If you’re involved in ecommerce – and most likely even if you’re not – you’ll have heard the term “conversion rate optimization.”

For most online retailers, and you might include yourself in this group, improving conversion rates – both on specific pages and for the whole store overall – is what ecommerce conversion optimization is all about.

But what if your commitment to “conversion rate optimization” is leading you down the wrong path?

Many online retailers over-focus on boosting their conversion rates. In the process, they lose sight of other vital metrics. And these metrics are crucial for successful growth.

If this sounds like you, then read on.

What’s the Big Problem With Conversion Rate Optimization?

Ecommerce conversion rate is a crucial metric. I’m not suggesting that optimizing it shouldn’t be part of your strategy.

But growing your online profits encompasses far more than simply increasing the sheer number of transactions.

You need to give equal emphasis to metrics that track the quality of those transactions and the longevity of customer relationships.

When it’s taken as a catch-all strategy, “conversion rate optimization” is insufficient, and the name places far too much importance on conversion rate alone.

That’s why the broader term “ecommerce optimization” holds much more substance.

What is Ecommerce Optimization?

The goal of Ecommerce Optimization is not only to grow the number of transactions.

It’s goal is to increase revenue and profits.

Ecommerce Optimization is the process of continuous testing and ongoing improvement of user experience.

The goal of #Ecommerce Optimization is not only to grow the number of transactions. It's goal is to increase the revenue and profits! #EcommerceOptimization #CRO Click To Tweet

Fundamentally, it comes down to average lifetime value. Along with your first-time purchase conversion rate, you should also seek to improve lifetime customer value. And doing this means focusing on a handful of other important metrics.

Customer lifetime value equationAlong with overall conversion rate, it’s important to focus on “single sale average” (or average order value), “repeat transaction average” and “retention period”. Source.
When you work to boost these other metrics, you’re essentially growing the average lifetime value (ALV) of your customers.

When combined, a high first-purchase conversion rate and a high average lifetime value will fuel the growth of your online store in ways that wouldn’t be achievable with an exclusive focus on your conversion rate.

The Four Most Important Metrics in Ecommerce Optimization

Metric #1: First-Time Purchase Conversion Rate
Metric #2: Average Order Value
Metric #3: Purchase Frequency (Repeat Transactions Average)
Metric #4: Retention Period

Other Important Metrics in Ecommerce Optimization

Metric #5: Newsletter Opt-In Rate
Metric #6: Number of Customer Service Requests
Metric #7: Number of Reviews

The Four Most Important Metrics in Ecommerce Optimization

At Growcode, we’ve honed our optimization strategy over years of experimentation with hundreds of clients. And whenever we put together an optimization strategy, we always focus on the following four metrics:

Metric #1: First-Time Purchase Conversion Rate

Your “first-time purchase conversion rate” indicates how well “new” traffic – the segment of website traffic that has no purchasing history – is converting.

It enables you to gauge the effectiveness of your store when it comes to potential (as opposed to repeat) customers.

The metric also allows you to create an important distinction necessary to formulate strategies to optimize for new vs. existing customers.

It’s possible, for example, that your promotional materials and existing storefront are very effective at converting existing customers, but at the same time are ineffective in regards to new traffic.

First-Time Purchase Conversion Rate Equation

When it comes to optimizing your first-time purchase conversion rate, you should focus on things like the clarity and effectiveness of new customer offers, the ease of checkout, the quality of branding and advertising that speaks to new demographics (as opposed to your current customer base) and so on.

Metric #2: Average Order Value

The term “average order value” refers to the average value of a single order (i.e. the value of one shopping cart) made through your store.

Boosting average order value is one of the quickest, simplest, and most effective ways to boost revenue.

Optimization relies on one of two strategies: encouraging customers to buy more items or higher-priced items.
Average Order Value Equation Average order value is calculated by dividing revenue by the total number of orders over a given period. Source.
When testing variations, it’s best to focus on product-page and checkout elements like offers of free shipping above a certain price-point, discounts for high-volume orders, the use of up-sells and cross-sells, and urgency-building techniques.
Cross-sells options on Apple online store Apple offers a number of relevant, attractive cross-sells during checkout.

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Metric #3: Purchase Frequency (Repeat Transactions Average)

Purchase frequency refers to the frequency with which customers make repeat purchases over a given length of time.

It measures the average number of orders per unique customer, usually over a period of 365 days. If you can increase the number of orders a typical customer makes over a given period, you’ll boost the purchase frequency, and thus revenue.
Ecommerce optimization purchase frequency equationPurchase frequency measures the number of orders over a specific period of time. Source.
Optimizing purchase frequency is all about fostering relationships with your customers after the initial purchase, providing them with incentives to continue shopping.

