Top 3 Growth KPIs to Monitor in Magento Metrics
Do you know Bob Moore? He’s head of Magento Business Intelligence, formerly known as RJMetrics, the company that was acquired by Magento in 2016. You might know RJMetrics for its famous analytical pieces on AirBnB and Crunchbase companies, A/B testing article on TechCrunch, and ALS ice bucket challenge analysis.
A year later after the acquisition, Bob made an impactful announcement during his presentation on Magento Business Intelligence Essentials, the new product his team has been developing for Magento store owners.
During Magento Imagine 2017 Bob Moore boldly announced that there are 3 key business Magento metrics that store owners need to monitor no matter what: customer acquisition cost, customer retention rate, and customer lifetime value.
Why did he focus on these exact Magento metrics when his product can track hundreds of interesting pieces of data and make custom reports where Magento BI combines these metrics in any desired way to offer store owners unique insights about their business?
The answer is simple. Even though our tools become more sophisticated and smart with every iteration, the core of the business lies inside the select few mission-critical KPIs that haven’t changed for years:
- customer acquisition cost measures how much you pay to get a customer to buy something from you,
- customer retention rate measures how many customers make repeat purchases at your store and become loyal to your brand,
- customer lifetime value measures how much money every customer spends at your store from their first purchase to their last.
Unless something drastic happens, these three metrics will always make up the core of the online retail business model. The less you pay to attract new customers to your store, the more customers stay with you after their first purchase, and the more they spend over their lifetime – the more successful your store is as a business.
Now let’s dive deeper into how each metric works and where you can improve when you monitor these KPIs for your store.
Customer Acquisition Cost Metrics
Getting a new customer always costs money. Whenever someone enters your store it means they either somehow managed to find it via a promotion (did you invest in paid ads on Google?), or they clicked on your link among many other options (did you invest in SEO?), or searched for your name specifically on the Internet (did you invest in brand recognition?).
Either way, your customers don’t come cheap. And understanding and monitoring the actual cost of your customers is a pivotal requirement of any business. If you don’t know how much you pay for every new user, how do you find out whether you are successful in getting new people in or need something to change?
In order to understand the effectiveness of each channel, you need to monitor customer acquisition cost in Magento. Depending on the actual effectiveness of each channel you can reallocate the marketing budget from one field to another, getting the most out of your money.
This is where Magento Business Intelligence shines. Instead of calculating your CAC (customer acquisition cost) manually, Magento BI makes use of Google Analytics data, Magento store data, ERP and CRM data silos to combine and process them into one huge warehouse.
The value here is not only in making different data into a single point of access but mostly in automatically analyzing it and giving advice on how to improve. For example, if one channel consistently underperforms, MBI will tell you to deprioritize it in favor of others. Automated actionable advice like that is what business intelligence is known for and what it does best.
Customer Retention Rate Metrics
Gaining a customer is one thing. Making someone come back for more is a different story. First, you have to convince the occasional shopper that they can trust your store and the quality of your merchandise to make a purchase. Once they buy from you we have a connection and the first step to building customer loyalty has been made.
Customer retention is tricky. First of all, it’s hard to tell what makes one person buy from you repeatedly. Is it a habit? Is it brand loyalty? Is it deals, customer service, post-sales, pre-sales, delivery time, guarantees, or something else? Unless you know exactly what makes them come back, you as a seller are not in control of their retention chances.
Sure, as in the example below, you can improve all of these aspects at the same time and this will ensure customers stay with you longer. But instead of spreading yourself thin all over the user experience, Magento BI can help you find actual bottlenecks and focus your efforts on them.
The whole idea of this kind of improvement is that you don’t rely on assumptions anymore. You accumulate data from multiple sources and then either analyze it yourself or use business intelligence tools to get insights into where your efforts will have the most impact.
Customer Lifetime Value Metrics
Do you attract more customers than you lose? Is your customer base growing or shrinking? Are you investing too much into customers that leave you after a few purchases? What happens here? Why do they leave? Why do they stay? Can you incentivize your oldest shoppers to stay longer with gifts and coupons? What kind of offers help newcomers stay longer?
Working with Magento, it’s hard to find all this data in the store metrics. Again we need to use business intelligence tools to collect, sort, and make sense of multiple data silos that save relevant information.
Business intelligence can segregate users by a multitude of attributes to find out who is leaving you sooner rather than later. Are they Android and iOS users? (Maybe you need a better mobile user experience.) Are you losing customers who have opened support tickets and experienced problems with their products? (Time to look into the returns process and see what happens there).
Do you lose the majority of your loyal users after the second purchase? (Time to ask real customers what went wrong for them and if they are unhappy with how the store treated them.)
Using an Actionable Magento Metrics BI Solution. Worth It?
We don’t say your store will fail if you only ever use Google Analytics to monitor your customers’ behavior. The point we are trying to make is that in e-commerce, when you don’t see something, you can’t control it and can’t make it better. You don’t know what you don’t know.
Generic Magento metrics data doesn’t allow Magento store owners to meaningfully monitor these 3 KPIs. Google Analytics does not offer webmasters to see any individually identifiable information on their visitors – making most of the BI-like insights impossible. Your most viable option here is actually using Magento BI (RJMetrics), Chartio, Looker, GoodData, or any other alternative that can build and update reports on your customers.
Sure, Magento users will benefit from the close integration of Magento BI Essentials into the Magento platform but are still free to choose any of the available competition.https://www.area19delegate.org/top-3-growth-kpis-to-monitor-in-magento-metrics/Website Designing