eCommerce Analytics, eCommerce, Data analytics / 5 MIN READ

How to Grow an eCommerce Business with Data Analytics


“I don’t care about money or success,” said no eCommerce entrepreneur ever. The reality is that when launching a business of any kind, the goal is to make it a success. Then, once that is achieved, the next step is scaling up and growing it as much as sustainably possible. The trouble is without a firm grasp of eCommerce analytics, entrepreneurs often are deluded into believing they’re doing the best they can. In some cases, they’re actually barely scraping by, and in the worst cases they’re bleeding money to the point that they’ll eventually close up shop. We don’t want to see that happen to you!

Data Prevents Delusions of Grandeur

To be an entrepreneur means jumping with no net and building your parachute on the way down. The reality is, there are a lot of delusions that come into play when we’re developing a startup. We tell ourselves everything is okay when it’s not. We believe with all of our being that the next set of eCommerce strategies will provide the golden goose we’ve been praying for. The problem is, if we lie to ourselves too long, it can be detrimental not just to our sanity, but ultimately our bottom line. 

Simply put, data prevents delusions because it gives you cold hard facts that brings reality back into focus. Much like you wouldn’t try to convict a criminal without evidence, you shouldn’t make decisions blindly in your eCommerce business. You need concrete proof of the way things really are so that you can make sound decisions that actually give you a chance to succeed and grow. That is the power of eCommerce analytics - the metrics that are measured become your way of avoiding delusions and having proof of how things are actually going so you can act accordingly.

What’s a Metric?

In simple terms, a metric is any computable, constantly defined measurement of performance. Trackable eCommerce metrics can range from cart abandonment rate and traffic sources to average order value and conversion rate.

What’s a KPI?

KPIs (Key Performance Indicators), also popularly known as performance metrics, are measurable values that offer a detailed representation of where your business stands. Basically, KPIs help you in monitoring and measuring your business progress in relation to its objectives.


Keeping Score With eCommerce Metrics

When you start looking at metrics, you may ask yourself what makes a good one? There are four key characteristics of a good metric. Ask yourself these questions:

- Is it comparative? Good metrics have the capability to compare changes, demonstrate performance and track the progress over a particular period.

- Is it understandable? Besides being easy to evaluate, a good metric won’t demand in-depth explanations.

- Is it a ratio or rate? Ratios or rates are good metrics because they allow corrective action to change the outcome. It should also enhance performance when numbers go up, down, or even when they remain the same.

- Does the data change the way you behave? Finally, and most importantly, good metrics will change the way you behave. If receiving the information won’t change your behavior, it’s not a usable metric because doing something different should have an impact on something - sales, customer satisfaction, retention rate, etc...

The Best eCommerce Analytics Approach  for Growth

To be successful with eCommerce analytics, you should focus on one metric at a time, the metric that matters most. What does this mean? Look at the various KPIs in your business, and focus on improving just one. This is not to say you should dismiss all other metrics. However, by laser focusing on improving the one metric that matters most to you, odds are you will find that other metrics improve as well.

Here are a few KPIs you may want to consider as the one you focus on as your most important metric:

Average Order Value (AOV)

AOV is typically a measure of how much your clients spend on a single order from your business. If you want to get AOV, divide the total revenue for a given period by the total number of orders made during the same period.

For example, if you sell $100,000 within a six-month period and revenue was generated from 200 orders, then your AOV is $100,000/200 or $500 for that six months. 

Customer Lifetime Value (CLV)

CLV allows you to view your consumer base through the big picture. It lets you view the amount of revenue your consumers will produce for your business throughout your partnership with them. To get CLV, multiply the AOV with the average customer lifespan and average buying frequency rate.

So, if your consumers spend an average of $100, places six orders yearly, and spend roughly ten years in your business, then your average CLV is 100 X 10 X 6 = $6,000.

Customer Acquisition Cost (CAC)

CAC is typically the total amount you spend to bring a new client on board. You can calculate this metric by dividing your total revenue and marketing expenses for a specified period by the number of clients attained during that time. Generally, if the number starts to increase with time, it should be an alarm that something is wrong with your user experience or product.

Customer Retention Rate (CRR)

If you lose consumers as fast as you acquire them, then something is terribly wrong with your customer relationship strategy or products. Returning consumers are the eCommerce business engine since it costs much less to retain contented consumers than to bring others on board.

CRR helps you in tracking your company’s ability to hold onto consumers once you win them. To get your CRR, subtract the newly acquired clients during a specific period from the number of consumers you had at the end of that period. Afterward, divide the amount you get by the number of clients you had during the beginning of that time, and multiply by 100.

Shopping Cart Abandonment Rate

It really hurts to see prospective buyers loading up shopping carts and then abandon it at the final stage. Well, some of the reasons why this happens include:

  • High shipping costs or unexpected fees
  • Your business doesn’t offer a guest checkout option
  • Payment security concerns
  • Long checkout process
  • Poorly structured user experience

Shopping cart abandonment rate is a crucial metric that all eCommerce businesses need to track. To calculate this value, divide the number of completed cart checkouts during a specific period by the total number of carts loaded during the same period. Multiply the number you get with 100.

Conversion Rate (CR)

Chances are high that your eCommerce business is already tracking some type of CR on your website. CR is determined by dividing the conversion number by the total number of visitors who received the chance to take action.

Which eCommerce KPI Should You Focus On?

Empathy – This entails collecting quality feedback from your customers. You can then use this feedback to mold a solution that fits the market’s demands to solve the issue.The truth is it depends on your eCommerce business model, and your current stage of growth. According to the Lean Analytics framework, every stage is succinctly defined with the main focus being on the customer journey, target market and interaction. Here are the various stages of your business:


Stickiness – In simple terms, this shows how long does a customer ‘stick’ with you. Often referred to as your retention rate.

Virality –  Virality is the number of new customers generated by the existing customers. Think of it like a virus that spreads. If customer one brings in two more customers, and then those two people bring two each, your business is going “viral.” In business, virality is a metric that measures the exponential referral cycle, which accelerates business growth.

Revenue – Revenue relates to marketing and shows you how to monetize your products and services. In this stage, you need to optimize your business to generate more revenue per customer.

Scale – Scale measures sustainable growth. This metric helps in defining new acquisition channels and it's all about taking your proven business and growing it at scale.

How to Stick to One Metric

Draw a line in the sand, set a goal for your most important metric and try to reach it. Don’t allow shiny object syndrome to take your attention away from what you’ve committed to measuring and improving. Again, focusing on one will likely improve other KPIs. However, by focusing on one, and one alone, you have the opportunity to hone in on the best methods for improving it, and growing your revenue faster and easier than you thought possible as a result.

Bottom line - eCommerce analytics help guide you on the path of least resistance to growing your business. Once you define what you want to track, your next step is to determine how to track your metric with a high degree of confidence. When equipped with this data, you’ll be able to design experiments to analyze ways to optimize and increase your eCommerce revenue.  

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Originally published Dec 18, 2020 11:41:51 AM / Updated December 18, 2020