With the conclusion of the holiday shopping season, it’s now reporting season for product managers in the retail e-commerce space. Many in the industry are reviewing data from the past year to understand trends, measure the effectiveness of their digital assets, gauge successes, and identify opportunities to improve.
During this exercise, it is essential to look through all product management lenses to derive the most value from your data.
How you interpret these metrics will depend on your business and technology objectives.
Since most of the data from the holiday season will be consumer data, it can be easy to just focus on consumer behavior and adjust your product accordingly, but that provides an incomplete picture. Evaluating technology and business metrics is also essential when measuring against KPIs.
The consumer metrics need to balance with and support business metrics. While your consumer metrics can help you understand how your digital products are helping or hindering revenue generation, your business metrics will help identify costs associated with that revenue generation. Looking at technology data such as latency can help you realize online consumer behavior.
Depending on the nature of your product and your goals, not all data looks the same. The exact metrics you measure should align with your business objectives (yes, the whole organization’s business objectives) and the key performance indicators you’ve identified to track your success.
Let’s review some of the baseline metrics that all e-commerce retailers should be looking at from the consumer, business, and technology perspectives.
From a customer perspective, the three main metrics you want to look at from the holiday season are bounce rate, conversion rate, and cart abandonment rate.
Bounce rate is the percentage of people who come to your website but leave almost right after landing a single page. There are many reasons users may immediately hop off – like finding the information they need quickly or not finding the product or information relevant. Understanding this, and your SEO strategy, can help you identify areas of improvement if your bounce rates vary significantly from industry standards.
The percentage of those who complete a specific action or actions you wanted them to complete. If this isn’t where you expect it to be or close to standard within your industry/niche then it’s important to look at both bounce and cart abandonment rates to understand where and what improvements are needed.
The percentage of user sessions that started on the path to purchase but ultimately did not complete the action, a very important metric. There are several reasons why a user would abandon a purchase: They could have changed their mind about the product, or it could have been because of the user experience (for example, the next steps weren’t clear, or shipping prices were too high, etc.). Understanding when and where abandonment is happening can inform either product or UX improvements, or both.
Page load time relative to bounce and cart abandonment rates is one of the clearest ways to identify a technology issue. While slight variations (say, a second or two) in page load times may not seem significant, there is almost always a correlation between the page load time and overall conversion rate. According to Portent, website conversion rates drop by an average of 4.42% with each additional second of load time. When analyzing conversion or cart abandonment rates, slow load times may be the culprit.
It’s not uncommon in CPG to measure digital product performance by sales, but that doesn’t present a clear picture. Several more longstanding metrics indicate the effectiveness of digital products, including customer acquisition cost, lifetime value, and customer retention rates.
As it suggests, this is the cost to acquire a single customer and is calculated based on the total number of new customers and the total cost to attract those customers (i.e., sales and marketing). Not each website or app referral has the same associated cost, so the average amount per acquisition can tell you if your sales/marketing or product management dollars are well-spent.
This is the total revenue a customer generates during the entirety of your business relationship. A higher value can distinguish repeat buyers from one-time shoppers, but price changes over time, and other factors can impact the value. While it’s helpful for analyzing the behavior of repeat customers, it’s also one of the more complex business metrics. That’s why having modernized and properly synchronized reporting tools is critical.
Another reason why understanding lifetime value is essential; customer retention rate is the percentage of your customers that are repeat customers. As you may be acutely aware, the cost of acquiring a new customer is higher than the cost of retaining an existing customer, so increasing the retention rate can significantly impact profitability.
As data from the holiday season comes back, product managers need to look at metrics holistically through the lens of customers and business while understanding how technology impacts overall success. Customer metrics will be the driving force behind the changes to your digital assets; business and technology metrics will help you adjust your overall strategy.