Retention Rate

The retention is the number of customers who keep returning to make more purchases. They are customers that a business manages to keep. This metric also tells you the rate of customers that you lost for a given period. This is important because returning customers are far more profitable than acquiring new ones. Therefore, businesses should cater towards the percent of repeating customers and think of marketing ways to raise that percentage. The safe value for this is business dependent, but the higher the retention rate, the more profitable a business is.

Calculation

In order to calculate the retention rate, you subtract the total number of new customers acquired in a time period from the number of customers at the end of the period and divide that by the number of customers at the start of the period. Then, that value is multiplied by 100 to generate a percentage.

[(Number of customers at the End of the Period - Total Number of New Customers Acquired in a Time Period) ÷ Number of Customers at the Start of the Period] x 100 = Retention Rate

For Example

If Net-a-Porter had 1100 total customers acquired at the end of a period, 200 new customers acquired in that period, and 1000 customers at the start of that period, then the retention rate is 90%. In other words, 90% of the customers from the previous period came back to purchase in this period.

Customer Lifetime Value

Customer Lifetime Value (CLV) measures how much any given customer spends with your online shop throughout the customer lifecycle. This tells you how much you can spend to acquire a customer and how far you should go to retain them. The CLV can act as a benchmark for future growth and expansion and determine the worth of a business. The CLV also demonstrates the significance of how repeated business can help shift a business’s priorities accordingly. In order to be sustainable, the CLV should be slightly higher than the customer acquisition cost (CAC).

Calculation

It’s determined by first calculating the average purchase value and then subtracting average purchase frequency rate from that number to determine customer value. Then, once you calculate average customer lifespan, you can multiply that by customer value to determine customer lifetime value.

Average Purchase Frequency Rate - Average Purchase Value = Customer Value

Customer Value x Average Customer Lifespan = Customer Lifetime Value

For Example

Let’s say Net-a-Porter generates $1,000 for a customer for a year, the customer has been buying from Net-a-Porter for 5 years, and the cost to acquire the customer was $2,000. The CLV would be $3,000.

New Customer Rate

This is simply the number of new customers for a given period. Increasing your customer base is the fastest way to grow your business and reach short-term revenue goals. By tracking the growth of the customers, businesses are able to better understand their projection and juxtapose their new customer rate to the retention rate and acquisition costs. The safe value for this metric is business dependent.

Calculation

To calculate the new customer rate, add up all the new customers for a given period.

For Example

If Net-a-Porter acquired 4,283 new customers in Q1 and 2,394 customers in Q2, the new customer rate for both quarters would be 6,677.

Customer Acquisition Costs

Customer acquisition costs (CACs) is the cost of acquiring a new single customer. It is very important to be aware of your CAC because your acquisition cost should be less than your average order value. This way, you can stay away from bankruptcy and make money off each new customer. This metric is also helpful to determine which marketing campaigns were successful by tracking how much you spend on them and how many new customers you received in return.

Calculation

In order to calculate CACs, you divide all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent. Most businesses find it useful to calculate CACs by source.

All Costs Spent on Acquiring More Customers ÷ Number of Customers Acquired in the Period the Money was Spent = Customer Acquisition Cost (CAC)

For Example

Net-a-Porter spends $12,000 on marketing on Facebook in October and acquired 15,000 new customers during that time. Thus, their customer acquisition cost was $0.80.

Average Margin

Average margin is what you earn from each product after deducting what you paid for supplying it. This is important because it is the starting point toward achieving a healthy bottom line net profit and it influences cash flow. If an average margin isn’t positive, then there is no income. Therefore, businesses need to set margin targets in order to make sure they are not yielding a deficit.

Calculation

In order to calculate the average margin percentage, you need to divide expenses by the net sales and multiply that value by 100.

(Expenses ÷ Net Sales) x 100 = Average Margin

For Example

If Net-a-Porter has $4 million in expenses and $16 million in net sales for a year, then their average margin is 25%.

Cost-Per-Click

The cost-per-click measures the amount of money paid for each click in pay-per-click marketing campaigns, like a Facebook ad. Paid advertisements are a significant growth driver for many online businesses, so it is essential to monitor cost-per-click to maintain a healthy return on investment (ROI) and check that your marketing efforts are worth a business's time. Understanding the cost of these campaigns and tying them back to a specific goal, such as product sales, is vital to making marketing decisions.

