Share, , Google Plus, Pinterest,

Posted in:

Use analytics to stay ahead in competitive markets

Web analytics will help you make better decisions at speed, making your business more competitive and agile, says payment expert PayGate.

The online marketplace has never been more challenging, competitive and demanding. The millennial and Gen X shoppers use e-commerce platforms to choose their products, others go online to hunt for bargains, and some use e-commerce for the convenience and the variety. The demand fluctuates alongside the personality of the shopper and it is only through analytics and specific metrics that the business owner can understand these demands and adapt accordingly.

This is precisely why analytics should sit at the very top of the business toolbox to provide your business with consistent insights that you can use to make strategic decisions.  With these tools, you get statistical information about your online marketing and sales activities that can help you gain a competitive advantage. For example, understanding shifts in consumer behaviour and catching trends that could potentially transform your sales or business approaches.

Through understanding these aspects of your business, you can potentially shift your profit margin and business growth over the short and long term.

The essential metrics every online business should track

Here you can find 10 metrics that will provide you with powerful insights that will help you build a thriving online business.

Metric 1 – Website traffic

More visitors means more sales. This means that you need to determine which platforms your customers are using and then actively engage with them there. For example, social media is a powerful tool for building rapport and relationships. Search engine optimisation is essential for appearing in Google searches when customers are looking for what your business sells. It’s also worth spending some budget on search engine marketing with online advertisements or influencer marketing, where you pay for someone to endorse your products, as these methods put your products in front of the right audiences. Here are some helpful tips on how you can get your first customers [link to story #34: How to get your first customers, once published in Oct]

Metric 2: Revenue by traffic source

You’ve invested into traffic generation and paid attention to the platforms, now you need to determine which ones work best so you can focus your energies optimising them for success. If you only track visits or transactions, you’re missing half the story. What you need to know is whether social is delivering results, or if SEO isn’t working, or if your spend on influencers is hit and miss. That way you can focus on what works – and save money on the channels that don’t.

Metric 3: Sales conversion rates

Let’s do some maths. If you have 1 000 visitors coming to your website every month and your conversion rate is 0.1%, then you’re only getting one sale per 1 000 customers. If you improve your conversion rate to 1%, you’re getting 10 sales. The formula for measuring your sales conversion rates is simple:

Conversion rate = Number of sales/ divided by the number of visitors x 100%.

If your conversion rate is low, use high-quality images, add trust badges, add customer reviews, implement live customer support chats, and constantly improve your customer value proposition to really make your site a pleasant experience when customers visit. Make your customers feel wanted, heard and cared for, and you’re on your way to improving their loyalty and spend.

Metric 4: Cost per acquisition

If you are spending more on getting a customer to your site than they are spending on your site, then you have a problem. Those customers are too expensive. To work out whether or not your acquisition strategy is delivering value, use the customer acquisition cost metric.

Customer acquisition cost = Total sales and marketing expenses/ divided by number of customers.

If this is too high, you need to consider improving your sales conversion rates, leveraging more word-of-mouth referrals, and investing in existing customers so they spend more. Have a look at these tips on how to provide excellent service to attract and convert more customers.

Metric 5: Average order value

The average order value is how much money a customer spends, on average, when they visit your site. The more they buy in a single order, the more profit for you. To work out the average order value for your customers follow this simple formula:

Average order value = Total revenue/ divided by number of orders placed.

To improve on this metric, encourage your customers to spend more than they had originally planned. You can use clever tools such as upselling, discounts and freebies. Here are some ways to increase your average order value and boost your profits.

Metric #6: Customer lifetime value

The customer lifetime value is the amount of money each customer is expected to spend on your products and services over the course of their relationship with you. When you know what this number is, you can then assess how much you should spend on acquiring a customer. The formula for this is:

Customer lifetime value = 52 weeks x average customer value per week x average customer lifespan.

To increase this metric, you need to get customers to increase their average order value, create brand loyalty and build long-term relationships. Follow our handy guide that takes you through this process right here on how to keep them coming back.

Metric 7: Percentage of returning customers

It’s actually better, and cheaper, to focus on your existing customers rather than to spend your time and money constantly wooing new customers. Don’t neglect the people you already have, rather invest into this formula to balance the two more carefully:

Percentage of returning customers = number of returning customers/ divided by the total number of customers x 100%.

Improve this number by going the extra mile, delivering extraordinary service, surprising customers, implementing a loyalty programme and improving customer communication.

Metric 8: Shopping cart abandonment rate

This percentage refers to the number of customers who add items to a cart and then leave,

abandoning the cart before they complete the purchase. This tends to be a very high number and the reasons can be anything from being interrupted, to enduring too complex a shopping process, to losing interest. The formula for working this out is also very easy:

Abandonment rate = number of completed purchases/ divided by number of shopping carts created/ divided by 100. 

Reduce this number by making the checkout process seamless, your website easy to navigate and the experience effortless. Here are more tips on how to design a website that gets customers to stay, especially when it comes to the payments page.

Metric 9: Return on ad spend

You can easily spend more money than you’re making if you don’t know exactly how much money you’re getting back in revenue for every Rand you spend on advertising to get new revenue. The formula for avoiding this disaster is:

Return on ad spend = revenue from advertising/ divided by the cost of advertising.

When running ad campaigns, it can be easy to get caught up in all the exciting metrics, but what matters is the bottom line. If your campaign isn’t producing a good return on ad spend, you need to change it up.

Metric #10: Gross profit margin

A business has to make a profit and your gross profit margin is the percentage that defines your true profit, or real income. This shows how much money your business brings you and how healthy it is. The average ecommerce gross margin is approximately 30-40% but this can vary according to the business. The formula to work this out is:

Gross profit margin = revenue (costs of goods sold) divided by revenue x 100%.

Improve your profits by knowing the cost of your inventory and being as granular as possible in finding all the variable costs so you can keep things under tight control.


The best way to use these metrics is to integrate your shopping cart with Google Analytics. This will allow you to set up goals and ad tracking codes to the relevant sections of your website that will allow you comprehensive insight into what’s going on. These results are so important to measure as they will help you to determine if your strategy is solid, help you identify bottlenecks in customer acquisition, locate areas that need improvement, and find new ways to grow your revenue. They will also help you to refine your spend so you know every penny is focused and delivering the right results.

DPO PayGate is a proud Partner of the NSBC.