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The Big Book of Ecommerce Marketing Chapter 4: Tracking & Reports

Lesson 2:

How To Find Insights From Your Data

When it comes to ecommerce, there are so many different metrics to monitor that it’s easy to feel overwhelmed. One of the best ways to think about all these metrics, and make them feel less overwhelming, is to create a framework where they all work together. 

The way we like to think about metrics here at Drip is to start with the most important one: your revenue. As a general rule, the higher the revenue, the better your store is doing (of course, you also need to keep an eye on profitability). 

What does ecommerce revenue consist of? Your revenue is the number of visitors to your site (site traffic) times your site’s conversion rate times the average sum of money that a customer spends:

Revenue = site traffic x site conversion rate x average order value (AOV)

Because site traffic, site conversion rate, and AOV are the metrics that most contribute to increasing your store revenue, they are the numbers to watch. Let’s take a closer look at each of them. 


1. Site traffic

Just like a physical store, an online store isn’t going anywhere if it doesn’t have visitors. Getting target customers to your site is a key building block for your business. A savvy paid ad strategy can help you get in front of your target customer, but it's not your only option! 

Here are ways to increase your site traffic: 

  • Consider working with influencers that have a loyal following within your target market. 
  • Seek PR placements, especially for events or during seasons relevant to your product. 
  • Optimize your site for search engines (SEO) to drive organic traffic to your site and content. 
  • Be a resource to your customers with content that establishes you as an expert and thought leader in your market.
  • Create opt-in forms to grow your email and SMS list — your emails and SMS campaigns can be a great source of traffic. 

The key to all of these strategies is to target and attract the RIGHT audience — people who need and want your product. When you bring a target customer to your website, they’ll convert.

2. Site conversion rate

Conversion rate has an exponential impact on your overall revenue - a 1% increase in conversion rate might mean 50% revenue growth - and simple actions that improve your site functionality will help boost this number. 

Site conversion rate simply tells you how effective your site is at converting visitors into paying customers. Look for this number in the analytics section of your shopping platform, or calculate it using the following formula: 

SITE CONVERSION RATE = Number of Conversions / Total Visitors

Aim for a site conversion rate over 2.8%, which is the average for US ecommerce stores. Here are a few simple, effective ways to boost site conversion rate: 

  • Increase your site speed - use an app or check to see if your shopping platform has a built-in tool to improve site speed. Also, utilize smaller images files and above-the-fold simplicity for a quick loading landing page that lets your customer cruise your site without pause upon arrival. 
  • Organize your site pages with the most important info at the top, this will make sure you grab your customers' limited attention with the information that matters most and is most likely to drive conversion. 
  • Make it seamless for your customer to navigate your site, browse products, add to cart, and checkout. Reducing the number of steps (and friction) to checkout shrinks the decision-making timeline and the chance for second-guessing or cart abandonment.
  • Nail down your product-market fit: simply put, make sure the product you are selling is needed by your target customer. When you are clear on who you are serving and what problem you are solving, it’ll be easiest to attract the RIGHT people to your site. 

3. Average order value (AOV)

Next, we’re looking at AOV, or average order value, which is simply the average amount of money spent each time a customer purchases from your shop. Increasing your AOV means you need fewer customers to reach your revenue goals, and any increases in conversion rate and traffic will have a bigger impact on your revenue. 

AVERAGE ORDER VALUE = Total Revenue / Numbers of Orders Taken

Here are a few ways to drive up AOV:

  • Create order minimums for free shipping. 
  • Cross-sell complementary products on product pages, in cart upsells, in your abandoned cart emails, and via SMS. 
  • Provide bundle deals, curated sets for specific customer needs, or promotional bulk options for customers who want to stock up. 

Now that you know your top three metrics, it is time to dive in deeper… let’s go!  

4. Customer acquisition cost (CAC)

Customer acquisition cost (CAC) is a really interesting metric because it gives you a snapshot of how your marketing efforts are cutting into your profits. 

