What’s the first metric that comes to mind when you measure your eCommerce store’s success? (Hey, don’t pick Average Order Value just because it’s in the title!)
Most any time I ask a merchant this question, they talk about the store’s conversion rate. To be fair, your conversion rate is a very important metric for your store. However, it’s not always the most important one (or even the best one to focus on), and your store size, what you sell, and how you get your customers are just as important for many eCommerce stores.
When you measure conversion rate, you typically divide as follows:
Conversion rate = ( Number of Sales / Total visits ) x 100
and if you get above 3%, you’re happy with your store performance.
You want the percentage of visits that result in a sale for your site (some sites use unique visitors instead of total visits, but Google Analytics goes with total visits, so that’s what I use). If you want to be more advanced, you could want to only include qualified visits (e.g. exclude visits that only reach your “jobs” page).
However, the thing to consider here is that you may not have enough purchases or visits to produce a reliable metric. For example, if I convert 1 of 3 visitors, is my 33% conversion rate amazing or significant? Not at all.
For many new eCommerce stores, the sample sizes used to determine conversion rate (number of orders and visits) are not large enough to produce a valuable store metric.
So as a new store, should you be focusing on conversion rates? While it’s a good metric to keep an eye on, there are other benchmark’s we can use to measure store success and focus on improving to encourage your store’s growth.
Your average order value is the metric we’ll focus on today, and if you want some further reading / tips, we have an entire series on improving it.
Your average order value is calculated by
AOV = total store revenue / total store orders
The reason I encourage new or small stores to focus on Average Order Value is because it’s a fairly useful metric, even at small sample sizes, and it’s also one that can be improved with a few proven strategies.
If you know your average order value, it can help you plan your store’s initial advertising and marketing and how much it’s worth to you to get each order. When starting out, you don’t know your customer lifetime value or if customers will be repeat purchasers, so you may not want to spend more to acquire a customer than the resulting order will be worth.
Even if investing heavily into customer acquisition is part of your growth strategy, investing multiples of your average order value could be dangerous for your business if you don’t have other plans on how to get existing customers to refer others.
So how can you get your average order value? One of the easiest ways to do so is to use Google Analytics (free) or other tracking service, as many sites already do. If you have eCommerce tracking on your site, Google Analytics can tell you your average order value easily.
For Easy Digital Downloads sites, you’ve got a couple of options for eCommerce tracking:
- There’s a free universal eCommerce tracking plugin available for EDD, which will add basic eCommerce tracking to your store (checkout viewed, order placed, etc). If you’re looking for just basic eCommerce metrics, this may be a good option to get a look into basic store stats.
EDD Enhanced eCommerce ($59) from Shop Plugins adds enhanced eCommerce analytics to your EDD store, letting you report on additional events along with tracking category revenue and advanced store metrics.
If you’re using WooCommerce, there are a couple of plugins available at WooThemes.com:
- WooCommerce Google Analytics (free) adds basic eCommerce tracking and the minimum events requires for enhanced eCommerce tracking, giving you some great insights into your sales metrics for free.
WooCommerce Google Analytics Pro ($29) adds advanced event tracking to your store, such as coupons applied, order refunds, customer registration, and others. It also adds enhanced eCommerce tracking with Universal Analytics so you can track category revenue and other enhanced eCommerce metrics.
For WP eCommerce stores, you can enable basic eCommerce tracking within the core plugin, under your store’s “Marketing” settings as the bottom.
Regardless of which plugin you use, once you start tracking eCommerce events, Google Analytics will report on your average order value. You can view this in GA by going to Conversions > Ecommerce > Overview, as Average Order Value is one of the overview metrics reported.
Tracking your average order value and working to increase it is one of the first optimization strategies new stores can take to drive additional revenue.
If you want to read about increasing average order value, the first part in our average order value series covers strategies for increasing AOV, and other parts of the series list helpful plugins for every eCommerce platform.
If you want to learn more about whether your conversion rates are statistically significant or not, Optimize Smart has a great overview.