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You can adjust the CPO formula to include other costs.
Business metricsAverage Cost Per Order (CPO): Definition, Formula & ExampleOnline shopping is growing rapidly. In fact, Statista estimates that 20.8% of retail sales will be online in 2023 and can increase to 24% by 2026. This means that e-commerce sellers should make the most of online advertising techniques that can increase sales and profits. After all, in e-commerce, success can often be measured in orders received. Many expenses that e-commerce sellers incur go toward encouraging customers to place an order. And that's where the cost per order (CPO) metric comes in. What is Average Cost Per Order? CPO refers to the total cost it takes to acquire and fulfill a single order. Costs can include marketing, manufacturing, storage, shipping, and other miscellaneous expenses, depending on the type of business. When evaluating an online marketing campaign, you can include the CPO and other metrics like cost per impression (CPI), cost per thousand (CPM), and cost per click (CPC). Analyzing your CPO can offer insight into areas for improvement and areas that are working. This can include: Where to optimize the supply chainIf your pricing strategies need adjustments, like introducing dynamic pricingHow effective your advertising and marketing campaigns are in attracting customersIf your budget allocations are driving sales and profits Evaluate Your Marketing Performance Easily Use real-time data metrics to help identify conversion rates and product profitability. Create and export custom data reportsIntegrate multiple stores and advertising platforms into one dashboardTrack your CPO and revenue-based metrics BeProfit offers an intuitive way to keep an eye on your expenses and profits, so you can easily see the results of your marketing techniques. What is the Formula For Average Cost Per Order? To calculate your average CPO, use the following formula: Average CPO ($) = Total Advertising & Marketing Expenses / Number of Orders Received This should be calculated at regular intervals for the most accurate baseline, like monthly, quarterly, or yearly. A low CPO indicates that the campaign is successfully generating higher sales and profits. A higher CPO can mean the campaign does not have the desired effect. You can also adjust the formula for the following costs, depending on what you'd like to track: Cost of goods sold (COGS): This includes material and labor costs, and other expenses associated with producing goods. Some products may have higher manufacturing costs, which can increase your CPO if included in the calculation.Packaging: This should secure the product and promote brand identity. Cost-effective packaging can help lower your CPO.Storage: Depending on how fast inventory ships, you may need various storage sizes. So, storage and warehousing costs can fluctuate your CPO.Shipping: If you factor in location, carrier, and turnaround times, your shipping costs can vary greatly. This can, in turn, significantly increase or decrease your CPO depending on the shipping methods you choose. So, if you're considering all these expenses in your evaluation, the advanced CPO formula is: Advanced Average CPO ($) =Total Advertising & Marketing Expenses + [COGS + Packaging + Storage + Shipping] / Number of Orders Received » Unsure about your COGS? Find out how to calculate COGS for your Shopify store Example of Average Cost Per Order Imagine an e-commerce retailer that sells designer shirts and launches an ad campaign to promote its new collection. It spends $200 on creating the campaign and $300 on promoting it. After a month, the retailer sold 50 shirts for $15 each. Average CPO ($) =Total Advertising & Marketing Expenses / Number of Orders Received= [$200 + $300] / 50= $500 / 50= $10 Now, what happens when you factor in additional costs for selling the t-shirts, like $150 for COGS, $30 for packaging, and $90 for shipping? Advanced Average CPO ($) =Total Advertising & Marketing Expenses + [COGS + Packaging + Storage + Shipping] / Number of Orders Received= $500 + [$150 + $30 + $90] / 50= $500 + $270 / 50= $770 / 50= $15.40 Naturally, when factoring in other costs, the CPO is higher. So, if you take into account the $15 of revenue per order, you can see that the basic formula shows a $5 profit, and the advanced formula shows a $5.40 loss. This can indicate that marketing efforts are effective, but that the fulfillment process is not cost-effective enough. Tips to Manage Average Cost Per Order If you're struggling to reduce your CPO, tracking your e-commerce expenses and your sales performance can provide the insight you need to make result-driving changes to your budget. Here are a few steps you can take: Track your expenses accurately: Make sure you're looking at the complete picture when it comes to costs. You should try to keep supply chain expenses low, automate tasks to lower labor costs, and optimize your ad spending.Analyze relevant data regularly: Staying on top of industry trends and comparing your metrics can help you keep your CPO optimal and make production adjustments according to demand. You can use tools like Google Ads to track conversions.Set realistic benchmarks: Use industry-wide benchmarks as a guideline to identify problem areas. This can help you plan your sales strategies to reach future targets. But remember that your goals should be relative to your business size, product offerings, and means.Use an e-commerce analytics solution: You can streamline your data for real-time monitoring through tools like BeProfit. This can help you keep up with your business's performance. » Discover what ad trackers are and how you can use them in e-commerce Waste No Expense—Improve Your Average CPO Your average CPO can reveal valuable information, from your marketing efficacy to your shipping efficiency. And knowing your CPO can help you optimize and strategically use your budget while reducing profit losses. Plus, it can be hassle-free. Using data analytics dashboards like BeProfit allows you to access all your data, including CPO, in one place and carry out precise profit analyses. With a real-time view of your business's sales, marketing, and profit metrics, you can act fast and make educated decisions about your customer acquisition, product advertising, and fulfillment techniques.