Ideally, your CAC should be lower than your Average Order Value and definitely lower than your Customer Lifetime Value (more on this metric below). In other words, you want to be spending less money acquiring your customer than you get paid by that customer.

If you have a higher-than-ideal CAC, your goal is to improve the efficacy of your marketing efforts, meaning you'll acquire more customers for fewer dollars each. When your acquisition efforts become more effective, you'll earn more customers for your investment and see your CAC drop.

A few ways to lower your CAC: 

  • For paid ads, continuously make adjustments to your audience targeting to ensure you're effectively reaching only your target audience. 
  • Invest in efforts to build organic traffic (see above) - it’s much cheaper, however, it takes longer to build momentum so consistency and patience are key.
  • Create a referral program so that your existing customers are incentivized to share their enthusiasm for your business.  

5. Customer lifetime value (CLTV)

Now we’ll look at Customer Lifetime Value, or CLTV, which is the total amount you earn from a customer over a period of time. CLTV is a reflection of AOV and retention (or loyalty), so those are the two factors to focus on in order to boost CLTV. 

Knowing your CLTV helps you figure out how high your CAC can go. For example, your Customer Acquisition Cost might be $20 and your AOV is $25. This doesn’t look very good. However, if you know that your average customer returns and buys from you three more times over a year, your CLTV is $100, and your CAC is still $20. Now, the numbers are looking up! 

Check your shopping platform or calculate this metric using the following formula: 

LIFETIME VALUE = Average Order Value x Number Of Transactions Within Retention Period

Let's talk a little more about retention. Retention tells you how many times you can expect your customer to return once you acquire them. Repeat transactions are the least expensive for you because you’ve already paid to acquire this customer so their repeat orders don’t have acquisition costs attached to them. Retention is vital to the success of your ecommerce business, it’s a make-or-break metric that’s worth your time and attention.

Retention depends on customer loyalty, which means your need to build a relationship with your customers over time. To increase retention and your CLTV metric, build email and SMS automations (like the ready-made Drip’s playbooks) that will personalize your customer experience, nurture your customers, and bring your business top of mind at just the right moments without you having to do a thing.

6. Channel revenue attribution

Now we’ll move into some of the more nuanced metrics that give you deeper clarity on the ways you are earning customers and how to increase your revenue.

Different marketing channels have different CACs and therefore different profitability, too. The revenue attributed to email and SMS is more profitable than revenue from influencers or paid ads because of the associated costs you incur. So, the more of your revenue that you earn from email and SMS, the better for your business. 

The main task with this metric is to know where your money is coming from and how much you are spending on each channel.

Since email is such an important and cost-effective strategy, you want to strive for earning 20-30% of your revenue from email marketing. 

Email metrics

Now that we have an understanding of ecommerce metrics overall, let’s focus on your email metrics (in order of importance):

  1. Email revenue (both as an absolute number and as a percentage of your total revenue)
  2. Email conversion rate 
  3. Click rate
  4. Open rate
  5. Unsubscribe rate

1. Email revenue

In addition to looking at the big picture and knowing how much of your revenue is coming from email + SMS automations and campaigns, always remember to do a monthly check on your automated series so you can look at the revenue from each email. 

2. Email conversion rate 

Email conversion rate shows you what percentage of email recipients made a purchase (keep in mind that every email will have a conversion goal). While some emails are intended to engage and educate your readers, more than half of your emails should be aimed at conversion.

Some of the ways you can increase your email conversion rate are to:

  • Segment based on interest or past purchases, and then send targeted email campaigns accordingly.
  • Add personalization (especially in your automations). Use the recipient’s first name in all abandoned checkout and post-purchase emails. Where applicable, use the names of abandoned or purchased products. 
  • Do a survey of your audience to better understand their needs and what they’re specifically looking for in your product, then use the feedback to better serve their needs in emails (and other channels).
  • Make sure your CTA stands out (use buttons) and is positioned high enough in the email. 
  • Make sure your key automations are activated. 

