the cost of acquisition, or the all-important lifetime customer value.
Still with me?
When it comes to increasing commerce performance, whether online or offline, our efforts and tactics should always be focused on achieving uplift in these areas. The question then is this: how can we, as digital marketers, do that?
This is exactly what I answer in this two-part series. In this post, I consider traffic — what kind to measure and tactics for doing so. In the next installment, I consider the last four: conversion value, average order value, visit frequency, and customer lifespan.
Traffic: What are you looking for?
When it comes to traffic, it’s not necessarily that you get what you pay for, but — well, it’s important to know that while obtaining traffic volume is somewhat easily done, traffic quality isn’t. It’s essential that your traffic strategy focuses on generating visitors that are valuable to your business.
We can do as much as we can to ensure that pages are rendered following SEO best practices, such as optimizing landing pages for the right keywords. But we also need to measure whether and how our SEO efforts are actually driving visitors toward our strategic objectives. There may be times to focus on the number of visitors — such as when you’re trying to drive brand awareness, for example.
But as any marketer worth their weight in leads knows well, awareness is just the top of the funnel. If you’re just focused on the number of visitors, while ignoring their engagement, your efforts are likely not paying off — and definitely not as well as they could be.
This is where campaign management and analysis come in. It’s important to measure how a campaign or traffic source is impacting your business and strategic goals. When measuring these, you should rely less on “vanity” metrics such as page views, bounce rates, and session duration, and focus on the metrics that really matter.
Instead, you need to measure the actions your visitors take that have real business value or will directly lead to actions that do, such as asking a question to an online chat bot, creating an account, or requesting a call with sales, are critical. You can also track engagements with certain pages, sections of pages, or specific assets.
We’ve designed the Sitecore Experience Commerce (XC) platform to make this process simple and straightforward using Engagement Value metrics. These allow you to define the value of each type of engagement using points. As visitors engage with different parts of your site, their points grow, revealing where they’re at in their journey so you can know how best to engage them next.
It’s also a good idea to classify your campaigns by channel, campaign groups, and other facets. You can then analyze what’s working across different facets such as channel, audience, messaging, and product. With this data at hand, you can correlate it with other data, such as product engagement data, to gain even deeper insight.
The insight from all of this empowers you to shift resources and budget, or allocate additional ones, to the campaigns and traffic sources that are providing real business benefit. This is an extremely valuable tactic when it comes to lowering your cost of acquisition and providing visible ROI, especially for those businesses investing heavily in paid traffic channels.
Effectively measuring traffic is important, but the greater opportunities lie in the next four metrics. Check out the next blog in this two-part series to learn more. Coming soon.
With a passion for growth, improving CX, increasing lifetime customer value, and reducing cost per acquisition through digital, Jay Sanderson is the Global Experience Commerce Product Specialist at Sitecore. Follow him on LinkedIn.