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Business metricsCustomer Acquisition Cost in E-Commerce: How to Find YoursEvery business needs customers to survive and grow. Customer acquisition costs (CAC), or what it takes to acquire a customer, can vary greatly depending on the type of industry and size of your business. For example, a small business looking to acquire new customers might incur low customer acquisition costs, such as one-time advertising costs. Conversely, a larger company with more established brands might have higher customer acquisition costs, such as annual marketing budgets. Here, we'll provide an easy-to-understand customer acquisition cost definition, detail how to figure out customer acquisition cost, and define what makes a good CAC. What Is Customer Acquisition? The process of customer acquisition is best understood as the procedures, strategies, and tactics used to generate new customers. This encompasses all activities undertaken by a company or product to generate interest in its products and services. The CAC includes advertising, sales promotions, direct marketing, and advertising agency expenses. What Does Customer Acquisition Cost Mean? A company's customer acquisition costs will include any expenses incurred to generate a new customer, including advertising, sales promotions, direct marketing, and advertising agency expenses. Customer acquisition costs are important because they reflect the cost of generating revenue from a new customer. For example, if the revenue generated from a new customer outweighs the cost of acquiring them, a business' marketing and other outreach costs are worth the time and money. Conversely, suppose the cost of acquiring a new customer outweighs the revenue generated. In that case, it's either time to shake up the strategies a business uses to generate new leads or, perhaps, it's time the business concentrated more of its efforts and resources on customer retention by pleasing their existing customers. How to Calculate Customer Acquisition Costs In order to determine customer acquisition costs, an entrepreneur can use the following formula: CAC = [Total cost of acquiring a customer + total sales expenses] / [the number of new customers acquired] While the above formula is a great starting place, it's important to understand that a few key factors can influence these values. One of the main factors is customer lifetime value (CLV). The customer lifetime value (CLV) is the worth of a customer over the time they are with the company. The CLV would influence customer acquisition costs because the longer an organization can get a customer to do business with them, the cheaper it becomes to have acquired them in the first place. Expenses that Contribute to Customer Acquisition Cost There are various expenses that determine the average customer acquisition costs across all industries. These typical customer acquisition costs include: Advertising - Advertising costs are the expenses generated by promoting a product or service.Marketing - Marketing costs are the expenses that arise in the process of marketing products or services.Sales - Sales costs are the expenses incurred by the company to generate revenue.Training - Training costs are the total of all training personnel, equipment, materials, and facilities required to produce a trained staff member.Staff wages - Wage costs are the amount of money an employer spends to compensate employees for their work.Product shipping - Product shipping costs are the set of costs that go into sending an item to a customer.Taxes - Tax costs are the expenditures incurred by an organization to comply with the legal demands of taxation. Average Customer Acquisition in E-Commerce The average customer acquisition costs for e-commerce businesses vary between different niches and the size of an online store. Some of the larger guys, like Amazon and eBay, pay between $150 and $200 per customer. For smaller online stores, however, this figure is generally closer to $20 per customer. Basically, for a small to midsize business, you'll want to aim to keep your expenditure-to-revenue ratio around 1:3. To stay sustainable as a business, this means that for every dollar spent, your business needs to earn about $3 back. Customers and Their Costs Customer acquisition costs are always contextual, meaning that they are dependent on a variety of different variables and factors that will influence the overall costs to a business of acquiring new customers. Keep this in mind when managing your marketing and outreach costs. If it costs your business too much to acquire customers, this will soon become an unsustainable business model that is likely to fail. If your acquisition costs are high, it might be time to really knuckle down, direct your efforts elsewhere, and focus on fostering the relationships you have with your existing customers. After all, turning a one-time customer into a lifetime customer is not only much more cost-effective but also time-saving.
CTR impacts conversion rates and ultimately profits.
