Online retailers have an ocean of metrics to track and KPIs to measure, and it's easy to lose track of what's important, urgent, and impactful. Your store's conversions and the conversion rate are probably the most important metrics to measure - conversions result in revenue, and tracking how your revenue is changing over time is crucial to know if your store is growing or not.
A 'conversion' is a website visitor session that leads to purchase (of one or more products). The ratio of conversions to visitor sessions is the 'conversion rate'.
According to Kibo's quarterly report for Q2 of 2021, the average global conversion rate was 2.7%, and the channel with the highest conversion rate (3%) was search or organic.
The global eCommerce conversion rate has experienced a decline of close to 1% from 2014 to 2021. A large part of this decline is because of the widespread penetration of smartphones and the ease of access to the internet. These two factors have led to more people casually browsing online stores but not making purchases, ultimately reducing the conversion rate.
Narrowing the scope to your brand and online store, how do you find out what is causing a drop in conversions and the conversion rate for your store? There are many factors that can influence the conversion rate. Which ones should you track and measure?
In this article, we explore 15 e-commerce metrics that impact conversion rates, and measuring them will help you uncover what exactly is causing a drop in your store's conversion rate.
5 Types of eCommerce Conversion Rates That You Must Track
Find out about the conversion rate metrics to help you detect your eCommerce store's performance:
Overall Conversion Rate
Overall conversion rate is the measurement of all conversions that happen via your online store. Conversions are not divided by any criteria like medium, campaign or geography, all store conversions for a given period are considered, and the rate is measured using the formula:
(Total conversions/Total number of visitors) x 100
While every other conversion rate that follows gives you insights into the performance of a particular segment of the business (like a campaign or a landing page specifically), this gives you an overview of how the business is performing as a whole.
Marketing Conversion Rate
Your store will acquire visitors and consequent conversions through multiple channels. You will get website traffic through organic and paid efforts like SEO, social media posts, search ads, social media ads, YouTube videos, etc. It's important to understand the results that each of these marketing efforts are yielding, and you can achieve that by segregating conversions by each marketing channel and then calculating:
(Conversions from the marketing channel/Total visitors from the marketing channel)*100
Ad Channel Conversion Rate
This metric will help you understand which advertisements are performing and which aren't, and this is an important metric because you will be spending a good amount of your marketing budget on paid ads. Segregate the conversions by ads and then calculate the rate by:
(Conversions from the ad/Total visitors from the ad)*100
Once you have an idea of which ads aren't performing, you can work on tweaking them or just shut these ads down and divert the budget into ads that are performing well.
Landing Page Conversion Rate
Tracking landing page conversions will help you find a clear winner when you run A/B tests. It will also give you insights into which landing pages are performing well and you can use these as templates for all other campaigns. To track this rate, calculate:
(Conversions on the landing page/Total visitors to landing page)*100
Customer Segment Specific Conversion Rate
Different customer segments react to campaigns differently. Your audience from the US might convert more from a particular landing page while visitors from Germany to the same page might not convert as well.
This does not always have to be because of the landing page or the campaign per se, it could just be a customer-segment-specific reason, like language. Tracking this metric will give you an idea of which customer segments are not converting well and you can work on tailoring different marketing campaigns for them. To calculate this rate:
(Conversion for the customer segment/Total visitors from the customer segment)*100
15 eCommerce Metrics Online Stores Should Measure to Know Why the Conversion Rate is Dropping
We look at 15 e-commerce metrics and how to interpret the impact of their movement on conversion rate
Impressions are the number of times someone saw an ad, a post or a link to your website. Impressions represent brand visibility. If your impression rate is dropping, the number of people your campaigns are reaching is dropping and this will impact overall traffic and consequently conversion rate.
Engagement rate measures the number of people who interact with an ad, a post or a link. While engagement could be anything from comment and alike to a subscribe, because you are measuring its impact on conversions, you only want to consider engagement that leads the user to the website, for example, a link click.
If your impressions remain high but the engagement rate is dropping, it means your campaigns are getting visibility but are not able to engage people. This will result in a drop in overall traffic and consequently, conversions.
Organic traffic to your website is visitors who come from search engines. A 2016 report by Wolfgang Digital stated that over 43.0% of all eCommerce traffic comes from Google search. People entering a store by searching a keyword are also more likely to convert, Kibo's quarterly report for Q2 of 2021 reported search as the highest converting channel with 3% conversions. Any fluctuation in organic traffic will, therefore greatly impact your conversion rates.
Average Order Value (AOV)
The average order value is the average amount you earn from each customer. Dividing the overall sales with the total number of buyers will give you the average amount they each spent. A drop in AOV could indicate that your users are dropping off at checkout or are abandoning products in the cart which is leading to a drop in conversion rate.