Calculation

The cost-per-click is calculated by dividing the total costs of your clicks by the number of clicks.

Total Costs of Your Clicks ÷ Number of Clicks = Cost-Per-Click

For Example

Let's say a Net-a-Porter ad gets two clicks, one costing $0.20, and the other costing $0.40, for a total cost of $0.60. You divide $0.60, the total costs, by 2 (your number of clicks), and you get an average CPC of $0.30.

Revenue by Traffic Source

Revenue by traffic source is the amount of traffic coming in from an individual source, whether it be from social media like Facebook and Instagram or an email chain. This is important because not all traffic is equal, so it highlights the most valuable sources that direct traffic to your e-commerce site or mobile app. Some traffic sources may send visitors who are more likely to be customers. Thus, this metric will tell a company whether or not to invest resources on sources that are not generating much traffic. Safe values are dependent on business goals and the number of ad platforms.

Calculation

Revenue by traffic source is calculated by multiplying the number of users from a single traffic source by the conversion rate and then multiplying that value by the average order value.

(Number of Users from a Single Traffic Source x Conversion Rate) x Average Order Value = Revenue by Traffic Source

For Example

Net-a-Porter has 500,000 users from Facebook in October. Their conversion rate is 3% and their average order value is $450. Thus, their revenue by Facebook is $6,750,000.

Conversion by Traffic Source

This metric tracks sales conversion rates from specific traffic sources. It is essential to know where users who become actual buyers are coming from compared to which ones only browse the site. This metric extends the functionality of revenue by traffic source, because it doesn’t only give you monetary value; it gives you a ratio of users that provide insights on where you should be directing marketing efforts and resources. Different traffic sources could be social media ads like Instagram & Facebook or search consoles like Google. Knowing the different conversion rates from different traffic sources is critical to understanding where to budget different ads, campaigns, and SEO.

For Example

Let's say Net-a-Porter had a conversion rate of 5% for Instagram and only 1% for tweets. Therefore, they would want to put more money into Instagram ads rather than Facebook.

Brand Name Search

This metric refers to how many times a business’s brand name was entered into a search console such as Google. Google keyword planner will give a business this information. It is important because it is a reflection of your marketing as a whole as it measures brand awareness and the rate at which your brand name is tossed around. Knowing your brand name search value is also beneficial to see where you stand in popularity against your competitors.

Conversion Rates by Device Type

Conversion rates by device type determine the rate at which different users using certain devices make a purchase. For example, do people tend to make a purchase more on mobile or on the desktop? It’s important to consider devices because as we’re moving more towards using tablets and smartphones, businesses need to consider this trend in their online marketing plan. Increases in mobile purchases may encourage a company to invest more in their mobile site.

Measurement

Conversion rate by device type can be determined by analytics and marketing tools that track what devices customers are making purchases on.

For Example

For Net-a-Porter, if the desktop site has a conversion rate of 7% and their mobile site has a conversion rate of 3%, this tells their digital team that they should seek to improve their mobile site experience to bring that rate up.

Bounce Rate

Bounce rate is the percentage of single engagement sessions. A bounce occurs whenever a visitor enters the page and subsequently exits without visiting another page on the site or interacting with any of the elements on the page. A high bounce rate may have a negative connotation, but bounce rates differ by page. For example, a contact information page might have a high bounce rate because visitors are not expected to heavily engage with it.

Calculation & Measurement

Bounce rate is determined by dividing the number of one-page visits by the total number of page views to a page. It is normally determined using applications like Google Analytics, which allows you to install a tracking code on your website. These products allow you to view a variety of data including overall traffic volume, source of traffic, visitor demographics and detailed insight about their visit and navigation throughout your site.

Number of One-Page Visits ÷ Total Number of Page Views to a Page = Bounce Rate

For Example

Let’s say, on a Net-a-Porter cover story, the total number of page views is 3,000 and the number of one-page visits is 150, then the bounce rate would be 5%.

Time on Site

The time that a visitor spends on a site is calculated as the difference between the recorded time of their last page visited on the site and their first. This is important because the amount of time spent on a site is a good indicator of the level of interest or involvement that a visitor has with the site. It can also indicate the success of a campaign or other promotional activity currently happening on a site.

Measurement

This can be measured by web analytics software.