Business metricsCTR Manipulation: 5 Expert Tools & TechniquesDepending on the industry or ad and site type, the click-through rate (CTR) can differ drastically. For example, Wordstream reports that arts and entertainment have an average CTR of 16.29%, but furniture businesses have an average CTR of 3.49%. Even a small increase in CTR can have a significant impact on business growth, insights, and profits. So, manipulating your CTR can aid in adjusting your site's search ranking for better traffic, understanding user behavior, and helping you stay competitive in your industry. What is CTR? CTR is a key metric that measures the number of clicks your ads or website receive in relation to the number of impressions they generate. A higher CTR typically means: More people are interested in your content, which can lead to increased sales and profits.Search engines identify your site or ad as valuable and relevant, which can increase traffic and engagement. But this can vary depending on the type of content, frequency of posting, and use of relevant keywords. Businesses can use strategies such as keyword research, optimizing content, and A/B testing to find a solid CTR benchmark specific to them. » Learn how to calculate CTR and why you should track it Monitor Your Ad Metrics With Ease Save time by auto-syncing data from numerous ad platforms into one easy-to-use dashboard. Uncover actionable insights to improve your profitability.Access on desktop or mobile devices.Get customizable data reports. BeProfit offers an intuitive one-stop platform where you can keep track of sales and ad data from various stores. CTR Manipulation Tools & Techniques CTR manipulation can help increase a website or ad's CTR to boost search engine ranks and traffic. This is typically done with various optimization methods, but some less favorable tactics can bring risks, like fines or search rank losses. These are known as 'Black Hat' SEO strategies and include click bots and human CTR services. But 'White Hat' SEO strategies leverage organic search, which accounts for 53.3% of traffic, and can foster more sustainable growth. These strategies include: 1. Email Marketing Email marketing allows for optimized subject lines, body copy, and CTAs to entice recipients to engage. Personalization takes it a step further by offering emails tailored to the recipient's interests, preferences, and behavior. This can lead to higher open rates, CTRs, and conversions. Additionally, email marketing can help previous visitors complete conversions, such as recovering abandoned carts. 2. Social Media Social media offers various strategies, such as improving organic social media presence by: Connecting with customersIncorporating social commerceUtilizing push notifications This helps extend brand reach and familiarity, which can lead to higher conversions. Using targeting and retargeting through social media can help improve customer retention because more tailored posts and social ads can attract them based on interests and relevancy. Higher retention can help lower ad spend and increase CTR. 3. Improve Copy Copy optimization can help maximize the relevancy and persuasiveness of your brand message to your target audience. Varying your copy with images and incorporating videos can help keep your content dynamic and engaging. Updating copy with more targeted language or visuals can also help increase CTR with particular desired target audiences, which can help boost conversions. 4. Paid Ads Optimizing paid ads' copy can help target the right audience. This can be done by selecting appropriate keywords and conducting research to find the best platforms for your ad to meet your conversion goals. Social media platforms offer various formats, such as: Sponsored postsIn-feed adsBanner adsVideo ads Pew Research reports that 95% of teens prefer YouTube over other social media platforms. So, let's take this example: If a brand wants to target teenagers, they can run short, dynamic video or banner ads on YouTube to increase engagement with their target audience. » Find out the best platforms to advertise based on CTR 5. Optimizing Your Website Optimizing your website can improve CTR by prioritizing a better user experience. This can include: Creating more intuitive site navigation through a better visual hierarchy.Ensuring your site is compatible with and runs seamlessly across devices.Optimizing your SEO to increase visibility in search engine results.Leveraging the design based on your product offerings and audience preferences. How to Manage CTR Manipulation Even with an improved CTR, tracking it regularly is still essential. Luckily, many social media business platforms have tracking capabilities, like Google Analytics's cohort analysis feature or BeProfit's ad data tracking functionality. Through monitoring, you can gain better insight into the success of your CTR manipulation techniques. It can highlight which strategies aren't cost-effective and which are effective. Using data like CTR, conversion rate metrics, customer retention rates, and other sales metrics can help businesses streamline their methods for better metric outcomes, revenues, and profits. » Using Shopify? Check out the benefits of customer retention analysis Elevate Your Content With CTR Manipulation CTR manipulation offers numerous ways to increase organic traffic and CTR. By tracking ad metrics like CTR, you can assess your performance and identify areas for targeted improvement. With BeProfit, profit and performance tracking is streamlined into one place for easier analysis. This can help you take control of your marketing data and make informed strategic decisions that manipulate your CTR creatively. Establishing a better CTR that aligns with your ROI and ROAS goals can help keep your expenses low and conversions and profits high.