3. Click rate 

Click rate is the percentage of email recipients who clicked a link in the email. This metric is a signal of how interested your subscribers are in your emails. 

The average email click rate will vary quite a bit across automation emails and campaigns. Because automation emails are, by default, very timely, personalized, and targeted, they’ll get a higher click rate and conversion rate. It’s not atypical to see 10% click rate (or higher) in some automation emails, like Welcome, Abandoned Checkout, and Post Purchase. 

Campaign click rate is generally much lower—between 1% and 3% for regular campaigns, and slightly higher for big sales campaigns. 

Here are some ways to increase click rate: 

  • Keep your emails short and focused. Don’t try to cram too much information into a single email, as doing so makes it harder for readers to focus (and often results in the email being closed and no action taken).
  • Make your CTA buttons clear and prominent. 
  • Make your email design and copy clear and concise. Remember: clear over clever, always. You can by all means make your brand voice and visual identity quirky and fun, but not at the expense of clarity. A confused mind doesn’t buy.
  • Experiment with the CTA in the buttons. Ditch the standard “SHOP NOW” and try more creative, curiosity-driven calls to action. For example “CHECK IT OUT”, “EXPLORE”, “LEARN MORE”, and “GO →”. 

4. Open rate

Since Apple’s iOS15 update in 2021, open rates have become far less reliable than it used to be. 

In a post-iOS15 world, open rate shouldn’t be taken at face value. Some of the opens that contribute to your rate are “fake” opens made by Apple in order to protect user privacy. Mostly, you can think about your open rate as something that shows accurate trends (not hard and fast numbers). Use these trends to compare the “open rates” of different emails, and then decide which ones attracted more interest from your subscribers. 

Regardless of how iOS15 has affected open rates, you can still increase them by: 

  • A/B testing subject lines and preview text. Shorter subject lines and preview text that is value and curiosity-driven do best. 
  • Here are some examples:
    • 50 grams of sugar? (for an email about how competitors’ food bars have loads of sugar)
    • We love hate mail (for an email that features funny reviews that look negative but are actually positive)
    • Stupid question, but… (for an email asking for a product review)
  • Excluding unengaged subscribers from your campaign sends. 
  • Experimenting with different send times (try sending during offpeak hours, which tend to be in the morning for most brands and audiences).
  • Never send to purchased lists (so you don’t trigger spam filters). 
  • Include a recipient’s’ first name in the email (even if it’s in the ALT text). This tends to help emails land in the primary inbox tab.

5. Unsubscribe rate

It’s important to keep a close eye on your unsubscribe rate, as it signifies how relevant and timely your content is to your subscribers. If your unsubscribe rate is high, it means you’re either emailing the wrong people, emailing the wrong content, or sending too much. 

A healthy unsubscribe rate should be under 0.5%. If yours is higher, here are some things you can do to decrease it:

  • Get better at segmenting your recipients. Your most engaged subscribers should receive the most emails from you, and your least engaged subscribers should only hear from you a couple of times per month (more on this in our segmentation section). 
  • Check your subscriber sources. Are you attracting the right audience? Are you attracting them using the right incentives? For example, if you’re running sweepstakes and giveaways that award iPads to winners (and you’re selling healthy food items or apparel), you’ll end up with thousands of completely unqualified subscribers on your list. The incentives to join your list should align with your products and your company as a whole. 
  • Check your content. Are you sending valuable and interesting information? Are you answering your recipients’ questions in and sharing info they’d potentially be interested in? These things go back to knowing your audience, and are the foundation of everything, including successful email + SMS marketing. 
  • Add communication preferences to your footer. Call them something descriptive (i.e. instead of adding a hyperlink that says “Manage Preferences”, say “Click to receive less email”). Create options to only hear from you once per month or only for sales & discounts, and then honor those preferences as you send campaigns. 
  • Consider reducing your send frequency. Most brands shouldn’t be sending more than 2 campaigns per week.