Critical Metrics for E-Commerce Success

- [Instructor] Fast forward two years, the demand for Carmen's Bakery has expanded and her regular customers want to place their bakery orders online. Carmen finally opened up her eCommerce store and is working to make sure she's tracking the right metrics to ensure the success of her store. eCommerce breaks down into four main areas, people, products, sales, and inventory. As a bare minimum, I always recommend one quantitative metric and one qualitative metric per area that can be shared across the business. Let's dig into our first category, people. Within eCommerce, people are defined by anyone who visits our online store. These are often referred to as visitors or users. As our quantitative metric, it's common to measure the number of users. Users are the amount of people or rather devices that visited our site. As mentioned previously, I'm not a big fan of users as a core metric in eCommerce. I find it to be a bit of a vanity metric. Suppose a user came to the site in error. This will inflate our user count and skew many of our metrics. To solve this, I use engaged users as a quantitative measure because it only showed users that intended to be on our site. I define an engaged user as a user that visited the site for 10 seconds or more, or viewed multiple pages. This will exclude anyone who came to the site and immediately left or a bot scraping the content of our site. Qualitative measures at this early stage are a little tricky. Asking our brand new users to fill out a form as soon as they get to our site may discourage users from purchasing from us. In this case, a proxy metric like time on site could be used. A short time on site like 10 seconds would indicate a poor experience, while a longer time on site, like two minutes, would indicate a more favorable experience. These two metrics engaged users and time on site would be enough for us to estimate both relevant traffic and quality of the experience. If I had to add one more metric to the mix, I choose existing customer ratio, as it would indicate how well we attracted repeat customers back to buying. This ratio is defined by the existing customers visiting the site over the total number of engaged users. So if we had 30 existing customers visit our site and a hundred total visitors, we would have a existing customer ratio of 30%. Please note that a customer is a user that has purchased from us previously. Generally, in eCommerce, it's expensive for us to bring in new users, so bringing existing customers back is crucial. Harvard University found that the probability of selling to an existing customer is 60 to 70% versus selling to a new customer, which is five to 20%. So it's really important to know if these customers are coming back to the site, even if it's just to browse. The same logic can be applied to our other sections. For products, my quantitative metric would be product views, which is the total number of products viewed. My qualitative metric would be the average product rating. If my goal was to improve the user journey online only, I'd probably use the average number of product views seen by a user. We've covered a few key metrics for people and products. In the next video, I'll cover sales and inventory.