A woman looking at an infographic of CTR effects
Business metricsCalculating CTR For Beginners: Formulas, Guides & ExamplesClick-through rate (CTR) is an essential metric that can help businesses evaluate their advertising campaigns' performances. Depending on the industry and platform, CTR averages can vary. For example, Wordstream shares that business services' paid search CTR average is 5.17%, whereas apparel has a 2.24% average CTR. So, this metric should be treated as more of a guideline than a definitive benchmark. Understanding your CTR can also provide insight into revenue and profits by highlighting how effectively you're utilizing your marketing budget. Understanding CTR CTR measures the engagement of online ads and other digital content, such as emails or website pages. To understand this engagement's correlation to revenue, you would need to also calculate metrics like conversion rate, cost-per-click (CPC), and others. CTR can be analyzed by subsections, such as micro conversions, search ads, and display ads. Each of these could provide different results, which can offer data for comparison to find from which ad type, for example, you garner the most conversions. Why Should You Track CTR? Tracking your CTR allows you to understand your marketing strategies' strengths and weaknesses. It can help better your business with: Increased conversions - Knowing where your campaigns are successful can help you identify and utilize effective techniques more widely, resulting in higher interaction and conversions.Insight into marketing campaigns - This can guide you to points in your campaigns that need optimization or costs that should be cut. By tracking CTR, you can better understand user behavior and, therefore, tweak your marketing approaches for better conversion and customer retention.Improved ROI - With a better understanding of your marketing campaign, you can increase the chances of users completing sales actions and the likelihood of turning profits. Track Profits From Your Marketing Conversions Automatically integrate your advertising data and easily track sales profits. UTM-based tracking allows you to analyze and optimize all engagement from social media to ad campaigns.Get an aggregated view of your business performance.Accessible on mobile and desktop devices for real-time team collaboration. BeProfit offers a customizable platform to track your advertising performance using key metrics. » Looking to do some CTR manipulation? Here are 5 expert tools and techniques How to Calculate CTR CTR is the ratio of clicks to the number of users who viewed the page, email, or advertisement. Some metrics to decide between before doing any calculations are unique clicks and overall clicks. If you want to categorize every time the same user clicks on the same link as one click, that's considered a unique click. Whereas overall clicks count every click, even on the same link and by the same user, as numerous clicks. Aside from industry benchmarks as a guideline, it's worth having your own benchmarks so you can measure your improvement from one period to the next. Although the CTR can vary based on platform, content, and channel, calculating it uses the same method and should be done at regular periods. CTR (%) = (Clicks / Impressions) x 100 Example of a Good CTR CTR (%) = (Clicks / Impressions) x 100= (75 / 3,000) x 100= 2.5% In this example, a call-to-action (CTA) button in an email campaign had a CTR of 2.5% Because email marketing CTR averages at 2.3%, this result is positive. This high CTR may have been achieved through extensive user behavior analyses or retargeting to ensure it was reaching people more likely to be interested. Successfully reaching a desired target audience can help businesses assess their marketing prowess and retain customers, which can improve conversion and help maximize profits. » Want to know more? Here's how email marketing practices can improve your ROI Example of a Poor CTR CTR (%) = (Clicks / Impressions) x 100= (50/10,000) x 100= 0.5% With the average CTR for Facebook ads at 1.4%, this example of a display ad that appears on Facebook feeds shows a low CTR. This may be a result of poor ad type selection, weak copy, and inefficient audience targeting, among other practices. This highlights how lower CTRs can cause businesses to lose out on potential conversions that could, in turn, lead to wasted costs with little to no ROI. Ways to Improve Your CTR Using data insights from tracking your CTR, and other metrics can inform new ways to use that can optimize CTR. Some of these ways include: Personalization - This includes web personalization, which targets your potential customers' specific interests and fosters a familiarity that can encourage engagement and loyalty.CTAs - By implementing CTAs for more strategic direction and redirection, you can increase the opportunity for users to visit specific pages or product pages.Retargeting - You can leverage social retargeting. This creates display pop-ups when a user interacts with your social content through likes or comments.Improve Ad Copy - Performing keyword research, rewriting, and making use of images and video marketing can optimize your ad copy with data-driven adjustments that can help drive engagement.A/B Testing - Testing various versions of an ad and comparing the metrics can highlight more precise areas of your ad that resonate best with users. You can use this insight and apply it to other ad campaigns for an improved CTR. » Discover steps to build a successful hybrid e-commerce marketing campaign Leverage Your CTR to Help Increase Conversions CTR is a key metric in understanding the success or failure of any given digital marketing campaign. Analyzing which platforms, techniques, and ad types are most successful, and which target audiences are most responsive to certain campaigns, can aid businesses to optimize their strategies for increased sales and profit-driving conversions. That's where BeProfit comes in. With a customizable dashboard that can easily track your profits and integrate your advertising data for real-time monitoring, you can focus more on spearheading informed strategies to continually improve your CTR.
