A recent article published by Doug Crowe on Shopify Plus highlights the surprising dangers of prioritizing conversion rates and Average Order Value (AOV) as the best measurements of marketing success.
These two metrics, unfortunately, are exactly how many of today’s B2C ecommerce marketers measure their marketing efforts. On their own, neither conversion rate nor Average Order Value alone delivers a complete picture of the health of your business. To borrow an example from the Shopify piece:
“A 2% conversion rate is terrible if your average order is $15. A 2% conversion rate is extremely high if your average order value is $995.”
If ecommerce marketers are using conversion rates and AOV alone to make business decisions, they’re likely only responding to just a small piece of the overall picture. What if a high conversion rate isn’t necessarily a be-all-end-all indicator of success, but is actually a sign that you have an opportunity to allocate more of your resources toward new customers? Conversely, what if a lower conversion rate is actually paired alongside other highly-performing loyalty ecommerce metrics? Turns out, either of these could be the case and conversion rate alone won’t give you the whole story.
The solution to metrics confusion
Doug Crowe explains that Revenue Per Visit (RPV) is the best ecommerce metric by which to optimize your business, and we agree. Revenue Per Visit combines acquisition metrics, conversion metrics, and AOV into a comprehensive litmus test of the health of your ecommerce business. It’s calculated by taking the revenue that you acquired within any given time frame divided by the number of visits within that same time frame, or by multiplying conversion rate and Average Order Value. It’s perhaps the only metric that delivers an understanding of where to prioritize your marketing efforts in a way that’s truly comprehensive. For example, if you’re aiming for long-term revenue growth and customer acquisition, your RPV will be on the lower side, and if you’re focused on driving profitability, your RPV will be higher. This metric will allow you to succeed in areas like traffic sources, lifetime value, and shopping cart abandonment. Read between the lines with this ecommerce metric to bring real results, not just impressive numbers to google analytics.
Examine success from many angles
Revenue Per Visit based on average customer is just one of numerous important metrics ecommerce marketers can use to more effectively evaluate and optimize their business. These Google Analytics metrics include but are not limited to repeat purchase rate, cart abandonment rate, customer lifetime value, churned-to-engaged, and more. All of these important metrics are focused on where marketers are missing an opportunity to reach customers with relevant and personalized messaging. When marketers focus on these metrics, rather than more superficial and potentially misleading metrics like conversion rate, they can better position themselves to keep customer’s shopping carts full, lower their acquisition cost, and guide shoppers toward becoming returning customers to their ecommerce store.