Type 2: Ecommerce sites Objective(s): The objective is increase sales and decrease marketing expenses. On the most basic level, you want to measure sales, returns and allowances, sales per visitor, cost per visitor, and conversion rate. On a more advanced level, you want to measure inventory mix, trend reporting, satisfaction, RFM, and other predictive modeling techniques.
Examples: ECommerce sites are sites where companies sell their products and services directly over the web (in some cases they also have physical store fronts. Examples are Amazon.com, BestBuy, Brookstone, and CDW.com.
Commerce sites are typically interested in the following metrics:
Gross margin Companies with high gross margins (gross revenue less cost of goods) have more money to spend on Business operations such as research and development.
Gross margin return on Investment (GMROI) GMROI is Gross Margin divided by demand creation expense for that order.That is, Gross Margin dollars are divided by the cost of the demand creation activity that drove the sale. This comes from being able to track the most recent campaign.
Net profit Represents the gross revenue minus taxes, interest, depreciation, cost of goods sold, and other expenses. Total sales Represents the total invoice value of sales, before deducting for customer discounts, allowances, or returns.
Average order size Represents gross sales divided by the number of orders—this reveals the average amount spent on each order. The higher the average amount, the better you are at motivating buyers to purchase more.
Accessory attachment rate This the overall rate at which accessories are added to an order. This is the measurement of the number of orders which have an accessory attached to the order, divided by the total number of orders. This measurement determines how to grow the overall average order size, as well as growing the gross margin/profit of a single order. Accessories typically have the highest gross margin on a site and significantly increase the profitability of an order. For example, the cables on a DVD Player order may have as much profit dollars as the player.
Sales conversion ratio Represents the ratio of visitors to sales and visits to sales.
Customer retention rate Represents the number of repeat customers divided by the number of total customers over a period of time. Commerce sites strive for repeat business.
Cost per sale Represents marketing expenses divided by the number of sales during a period of time. Low cost per sale means efficient marketing and a higher net profit.
Customer acquisition cost This is marketing expenses divided by the total number of orders from unique, first-time buyers over a period of time. If it costs a lot to acquire new customers, then you may have to retool your marketing effort.
Average lifetime value What is the value of your customers over a period of time. Is it increasing?
Specialized conversion rates Conversion rates typically explore how many visitors move from one step to the next in a scenario that you are monitoring. An example of a specialized conversion rate for a commerce site: your site invites visitors to register for a newsletter or sign up for a contest. Compare how many visitors see the offer with how many actually sign up.