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Business metrics5 Expert Ways to Lower Your CPA Through Ad SpendWith global ad expenditure at $822,756 million, digital advertising is at the forefront of businesses' strategies. Specifically, cost per acquisition (CPA) can make or break your profitability. The lower your CPA, the more revenue you'll be able to generate from your ad spend. But achieving a low CPA isn't always easy—it takes a strategic approach to optimize your ad campaigns and make the most of your budget. Understanding CPA CPA is used as a metric to measure how much it costs for each successful acquisition or conversion. CPA ($) = Total Advertising Costs / Number of Conversions A successful acquisition from an online advertisement could be: A signupPurchaseSubscription to a newsletterAnother goal that you want customers to complete Monitoring CPA in conjunction with other metrics, like marketing ROI or customer conversion rates, can provide a more complete overview of how successful your campaigns are at obtaining and converting customers. Good ad spend can differ depending on the industry, target audience, and desired ROAS. The higher the CPA, the more expensive it is to acquire each customer, so lowering this number, typically, should be a top priority. Using CPA data to adjust advertising tactics and budget allocation can help drive profits and minimize overspending. Monitor Your Ad Data Easily Simplify your performance and profit tracking with integrated data. Pull and optimize ad data from various platforms in one intuitive dashboard.Access custom reports in real time.Pinpoint ROAS and conversion rates per platform. BeProfit provides a hassle-free platform to help you assess your ad metrics and identify your most profitable products or services. » Discover the ROI and ROAS differences How to Lower Your CPA Making the most of your ad spend with data-driven strategies can include a number of techniques based on your marketing goals. 1. Personalization Personalized ads are a cost-effective technique to avoid irrelevant advertising that doesn't turn into conversions. Personalization AI can produce tailored advertising by using data about: Customer preferences and interestsBrowsing historyGeographic locationSales data Personalized ads can help increase engagement and conversions, which can decrease your overall CPA. Additionally, personalizing ads gives customers the feeling that they are being seen as individuals rather than just another face in the crowd. This can inspire trust and encourage better customer retention. 2. Targeting and Retargeting Targeting involves ads tailored toward specific groups or demographics of people based on their interests or location. For example, Facebook Ads allows for keyword targeting and tailored audiences so that there's less wasted ad spend on uninterested audiences. Retargeting allows you to serve specific ads only to those customers who have already interacted with your website in some way, such as clicking on an ad or making a purchase. By appealing to specific interests and demographics, advertisers can make strategic budget decisions and increase the likelihood of customer acquisition through less costly means. » Using Facebook? Learn how to advertise on facebook like an e-commerce pro 3. Optimize Paid Campaigns With paid campaigns, you can use audience segmentation based on different criteria like age, gender, interests, location, and more, and performance metrics to analyze efficiency. Then, specific methods can use this data to maximize engagement, including: Changing when an ad runs based on higher site or page traffic timesLimiting geographic locations where certain ads run based on demographicsTargeting the ads to specific devicesImproving keywords and copy based on relevancyOptimizing landing pages Additionally, monitoring performance metrics such as click-through rate (CTR), conversion rates, and cost per click (CPC) regularly can help identify any underperforming campaigns that need adjustment. It can also highlight if an ineffective campaign should be paused entirely to minimize wasted ad spend. 4. Leverage Video Marketing Research from Wyzowl shows that 89% of consumers have been convinced to purchase a product or service after watching a video, and 51% are more likely to share video content than any other online content. This can lead to a higher click-through rate and more chance of lowering CPA. Advertisers have various options, like: Banner videosIn-feed videosCross-platform social media videosInteractive videos Incorporating videos in your e-commerce marketing can help prospective customers understand your offerings and provide interactivity, which is useful in increasing engagement and retention. Because customer retention is cheaper than acquiring new customers, this can also help lower ad spend. 5. Analyze Your Strategies But let's not forget about analytics. Performance metrics, such as CTR, CPC, and sales conversion rates, can help you assess campaign success. Using tools like Google Analytics is one great way to pinpoint areas for improvement. By monitoring any underperforming campaigns closely to determine why they aren’t performing well, you can implement new ad spend and optimization strategies. For example, if a strategy gets the customer to click on your page, but they don't convert. This could mean you need to revamp your page copy or change ad redirection with more fine-tuned personalization. Regularly tracking and adjusting your ad strategies and performance can help improve conversion by streamlining or retargeting rather than increasing CPA. » Check out the ultimate guide to effective e-commerce ads Optimize Your Ad Strategies for a Lower CPA Optimizing ad spend shouldn't stop after initial implementation. By adopting omnichannel strategies like expanding reach across various platforms using different paid social types, you can curate customer experience based on location, interests, or channel. To help, BeProfit provides an all-in-one platform to monitor advertising metrics and profits with ease. This way, you can focus on reducing ad spend waste and optimizing tactics to help keep your CPA low, your conversion rates up, and improve your ROI and profits.