Exit Page Rates

Exit rate is the percentage of visitors who click away to a different site from a particular page, after having visited any number of pages on your site. It is important because it indicates areas of your site that may need more work to grab the user's attention and engage them. If you’re looking to convert more visitors into customers, you need to understand how they navigate your site. The exit rate can be confused with the bounce rate. A bounce can be an exit, but an exit cannot be a bounce. Exit rates can drive important site features and design, whether it be improving the content on a specific page or making links to purchase products more visible.

Measurement

Like bounce rate, the exit rate can be determined using applications like Google Analytics, which allows you to install a tracking code on your website. These products allow you to view a variety of data including overall traffic volume, source of traffic, visitor demographics and detailed insight about their visit and navigation throughout your site.

For Example

Let’s say on Net-a-Porter, a story featuring a new jacket had a very discreet “Shop the Look” button. The exit page rate on that story was 56% because viewers were unaware they could shop on that page. Thus, Net-a-Porter saw that as an indicator to reduce their exit page rate and further engage their viewers by creating a bigger, more visible “Shop the Look” button and include visible social links.

Social Media Share Rate

Social media share rate measures the engagement of users on a site and how often they’re sending content to their friends via platforms like Facebook, Instagram, Twitter, and Pinterest. It’s important for users to share your products and content on social media because this can generate new customers without putting in any investment.

Measurement

This rate can be determined using analytics software and marketing tools to track user sharing behavior.

For Example

A user on Net-a-Porter can share a new pair of shoes that just got released on Facebook. Their friends can see it on Facebook, become interested, and click on it. This can increase clicks to the site, potential revenue, and new customers for Net-a-Porter.

Email Opt-Ins

Email opt-in rate is the percentage of site visitors who subscribe to your email list. It is super important because it can deliver a 4,400% return on investment. Therefore, businesses should dedicate resources to pushing email campaigns and track the opt-in rate. Emails can alert customers of certain sales and promotions going on, giving them an incentive to visit the site. The greater the email opt-in rate, the higher the potential for bringing in revenue.

Measurement

This rate can be determined by using built-in analytics in an email marketing tool or set up in Google Analytics.

For Example

A user who subscribes to Net-a-Porter’s emails can receive notification when they have new releases or new trending stories on their website. Receiving these emails makes a user more likely to click into their site, look at their products, and read their stories. This not only increases brand awareness and engagement, but it also increases the chances of a product catching a user’s eye.

Page Load Time

Page load time is a web performance metric that directly impacts user engagement. It indicates how long it takes for a page to fully load in the browser after a user clicks a link or makes a request. There are many different factors that affect page load time, from where a user is located to the web page design. Page load times can impact revenue since people today are all about speed and efficiency. Sites that load faster have better engagement and conversion rates.

Measurement

Page load times can be measured using analytics software like Google Analytics.

For Example

Net-a-Porter currently has an average page load time of 5 seconds. This drastically improves the user experience and definitely their engagement and revenue.

Net Promoter Score

The net promoter score is a score from a survey that measures your customers’ satisfaction and how willing they are to recommend your company’s services or products to another. It is significant because this user feedback can guide important business decisions and is used as a proxy for gauging the customer's overall satisfaction with a company's product or service and the customer's loyalty to the brand. The goal is to have a high score from 9-10, meaning the customer is a promoter.

Measurement

This score can be measured by using a survey and asking customers how likely they are to recommend you to a friend and why they chose that number.

For Example

If Net-a-Porter prompts a customer to fill out a customer satisfaction survey and asks them how likely they are to recommend their company to a friend and that customer responds with a 9, it means that he or she is a promoter and is very satisfied with Net-a-Porter. They can also tell Net-a-Porter in their survey that they gave this score because they like the one-day delivery option and how user-friendly their website is.

Support Rate

Support rate measures how many of your visitors need support before making a purchase. It is important because if it is too high, then the business should put more effort into providing more information about the product, return policies, shipping, and such so users don’t have to ask for support in the first place. The ideal support rate should be as low as possible.

Calculation

Support rate is calculated by dividing the number of visitors who need support before purchasing by the total number of people who made a purchase.

Number of Visitors who Need Support before Purchasing ÷ Total Number of People who made a Purchase = Support Rate

For Example

If Net-a-Porter had 12,000 people who made a purchase in a month and 1,000 people needed support before purchasing, then the support rate is about 8%.