All eCommerce business owners understand the enduring importance of increasing growth and revenue as the industry rapidly expands. Are you feeling overwhelmed with a never-ending to do list? We’ve got the tips on how to hack your eCommerce growth.
You need to be obsessed with these three metrics to increase your revenue and profitability:
1. Customer Acquisition
2. Frequency (f)
3. Average Order Value (AOV)
By understanding these metrics, you can optimise your operations, increase revenue and grow your eCommerce business.
Digging deeper, these KPIs tell you what strategies are and aren’t working for you. If you are spending a large sum on customer acquisition without also addressing your AOV and Frequency, you’re missing critical elements in your marketing and growth plans.
Double Your Revenue with Smart Increments
eCommerce growth strategies often spruik the need to address a never-ending list of things to do. The end result? You split your time across too many channels, tactics and analyse every metric in the name of conversion optimisation.
What if we told you you can double your revenue without having to double your number of custommers or price? You can. That’s the power of these three metrics – they’re magic (because science is magic).
When you increase customer acquisition, purchase frequency and the average order value by 30% (a much more achievable incremental growth), you can double your revenue. Let’s do the math.
If you have 500 customers, purchasing at a frequency of two orders / month and an AOV of $100, your revenue would equal $100,000.
500 x 2 $100 = $100,000
The following month you focus your efforts on increasing each metric by 30% – you have 650 customers, with a frequency of 2.6 and an average order value of $130:
650 x 2.6 x $130 = $219,700
Guided by these metrics, you can hone your efforts to achieve a reasonable increase per reporting period, and double your income. That’s how you can turn a growth mindset into real results.
Ready to kickstart that eCommerce growth? Download the Workit Spaces eCommerce Growth Calculator, put your own numbers in and see your potential! Warning: this will seriously motivate you!
1. Customer Acquisition
Acquiring customers for the first time is the hardest and most expensive marketing activity.
It can cost up to five times more to attract new customers than it does to retain an existing one.Forbes
Some of the best channels for acquiring customers include paid social, organic social, SEO and a well converting website. In your early days, social advertising (via Facebook, Google etc) can appear costly, but it’s scalable, trackable and will accelerate your sales and marketing engine by getting potential buyers to your cart.
Engaging content that builds brand familiarity and love via organic social media, and intelligent SEO are also vital for long term cost effectiveness of customer acquisition.
Pro-tip: Dive into your data and calculate what your cost per acquisition (CPA) is for each channel and work towards improving that cost. It is imperative to focus your efforts on your brand’s purpose and your ideal customer, and which channel delivers the best results.
Don’t underestimate your customer data. Look through your customers’ purchase process and focus on the drop off points, the questions website visitors ask and the feedback customers provide. Invest in cost-effective means to get people to your website and once they’re there, work on getting them to add to cart and purchase.
2. Purchase Frequency
Frequency (f) is the number of times a customer purchases a good or service from your store in a given period, usually a year. The value also indicates the average customer’s willingness to buy from you again and the strength of your their loyalty. When you increase frequency, you increase revenue per customer, allowing you to hack your eCommerce growth.
A customer who has a good experience is more likely to purchase from you again. They already know your brand and (hopefully) trust your brand – you just need to give them a reason to open their wallet!
To calculate your average purchase frequency:
Frequency = Total number of orders / Total number of unique customers
Keeping a close eye on frequency will tell you the overall effectiveness of your remarketing efforts.
Top tactics to improve Frequency
When it comes to improving purchase frequency in eCommerce, email remarketing is extremely cost-effective and successful. Your customer provides their contact details and trust at the point of purchase, treat it with respect!
The average eCommerce conversion rate is between 2% and 4%. However, the conversion rate for email retargeting can be as high as 41%.Campaign Monitor
Use a combination of direct marketing like email, social media groups and SMS to build brand familiarity, loyalty and even advocacy. Thank your customers for their purchase. Are you a purpose driven brand? Let your customers know they’re now a part of a special group of people. Personalise communication beyond first name emails by capitalising on the data you have already obtained about them – and groups of your customers just like them (called cohorts or segments). What do they like? Communicate your shared values. What , whey and when are they most likely to purchase next?
Pro-tip: Develop social proof through reviews. Reviews of your product and customer support builds trust and directly support your customer acquisition strategy. Beyond email, you can also use social ads triggered by purchases to increase frequency with reminders or VIP offers, but keep track of your budget as remarketing should be cheaper than your CPA.
3. Average Order Value (AOV)
Average order value is your revenue divided by the number of your customers. It’s one of the most important metrics in ecommerce to hack your growth.
AOV = Revenue / Number of Unique Customers
Put simply, the higher your AOV is, the more you’ve earned from the same number of customers.
According to Shopify, AOV is one of the first numbers business owners try to improve to increase revenue or optimise return on ad spend.
When you improve your AOV you improve the cost-effectiveness of each transaction and ultimately, the profitability of your business. That extra money coming in can be reinvested to acquire more customers (which is generally expensive but you need to compete), product development, staff, or customer experience.
To increase your AOV, aim to upsell at the add to cart process or checkout. AOV can be improved with bundles, “you might like” or “other people also bought” (a social proof variant), or through upgrades like “spend X to get free shipping”. All major online storefronts like WooCommerce, Shopify, Squarespace and Magento etc, have plugins available to increase your AOV.
Pro-tip: Make sure you don’t bombard your customer with upsell options, but present them with the option best suited to their preferences. If you’re ready to get sophisticated here, apply lead-scoring marketing automation to adapt highly customised and relevant offers to customers.
CRM provider, Copper explains it is equally important to maintain healthy relationships with your current customers and not force purchases on them. Make your customers feel like they aren’t being sold to but you are offering something they need.
Bold Commerce offers a great example – if you are selling laptops, offer your customers a laptop bag or mouse. These offers can be made using products tags and related product offer triggers.
A Growth Mindset
Now that you have the three key metrics to hack your eCommerce business growth, it’s time to put them in action!
Use your customer acquisition, frequency and average order value metrics to filter out the marketing noise baying for your attention. The multiplier effect of these metrics working together can’t be overstated.
Use these metrics combined to help you shift from doing everything to implementing the most beneficial growth strategies, while having the ability to measure the impact of your effort and budget.
As your business scales, rethink your workplace. Workit Spaces offers a range of eCommerce business solutions, micro-warehousing and fulfilment solutions, showrooms and photography studios to suit your changing needs.
Want more? Check out our eCommerce resources.