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Business metricsAOV Beginner's Guide: What Does It Mean For Your E-commerce Business?For an e-commerce business, conversion rates and average order value (AOV) go hand in hand. While these can differ between industries and market sizes, recent statistics show that the average conversion rate for e-commerce businesses is around 1.72%, while the average AOV sits at around $116.72. So, consistent conversions can help increase AOV because it means more people are completing purchases while maximized AOV can improve revenue and profit margins. » Want to know more? Learn the best conversion rate metrics for e-commerce startups What is Average Order Value? AOV calculates the average amount of money spent by a customer per order over a certain period. This metric directly impacts profits because if an e-commerce business doesn't make enough sales or only makes low-value sales, it may turn a low profit or no profit after expenses are paid. How to Calculate it? AOV ($) = Total Revenue / Number of Orders Received Let's look at an example. An online clothing store received 200 orders and made $10,000 in a month. AOV ($) = Total Revenue / Number of Orders Received= $10,000 / 200= $50 A lower AOV, like this, may imply that customers are spending less per order, which can hamper profitability. But a high AOV indicates that customers are willing to spend more money on the business. So, let's say the same online store made $20,000 and received 200 orders in a month. AOV ($) = Total Revenue / Number of Orders Received= $20,000 / 200= $100 This higher AOV can enhance profitability and highlights positive customer engagement with the store. Why Should You Calculate it? Calculating and monitoring AOV can help businesses understand their sales strengths and weaknesses and their customers' buying habits. Some ways include: Tracking revenue and sales metrics to identify areas where they can cut costs.Businesses can make data-driven decisions to improve sales and revenue.Analyzing AOV can help identify techniques that need improvement to increase customer loyalty and drive sales. Seamlessly Monitor Your Sales Data Make sales data and revenue metrics easy to digest with an intuitive one-stop platform. Use cutting-edge analysis for insights into marketing performance.Access the app using desktop or mobile devices.Create and export custom data reports to assess revenue and profits. BeProfit offers a user-friendly platform to make conversion, profit, and sales data easy to monitor and comprehend. Understanding Average Order Value's Impact Customer retention can lead to a high AOV because when customers are loyal to a brand, they tend to make repeat purchases. The trust and loyalty the business has built with its customers can increase the likelihood of higher-value purchases. Poor customer retention can negatively impact revenues and profits and can indicate a business is not appealing to customer needs. For example, this happened when I first started in e-commerce and spent a significant amount on marketing but failed to convert those leads into conversions. The AOV and profits increased through employing effective sales techniques, like web personalization, because costs were optimized. » Find out ways to boost product profitability for your e-commerce store How to Improve Average Order Value Finding the best techniques to improve conversion and increase AOV is essential to improve a business's bottom line. Here are a few to help your business achieve this: Upselling and cross-selling: By suggesting related or complementary products to customers based on their browsing preferences or past purchases, businesses can encourage them to add more items to their cart.Customer support: Various channels such as live chats, phone calls, and personalized emails can enhance customer satisfaction, leading to repeat purchases.Digital marketing: Using various digital marketing techniques such as email marketing, social commerce, and other targeted advertising can attract more customers and encourage them to spend more.Product bundling: Offering products in bundles based on customer interests can encourage customers to buy more as it offers them more value for their money, resulting in a higher AOV.Loyalty programs: Rewarding customers for their repeat business through loyalty programs such as points, discounts, and exclusive offers can incentivize them to spend more. » Discover the best Shopify apps to increase your AOV Track Average Order Value To Help Your Business Tracking AOV can help businesses identify opportunities to reallocate funds or cut unnecessary marketing costs, plus assist them in making informed decisions about pricing, advertising strategies, and promotions. With BeProfit, you can track your revenue-based metrics, retention rates, and profitability in an integrated platform. This way, you can identify your sales trends and make data-driven decisions about your marketing strategies to help increase AOV.
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Business metricsRevenue vs. Product Revenue Discrepancy in GA4—Resolved Are you, like many others, having a tough time understanding the difference between "revenue" and "product revenue" in Google Analytics 4 (GA4)? It may seem like these two metrics report on the same thing—but they don't. In fact, these two metrics, used in tandem, will give you a deeper and clearer understanding of the financial health of your business. » Need more insight into generating revenue? Learn how to perfect your sales funnel with GA4 Revenue in Google Analytics Revenue is the aggregated metric from your web e-commerce or in-app stores. This is the value that's used most frequently in reporting, because it aims to give you an overall picture. Beyond wondering how sales revenue is calculated, it's important to bear in mind that revenue represents the value of an entire purchase or cart. Therefore, it can include tax and shipping costs as well as discounts, because these values are applied to the entire purchase and not individually to each item. Let's look at an example. Let's say a customer buys a T-shirt from Joe's Tees (an online e-commerce store). Here is an example of the code that's generated for the revenue metric. Take special note of the bold, underlined coding: ga('ecommerce:addTransaction', { 'id': '5678', // Transaction ID. Required. 'affiliation': 'Joes Tees', // Affiliation or store name. 'revenue': '5.99', // Grand Total. 'shipping': '1', // Shipping. 