Analyse this

By Stephan Spencer

Tuesday 1st July 2003

An online wine shop used metrics to improve its web marketing. It broke its visitors into five distinct segments and found that one segment comprised less than 10% of its audience but accounted for over 80% of its revenue. It was then able to target that sector more aggressively. When new visitors from that segment entered the site, they received special treatment in the form of discounts and customised content. Metrics also showed which products sold the best when recommended alongside others. For example, bakery products sold surprisingly well when cross-sold with white wine.

Track the following metrics for your site and use the data to make improvements. Then use the same metrics to see if your improvements work.

Abandonment. What percentage of visitors abandon your home page without going further? What percentage abandon their shopping carts? What is the ratio of abandoned carts to completed purchases per day? How many items on average are in an abandoned cart compared with a completed transaction? What is the profile of items abandoned versus purchased? Perhaps you need to keep visitors' carts alive for longer, or email visitors who abandon shopping carts, and offer a discount or incentive to complete their orders.

Conversion. What percentage of visitors become customers, or at least move a step closer to becoming customers by requesting a catalogue or signing up for a newsletter? What is the cost per conversion (advertising and promotional costs divided by the number of sales)?

Retention. Ascertain the percentage of customers that make repeat purchases during a certain period. Enhancing customer retention is cheaper than acquiring new visitors and buyers.

Lifetime Value (LTV). What's the value of a given customer during the lifetime of the relationship? The LTV calculation is too complicated to cover here, but it includes a number of variables, such as retention rates, size and frequency of orders, revenue, referrals, direct costs, gross profits and discount rates. Improve a customer's LTV by up-selling (recommending a more expensive version of the product), cross-selling (suggesting other items that go well with the product), increasing buying frequency and reducing the cost of sales and support.

Referral Source. Determine which websites (search engines, industry portals, partners and affiliates), email campaigns and online promotions deliver the most sales, enquiries and customers.

Recency, Frequency and Monetary Value (RFM). How recently did a given customer visit your site and/or make a purchase? How often do they visit or purchase? How much do they spend? Customers in the highest value segment should be well taken care of.

Other web metrics include stickiness, slipperiness, attrition, churn, velocity and reach, to name just a few. Two great sources for more on web metrics include Jim Sterne's book Web Metrics and his "E-Metrics" white paper available for free here.

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