Ensuring the long-term success of your eCommerce business can be a heavy crown to wear, but analysing your metrics, gathering qualitative data, and making big decisions based on this information could lead you to an even more significant level of success than you’ve already reached.
We’ve talked about calculating your Customer Lifetime Value, and while CLV is our main focus, it doesn’t mean that Conversion Rate isn’t important. Conversion Rate is a part of the CLV equation; it is part of your customer journey and gives you insight into how you can create longer-lasting relationships with your customers that keep them coming back.
As an eCommerce manager, director, or founder, you will already have heard about Conversion Rate and its importance. We’re here to give you more detail and extra insight into the metrics and things to keep in mind.
How to Calculate Conversion Rate
Calculating your Conversion Rate is the first step to calculating your Customer Lifetime Value. Your Conversion Rate is the percentage of visitors you receive on your website who purchase a product (or service) or fill out a form — whatever your goal is for them.
Here is the Conversion Rate formula:
Of course, this calculation will differ depending on whether you’re calculating for your eCommerce store, lead generation, email marketing, or funnel conversion rate.
In all instances, the basis of the formula will remain the same while the variables will change.
When analysing the collected data and interpreting the results to make your decisions, keep in mind the overall context, industry average, and historical trends.
How Your Conversion Rate Stacks Up Against Industry Benchmarks
The problem many eCommerce managers, directors, and founders face is needing to know which benchmarks they should measure their metrics against. Conversion Rates (specifically for eCommerce) vary depending on the industry, products or services, and target market.
For example, the average Conversion Rate for the retail sector will be entirely different from the travel industry. This is because the product or service and its target audience are different. For example, should your products have high perceived value, they may have a lower Conversion Rate as your products appeal to a certain earning category of customers. Similarly, if your product or service is a once-a-month purchase like a bottle of vitamins, it will have a higher Conversion Rate when compared to a not-so-regular purchase like mattresses.
That being said, even eCommerce companies within the same sector will see differing numbers as their customers may adopt different approaches to what they are looking for. Every calculation needs to consider your customers and who they are — but more on that later.
Some factors influencing your Conversion Rate are website design, product pricing, shipping costs, return policy, loyalty programs, and so on. Conversion Rate can also vary by traffic source and even by device. The truth is that 58.99% of website users are on mobile devices, which needs to be accounted for within your data.
The truth is that Conversion Rate alone will not have the largest impact on the health of your eCommerce store. Including additional KPIs like gross margin, average order value, and Customer Lifetime Value will give you a clear picture of what your store is succeeding at and lacking.
How to Influence Your Metrics
Focusing on a single metric, like Conversion Rate, won’t allow your eCommerce business to reach its full potential.
Like when we build a home, a single blueprint is not the only thing we need to ensure it stands on a solid foundation — deep digging and analysing need to be done before implementing decisions.
The metric that gives you a clear overview of the health of your eCommerce business is Customer Lifetime Value. It uses almost all metrics within your business to calculate its success with your customers and whether you’ll have the repeat purchases you need.
There are many ways you, as an eCommerce leader, can influence your metrics. While we have many blogs describing different sections like Nail Customer Optimisation, 7 Strategies to Kick Start Your Customer Value Optimisation, and How Did Your Site Perform This Year?, here are some quick tips to influence your metrics.
Web Design Optimisation
Optimising your web design to take the customer where they want to be with as little effort as possible is a fast track to increased metrics.
User experience should be the highest priority in your web design, and guiding the customer throughout your site will make for a seamless customer journey. And don’t forget to focus on creating a mobile-friendly site too. Most users will visit your store on mobile devices, so don’t make it difficult for them.
Additionally, many development tasks will improve the overall customer journey and create an experience that stays with them. Things that seem unimportant, like site speed, usability, click-through rates, bounce rates, etc, all form part of the impression your brand leaves on your customers.
Social proof goes hand-in-hand with loyalty programs and allows customers to visualise whether or not your brand is fit for them. Showcasing testimonials and customer reviews on your site will build credibility with potential customers.
And using an app like Okendo will even allow potential customers to search for suitable products based on what attributes they are looking for. This is a great way to show your credibility while making your search function as easy as possible. Otherwise, a tool like Judge.me will give you more bang for your buck.
Additionally, using apps like Videowise will allow your customers to speak for you. TikTok is all the rage as people gravitate more towards video than text. That’s why implementing a UGC (User Generated Content) approach to your social proof will increase your Conversion Rate.
Segmenting your customers shouldn’t always be based on what they bought from you or their favourite colour. RFM segmentation with Omniconvert allows you to segment customers based on how recently they purchased, how frequently they purchased, and how large or small their monetary value is.
This allows you to personalise your site data to improve your Conversion Rate. Knowing who your customers are and where they are in their journey will help you to cater to their needs, even if they’re small.
When you have an eCommerce store, the testing is never over. You need to constantly test your web design, copy, sign-up forms, email marketing, and so on.
A/B testing can give you some of the most crucial information needed to implement much-needed changes you may not otherwise have known about.
Make Your Life Easier
While calculating your Conversion Rate and analysing this metric is essential, you will need the whole picture to make informed decisions about your eCommerce strategy. Taking into account multiple metrics will give you an overview of the health of your store.
Our incredibly talented team consistently educates themselves on CLV and how it can help your eCommerce business hit all goals. We love to ensure that we cover all bases by educating ourselves, implementing the changes, and tweaking changes based on data. You can get regular tips by following Adam and Peter on LinkedIn.
As a leader in the industry, you should be informed every step of the way, and with the number of decisions you have to make, we like to make your life a little easier. If you want to find out what changes you need to make, get in touch with us at Blend.