If you've ever logged into your webstore traffic tools and felt overwhelmed by all the information there, you're not alone. What I am going to share with you will allow you to filter out 90% of that information for what really matters, three metrics that you can influence that will determine how successful you are at the end of the day: Visits, Conversion Rate, and Average Order Size.
THE MECHANICS:
Visits is a measurement of how many times a someone "walks" into your virtual store, like the door chime on the front door to a shop, but it's a chime that only rings when someone comes in. It doesn't matter if it is the same person coming back or different people. The Conversion Rate is a percentage of visits to your site that translate into sales. If your software doesn't give this to you, just divide visits by your number of orders. Average Order Size is exactly that, just be sure you're not including taxes and shipping.
To show why these metrics are important in the end, let me show you how they come together to : Visits x Conversion Rate x Avg. Order Size = Gross Sales.
In plain English, if I had 100 visits to my website, 10% of the visits translated into sales, and on average each sale was $100, I made $1000 in that time period. You can see how a small change in any one of these metrics will have a big influence on the total. Now we're getting to why these are important, read on.
THE APPLICATION (This is the most important part!):
Hopefully you'll already have a good idea of what your sales are in a period, but what we've derived are three components that each multiply the final value, each one of which can be influenced. Consider this translation of these metrics:
Visits = How successful I am at getting people onto my site through email, magazines, television, etc.
Conversion Rate = How successful I am at getting the people who visit my site to buy something.
Average Order Size = How successful I am at getting the people that buy to buy a lot.
Are these things that you can control? Absolutely! And the powerful thing is that each one has an equal impact on your overall sales. So if you can't focus on them all, choose just one. For example, if you can't afford to spend more on advertising, then pay more attention to the user experience (conversion rate), or do a better job at promoting add-ons and accessories (average order size). Maybe you decide to bring in a better line of products to sell (conversion rate and/or visits). Think about the opposite effects of lowering your prices and how you'll need to compensate with either a larger conversion rate or more visits.
The way these three metrics work together is powerful! The marketer who is constantly aware of changes in these numbers, what influences them, and creates a marketing plan with these metrics in mind will be an e-commerce marketing superstar!
FYI to those who get this and want to take it to the next level. Instead of using Average Order Size, try your Average Order Profit. Ultimately we should care more about profit than just our sales. Because 3rd party analytics software usually only tracks sales, I left it out. It is not too hard to plug in and may make more sense for the way you think about marketing your products.
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