'tax': '0.50' // Tax. }); This code highlights the grand total, and includes shipping and tax in the final revenue report. » Discover the benefits and difficulties of revenue analysis in e-commerce Product Revenue in Google Analytics Product revenue focuses on the value that individual products contribute to the total revenue. It looks at each product's value and quantity in the cart separately. Therefore, you may have situations where the values of revenue and product revenue don't correspond, even though you're analyzing the same products in the same cart. Here's another example so that you can compare the coding. Sticking with Joe's Tees, have a look at the bold, underlined section: ga('ecommerce:addItem', { 'id': '1234', // Transaction ID. Required. 'name': 'Black Rambo T-shirt', // Product name. Required. 'sku': 'AA12345', // SKU/code. 'category': 'Rambo Range T-shirts', // Category or variation. 'price': '5.99', // Unit price. 'quantity': '1' // Quantity. }); The value of the revenue is $7.49, while the product revenue is $5.99 because revenue also calculates tax and shipping. » Worried about product performance? Use these tricks to analyze your products with GA4 Final Takeaway So, revenue will provide you with a baseline of your overall performance, while product revenue will show you the weight of each individual product's contribution. This is good for determining which products are your bestsellers and which need a marketing boost or should just be discontinued. If you're still struggling to understand the difference between these metrics, you can call on BeProfit. Their solution will demystify all the GA4 discrepancies. The bottom line is that the success of your business depends on accurately understanding the metrics and data you can extract from GA4. » Want to see what BeProfit has to offer? Schedule a demo
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Business metricsHow to Calculate Your e-Commerce Store's Product Return RateHigh e-commerce return rates can be a serious issue for your store's bottom line. Currently, statistics suggest the cost of returns each year amounts to around $101 billion in lost cash for businesses. While returns are problematic for any store, they can be particularly damaging for e-commerce store owners. Apart from having a dissatisfied customer, you miss out on a sale and lose cash on two-way shipping expenses and packaging costs. Understanding Product Return Rate in e-Commerce Product return rate looks at the frequency at which customers return items to your online store. According to studies, a quarter of all consumers return between 5% and 15% of all the items they buy online. If your return rate is higher than this, it could be a sign you need to make some significant changes to your quality management processes. Product Return Rate Calculation: The Formula The formula for calculating product return rate is relatively straightforward. Simply divide the number of products returned by the number of products sold, then multiply by 100. Return Rate = Products Returned / Products Sold x 100 Example Imagine your online clothing store sells 15,000 products within a year, but 5,000 of those products are returned by customers. The formula for calculating your product return rate would be: 5000 / 15,000 x 100 = 33%. If your company sold 10,000 products but had 100 of those items returned, the formula would be: 10,000 / 100 x 100 = 10%. What Is Considered a Good e-Commerce Product Return Rate? A "good" e-commerce product return rate can be difficult to define because the average refund rate for e-commerce stores typically depends on the industry. For instance, apparel retailers generally experience an average return rate of around 12.12%, while home improvement and houseware brands can experience an average return rate of up to 11.5%. After industry, a business's return policy also holds great sway over the return rate. A generous return policy with free returns may have a higher return rate because customers are less likely to accept a product they’re not 100% happy with. Other factors that can contribute to higher return rates include: Price: Organizations selling high-price items may receive more returns because customers have higher expectations.Seasonality: A quarter of holiday shoppers buy items online intending to return them at a later date. Holiday returns are particularly common because gift recipients aren’t always happy with the item they receive. Poor product pages: Companies who provide little product information on their online platforms are more likely to see higher returns because customers may have made an uninformed decision when buying the item. The versatility of product return rates means it’s important for retailers to look at their metrics in the context of customer behavior. Organizations generally achieve the best return rates when they reduce the need for returns with high-quality products, and deliver customer-friendly purchasing policies. Best Practices to Optimize e-Commerce Returns There are a few ways companies can improve customer experiences and mitigate returns. Some of the best strategies to reduce return rates include: Implement the right return policy: A well-crafted return policy can help to reduce product returns and boost sales, while reducing cart abandonment. Make sure your customers know what to expect when returning an item. Make product information accurate and accessible: Ensure your product descriptions provide plenty of clear information for your customers to make confident decisions. Include high-quality photos, interesting product details, and relevant sizing charts. Keep customers informed about returns: Leverage automatic emails and notifications to inform your customers about the returns process. Around 92% of customers say they will buy from a company again if the returns process is simple. Elevate the value of customer reviews: Use customer reviews to highlight the values and benefits of a product in advance of a purchase. Most customers will check reviews to determine what they can expect from a product before buying. Promote exchanges over returns: Give customers a hassle-free way to exchange their products for something else on your store. This will also help to reduce the amount of money you lose from a potential return. » Discover 5 strategies to reduce your e-commerce return rates Reduce Your Return Rates Now that you know how to calculate product return rates, it might be time to think about the other metrics and strategies you can use to improve the success of your online store. Tools like BeProfit can give you a behind-the-scenes insight into the factors that influence your company’s profitability.
A good CLV can improve profits and sales.