Did you know that 46% of Prime members say they buy on Amazon at least once a week? That is more than 52 orders a year for every single user in that group!

Did you know that 46% of #Prime members say they buy on #Amazon at least once a week? That is more than 52 orders a year for every single user in that group! #ecommerce #EcommerceStats Click To Tweet

Loyalty programs, seasonal offers, retargeting, and interest-based segmentation are all strategies to experiment with.
Loyalty Program - Amazon PrimeAmazon Prime members tend to spend more per year, around $1.300, than non-members, who spend an average $700. Source.

Metric #4: Retention Period

The “retention period” refers to the length of time an average customer remains active. Generally speaking, customers are considered inactive if they fail to purchase a product for a specific period of time, usually six or twelve months.

Retention rate is very closely related to this metric and measures the loyalty of your customers as a percentage. A high retention rate is an indicator of a long retention period.
Retention Rate EquationA high retention rate is indicative of a long retention period. Source.
Much like purchase frequency, improving retention rate involves building an attractive loyalty program, fostering your community, and taking a results-focused approach to measuring marketing to current customers.
"Re-engagement emails? to lengthen the buyer retention period JOY uses “re-engagement emails” to lengthen the buyer retention period. Source.

Other Important Metrics in Ecommerce Optimization

The four metrics described above are what I believe to be the most important from an ecommerce optimization perspective.

But the story doesn’t end there.

There are a handful of others that, when integrated properly into an optimization strategy, can significantly boost conversions, revenue, profits and lifetime value.

Specifically, I urge you to pay attention to the following:

Metric #5: Newsletter Opt-In Rate

It’s very important, as an online retailer, that you’re actively growing your email list (collecting emails can also reduce checkout abandonment rate).

For encouraging both first-time and repeat orders, few marketing strategies come close to the effectiveness of good ol’ email.

What’s more, a host of automation tools make it easier than ever to manage, measure and improve your email campaigns.
Collecting emails on ecommerce siteDebenhams includes opt-in forms in a variety of places on their site, including before checkout. Ask for emails before checkout so you’re able to retarget visitors that don’t complete checkout.

Metric #6: Number of Customer Service Requests

Are you tracking (and trying to lower) the number of emails and calls to your customer service center?

Customer service represents a sizeable cost for online retailers. But it’s also one of the easiest areas to streamline.

You can limit the resources required to run your contact center in a variety of ways. In particular, providing better information on your website – like pre-purchase details on the product pages, delivery times and costs, return and exchange status etc. – is one of the most effective.

At Growcode, we often find that online retailers have a blind spot when it comes to knowing which information to include on their sites. They’re eager to ease the burden on their call centers – but don’t have a complete picture of what is lacking.
FAQ on Apple online storeApple includes contextual FAQs on many of its product pages.
One simple, easy way to hone in on common customer queries is to extract the most-asked questions from the call made to your call center.

It only takes a few hours to process large amounts of information. And once you have those questions, you can include answers – either in the form of FAQs or supplementary information – in your help area and on specific pages.

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This is exactly the advice we gave to one of our clients, a travel agency.

They had a huge amount of inquiries asking for flight durations – information that wasn’t available in an understandable format on the site.

After including flight duration times on the site – in a variety of places, including on customer account pages – the number of customer service calls decreased significantly thus saving money.
Frequently Asked Question on Apple online store Apple placed FAQ on virtually everywhere on the site, dealing with questions specific to the products or information on that page.

Metric #7: Number of Reviews

Reviews have a significant effect on product page conversion rates.

Repeatedly, I find that the quantity and quality of reviews on our clients’ product pages are key drivers of increased conversion rates.

If you’re struggling to generate product reviews, testing ways to incentivize customers to leave reviews will be worthwhile.

Are you, for example, following up via email to request reviews?

Do top reviewers receive any recognition?

Do you offer any discounts for in-depth reviews?
Customer Reviews on Crutchfield product pageReviews are a major part of Crutchfield’s product pages.

Conclusion

The aim of ecommerce optimization is to improve the whole customer experience. Ecommerce conversion rate optimization is vitally important. But it is just one part of the whole picture.

If you develop a more thorough optimization strategy – one that accounts for a complete range of metrics rather than just one – you will find that your levels of customer satisfaction and loyalty, conversions, and sales figures will all be much better off.

And that’s what we’re all after, isn’t it?

BTW get the 115-Point Ecommerce Optimization Checklist and skyrocket your conversion rate!

Drawing on eight years of experience, we gathered all our top insights into one book: The Ecommerce Optimization Checklist of a 7+ Figure Online Store. If you want to increase the performance of all your pages – from the homepage to checkout – grab your copy here.
Ecommerce Optimization Checklist


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