#1 Key Business Metrics
Welcome to the Out of the Jungle: Product series in which we’ll walk you through all the key tactics and strategies to help you unlock the full potential of your product portfolio. Where should you direct your focus, which numbers are the most important to keep track of? Without further ado, let’s dive into the first and foremost factor upon which your product’s performance is based: your key business metrics. We hope you’ll have more fun than a barrel of monkeys!
Key Business Metrics
Product tab is the very first thing you see when you go the Product Statistics plugin. It summarizes the most important indicators of your product’s performance, including the fundamental business KPIs. Running a business without data is like driving with your eyes closed. You need to understand your data if you want to stay on the road, and be ready for any turns or potholes along the way. By monitoring your products, and more precisely all your product variants, it’s easy to determine when to make changes such as reviewing pricing strategies, offering discounts, adjusting your product portfolio, or loading and unloading your stock.
#1 Number of Sold Products
In order to stay on top, tracking what goods are in demand should go without saying. That means knowing the number and quantity of orders per particular product, and in combination with product revenue allows you to distinguish between the most important products (in terms of selling, popularity, etc.) and which products aren’t selling and bringing you down. Monitoring the volume of products sold compared to previous periods can help you predict future buying habits since this number can vary based on seasonality and trends.
Also, don’t overlook the average selling price per product which represents a count of sales from all orders divided by a number of sold pieces. This metric provides you with pivotal information necessary for product price optimization, and by extension, your overall financial performance.
#2 Revenue
Revenue is the total amount of money you received for goods sold (or services you provided) during a certain time period. It’s important to track your revenue daily and have a clear overview of your performance, including where you generate the most money, where you’re losing money, and how this number relates to your product portfolio. Predictive analysis can go a long way in terms of forecasting. Using past performance data to predict future results will help you plan your cash flows better.
To increase your profits you also need to know which products generate the highest revenue and are worth giving priority promotion. Promotions and discounts can be great ways to drive interest and incentivize sales in your online store. In addition to helping you acquire new leads (who you can then sell to again later), they also help in re-engaging old customers who maybe have not visited in awhile.
| Tips & Tricks |
Many eCommerce platforms easily allow you to create coupon codes that you can offer your customers, such as percentage / money value discounts, store credits, free shipping, free gifts, etc. They are easy to use and easy to track. Just don’t give them away too easily!
- Seasonal and holiday offers
- Pre-launch offers
- Exit intent pop-up offers
- Abandoned cart offers
- Retargeting offers
- Customer loyalty offers
- For referrals / affiliates
- For sharing on your social media sites
- In exchange for signups to your email list
- Volume / cart size offers
However, there are some potential drawbacks that you need to consider such as undercutting your margins. It can also hurt your brand image — customers may see your products as being lower quality if they’re being offered at discount. The risk of using discounted pricing too often is that customers may choose to buy from your site only when there is a promotion on.
#3 Gross Margin
Total gross margin is calculated by subtracting total costs and expenses from your revenue. It’s the basic KPI of your business productivity as it indicates the financial gain of your sales efforts. In this case, monitoring your margins can help you make informed and economical decisions, such as determining when to drop products with higher costs.
| Tips & Tricks |
Customer centricity has become an essential principle in eCommerce, and in order to stay competitive online stores need to do everything possible to increase the satisfaction of their clients. Therefore, maintaining high standards of customer service are indispensable. You need to have a responsive website or mobile app; you should ship and return for free; you must offer ‘buy online, pickup in store’ options, etc. All these strategies will help ensure loyalty from your customers, but it also represents giveaways that add costs. Unless you have unlimited resources from stockholders (like Amazon), you’ll notice such costs have to be made up somewhere. So what can you do in order to raise your margins?
- Increase prices of your most popular products
- Sell added value by bundling items
- Get rid off your slower-moving products and narrow your focus
- Limit the discounting (don’t get your customers too used to discounts)
- Award extra hours based on average sale / sold units per customer
- Buy more from fewer vendors and ask for a discount
- Increase the basket size / your AOV
A good strategy is to look at your Total Gross Margin in combination with average gross margin per product. It will reveal products that are in the most demand according to generated profit. This way you can ensure adequate inventory and always be prepared with the best offer for your customers.
#4 Number of Orders
Every eCommerce businessman tracks the number of orders daily. People tend to routinely monitor this simple metric to evaluate their store’s overall performance, which is dependent on a number of variables including marketing campaigns and recurring factors such as the season, weather, and holidays. For many merchants, this is the only data they will take into consideration, which is unfortunate if we consider the potential of such information.
For instance, knowing your average order value (AOV) is just as important. AOV is calculated by dividing the total revenue by the number of orders. By checking this metric you can determine how much a customer spends in your online store on average, and whether they buy more expensive / multiple items per basket, which in turn can tip you off to possible targeted marketing campaigns.
| Tips & Tricks |
If your AOV is low you can try different strategies to increase it. Whichever way you choose to increase your AOV, always keep an eye on the margins, especially when applying a discount. If you give a discount over your margin, AOV can result in an inverse effect. Increasing AOV in this scenario would result in an even greater loss of money. Here are some tactics that can help you boost your AOV:
- Reduce your order execution cost
- Offer volume discounts
- Promote special product bundles
- Cross-sell (encourage customers to buy a comparable higher-end product)
- Upsell (invite customers to purchase related or complementary items)
- Offer free shipping for a higher order value
- Create a loyalty program
- Set time-limited offers
Did you know? Product recommendations are responsible for an average of 10–30% of eCommerce revenues.
We hope you liked this post! Feel free to share your tips and tricks with us in the comment section below. And as always, stay tuned! The next volume in our Out of the Jungle: Product series, Part #2 Products, Variants, Categories, is coming in a month. :-)