Business metricsUnderstanding CLV: Definition, Analysis & ExamplesA survey by eConsultancy shows that 76% of respondents view customer lifetime value (CLV) as a pertinent aspect of their business. However, only 42% were able to measure it. It may not be easy to accurately gauge how much revenue a customer will likely generate over their entire relationship with your business. Nonetheless, measuring and improving CLV can boost your bottom line and build long-lasting customer relationships. What is CLV? CLV is the estimation of total revenue per customer based on past and predicted purchases. While there isn’t a one-size-fits-all answer to a good CLV metric, it's helpful to measure because if, for example, your CLV is lower than your usual customer acquisition costs (CAC), you are likely to lose profits and revenue. An ideal ratio here would be 3:1. CLV is often alternately called lifetime value (LTV). Although these two don't have any material differences, LTV is sometimes more focused on the accumulated value of all customers. Gain Insight To Boost CLV BeProfit can help you understand your CLV through in-depth analysis, so you can make data-driven changes to your acquisition and marketing techniques if needed. Uncover actionable insights to improve your margin, profitability, and retention.Easily connect store and advertising platforms into one dashboard.Access the BeProfit app from mobile or desktop devices with ease. How to Measure CLV There are some variables you may need to calculate before getting to CLV, such as: Avg. Yearly Revenue Per Customer = Total Revenue / No. of Active CustomersGross Margin = Sales Revenue - Cost of RevenueChurn = % of customers that stopped using your product or service over time. From there, you can work out the CLV using this formula: CLV ($) = (Avg. yearly Revenue Per Customer X Gross Margin) / Churn » Need some clarity? Learn how gross profit and gross margin differ Understanding CLV: Examples Scenario 1: “Good” CLV Let's say an e-commerce business has an average yearly revenue per customer of $500. Its total revenue over the past year has been $1,000. Over the same period, it spent $500 on bringing and promoting its products to the market (the cost of revenue). Let’s also assume they had 100 customers at the beginning of the year and 20 left by year-end. First, we'll need to work out the gross margin, then the CLV: Gross Margin = Sales Revenue - Cost of Revenue= ($1,000 - $500) / $1,000 x 100= 0.5 or 50%CLV ($) = (Avg. yearly Revenue Per User X Gross Margin) / Churn= ($500 X 0.50) / 0.20= $1,250 This is a good metric given that the CLV is more than three times the cost of revenue, meaning the business is reaping a profit. Scenario 2: "Poor" CLV Now, let's say a subscription-based software company has an average yearly revenue per user of $100, a gross margin of 70%, and a churn rate of 40%. CLV ($) = (Avg. yearly Revenue Per User X Gross Margin) / Churn= ($100 X 0.70) / 0.40= $175 Here, a lower CLV can be a warning sign that the company needs to take action to improve its customer relationships and generate more revenue from its existing customer base. Why is CLV Important? CLV and positive customer-business relations go hand-in-hand. Without satisfied customers, your business can experience low sales and retention, which ultimately can negatively impact your bottom line. So, let's look at how CLV relates to and influences the following facets of e-commerce businesses: Customer behavior and retention - When customers feel valued and engaged with a business, they are more likely to make repeat purchases over time, which can increase CLV.Marketing - CLV can highlight whether marketing strategies, like email marketing, are effective or not, so businesses can then make informed adjustments to improve conversions.Average order value (AOV) - Loyal and satisfied customers are more likely to make larger purchases, which can boost CLV.Sales and profit - Understanding CLV can help businesses identify their most valuable customers and focus on retaining and growing those relationships. This can lead to more purchases, higher AOV, and larger profits. How to Improve CLV There are multiple strategies businesses can utilize to help increase their CLV and enjoy the benefits of the facets mentioned above. Some of these include: Loyalty programs - These can encourage repeat purchases, build customer retention, and maximize product profitability and CLV.Improved customer service - Customer satisfaction and loyalty can increase because customers may feel more understood. This can boost CLV and sales.Upselling and cross-selling - Recommending relevant products or services to customers based on their preferences and browsing habits can increase CLV as well as AOV.Leveraging social media - Businesses can build brand loyalty and encourage repeat purchases through strong online engagement, presence, and open customer feedback.Simplifying user experience - Optimizing sites, streamlining checkout, and providing clear product information can improve overall customer experience and increase sales and CLV. » Find out how to double CLV methods from WooCommerce sellers Boost Profits By Prioritizing CLV in Your Business Analyzing CLV can aid in the success of an e-commerce business by providing insights into business performance. Leveraging strategies, like marketing and social media, can help improve customer retention and loyalty. This can reduce CAC, increase profits, and ultimately boost CLV. To this end, BeProfit offers an intuitive, all-in-one dashboard that allows businesses to track profits and sales data, which can be actioned to improve retention. BeProfit is a wonderful solution for businesses looking to take their CLV analysis to the next level for better revenue and profits.