Cart Abandonment Rate
An increase in cart abandonment rate will clearly lead to a decrease in conversion rate. A high or increasing cart abandonment rate indicates some hurdle at the final purchase stage. Visitors are interested in the product, they are adding it to the cart, but are abandoning it just before checkout. Engaging these users with cross-sells, up-sells or discounts is a great way to encourage the purchase and increase conversion rate.
Repeat customers and Customer Retention Rate
A returning user is one who makes a purchase and returns to make another one and the customer retention rate is the rate of returning visitors to your store. It is a great metric to measure brand loyalty. A drop in CRR will result in a drop in repeat purchases and will reduce the conversion rate.
If you send emails to 100 users, 40 of whom click a link to your store and 20 of them make a purchase you have an email CTR of 40 percent and an email-to-conversion rate of 20 percent. If you continue to send the same number of emails but experience a drop in CTR, there is going to be a consequent drop in conversion rate.
The subscription rate is a measure of the number of people who subscribe to your emails. It's equally important to measure the unsubscription rate - the rate at which people unsubscribe from your email list. If you maintain a constant email CTR and increase subscribers, you will receive more visitors to your store and this could result in an increase in conversion rate.
Sales Conversion Rate
The number of visitors needed to make a single sale is your SCR. If your store received 500 visitors and sold 50 products, your website has an SCR of 10 percent. It also gives you an important insight - you need at least 10 visitors to sell 1 product. A drop in SCR indicates that your visitors are increasing but purchases are not, and this will consequently affect the conversion rate. You may be drawing in the wrong audience to your store.
Customer Lifetime Value
CLV is the total amount a business will earn throughout the lifecycle of a customer. The average CLV will give you an understanding of how much your revenue will be for the current users you have acquired. A drop in CLV over time indicates that users are willing to spend less on your store, and if this drop is because of a drop in returning user sales, it will result in a drop in conversion rate.
Customer Churn Rate
The opposite of Customer Retention Rate, Customer Churn Rate is the measure of the rate at which you are losing customers. A churn rate of 10% indicates that 10 out of 100 customers (who have made a purchase) have not returned to make a repeat purchase. An increase in churn rate will result in a decrease in conversion rate, and you will need to work on enticing repeat purchases through discounts, cross-sells, etc., and on enforcing brand loyalty.
Refund and Return Rate
The return rate is the measure of products returned by customers. Subtracting returns from your gross revenue (or gross conversions) will give you your net revenue (or net conversions), and this is a more accurate measurement of earnings for your store. An increase in return rate will result in a decrease in net conversion rate.
Social Media Followers
Followers on social media - YouTube channel subscribers, Instagram followers, Facebook Page followers, etc., is a measure of brand loyalty on social media. The number of subscribers you have will directly impact your organic reach on social media - a higher subscriber count will result in higher impressions for your posts. An increase in impressions will result in an increase in traffic and consequently, conversion rate.
Customer Reviews and Brand Scores (NPS)
A 2020 article by DailyBlogging reported that 92% of consumers read online reviews while purchasing a product and 62% more revenue is generated from regular consumer testimonials. Improving your store's NPS and other reviews will greatly influence conversions. If you're seeing a drop in conversion rate and all other measures metrics are constant, your visitors may be bouncing off because of a bad review.
A Great way to Improve Conversion Rate? Personalization!
Use this conversion rate metrics to find out where you are standing! Once you have complete visibility over the conversion status, it is time to find out a way to boost it.
One of the best ways to improve conversion rate is through personalization. With personalization, you can offer your customers what they want and how they want it. So, it becomes easier for them to relate with your products and services.
We at Argoid can help you achieve utmost level of personalization through our eCommerce recommendation engine. You can boost your conversion rate using our recommendation engine in the following manner:
- Highly convertible home-page and product page recommendations
- Reduced search efforts with tailored recommendations
- Personalized emails with relevant product recommendations
To know more about this, start your free demo now!
FAQ's on eCommerce metrics
What does customer lifetime value of your store tell you?
The lifetime value of a customer, or customer lifetime value (CLV), represents the total amount of money a customer is expected to spend in your business, or on your products and services, during their whole lifetime. CLV tells you how best you are resonating with your audience, how much your customers like your products and what you're doing right — as well as how much you can improve.
How can personalization improve your conversion rate?
You need to draw your visitor's attention by personalized content personalized offers for visitors/ tailor made preferences for existing customers and others. This is proven to increase conversions and impact your sales positively.
What is the importance of customer reviews and brand scores?
Customer reviews appear to be a great avenue for grabbing consumer's attention and increasing sales. Customer reviews is important as they are very helpful to a vast majority of consumers and they are also responsible for securing your online visibility in search rankings