As we move swiftly into the festive period, we have been working closely with our ecommerce clients to make sure that we are properly prepared for the inevitable onslaught of Christmas and New Year orders. Not wanting to mention the ‘C’ word too early, we also anticipate this to be one of our busiest months to date, as more and more people switch to carrying out their Christmas shopping online.
Personally, I am planning to do 90%+ of my Christmas shopping online this year – all in one go, over the weekend. I usually like to balance this out with a bit of traditional high street shopping (to get me in the festive spirit), but my purchasing habits have definitely changed of late – as have those of much of the UK population.
So, what have we been doing to help our ecommerce clients prepare? Creating elaborately crafted bespoke media plans, including an intricate mix of influencers, content marketing, and complex day parting?
Well, yes, but also in many cases it’s a lot simpler than that. In fact, it is so simple that I am a little embarrassed to say it – but here we go…
We have focused on getting the basics right. It’s not glamorous, I know, but all too often we forget the basics when the next ‘new’ thing comes along. I have been guilty of it myself in the past, believing that I need to come up with something creative and original to impress others or make myself sound important. In reality, we just need to focus on what works and keep doing that – but do it a bit better.
So, what are these basics? For me, those basics all revolve around some core KPIs that we track every day, week, month, and year. And today, I’m going to share with you a few of those KPIs that I keep a close eye on and hopefully it will serve as a reminder to everyone to take a look at these first before doing anything else.
So, in no particular order…
Shopping behaviour & conversion rates
This is one of my favourites and involves looking at the drop off rates between Sessions, Product Views, Add-to-Baskets, Check-Outs, and eventual Purchases.
The reason why it is one of my favourites is because when we collate all our clients’ data, we can clearly see patterns in behaviour. We can see what a ‘good’ conversion rate looks like and can quickly identify the areas that need improving.
For example, if we look at the add-to-basket rate (add-to-basket/ sessions), some of our clients are achieving a conversion rate above 15% – that’s pretty good. At the lower end, we are seeing around 5%. So why the difference? And how can we get that 5% up to 15%?
Well before we can do that, some more analysis is needed – broken down further into mobile/ desktop traffic and by traffic source.
Could it be that the Facebook traffic we are driving to the site is bringing this metric down? Or is it a simple case that we need to make sure that our delivery charge and time needs to be clearly identified on the product page?
This is especially important if you make any changes to the website. Have those changes improved the conversion rate or made it worse?
Having that information upfront and easy to see around busy times in retail such as Christmas is very important, as ‘will this arrive on time?’ will be a question on everyone’s mind. So, if you don’t have it shown and they get to the basket and it says ‘delivery time 3 weeks’, the chances are that they may look elsewhere and you could lose that conversion.
Next – what do your conversion rates look like?
Cost per Action (CPA)
Coming from a traditional direct response background, I don’t think any metric has been hammered home quite as hard as CPA (some people call this CPO). Cost per Action/Acquisition (or Cost per Order) is the simple calculation of spend/orders. For example:
£100/10 = £10 Cost per Order
This is a very simple calculation to make, but one which has a significant impact on how we run our activity.
Further to this, the CPA on its own is not enough – it needs context. For example, one client’s CPA of £33/order might be good, but for another client it could be far too high. You want to try to ensure you’re not paying more to get an order than the value it offers to your client’s business.
That all depends on things such as LTV (lifetime value) and the client’s own operating costs and profit margins. In a nutshell, if your fixed costs are high, you need a lower CPA to remain profitable, but if your fixed costs are low, you can afford a higher CPA. Another topic for another day, but the key thing to remember is to work with your client to come up with a target (and max) CPA and then align your marketing efforts to achieve it.
Return on Advertising Spend (ROAS)
At the other end of the scale, we have clients who are more focused on ROAS (return on advertising spend). Again, another simple calculation to make – ROAS is revenue/spend. For example:
£5,000/£1,500 = 3.3
Or in other words, for every £1 spent on marketing, we are making £3.30 back.
Like with CPA, on its own, without any context, who is to say if that is good or bad? At the very least you can be confident that your marketing efforts are producing a positive ROAS – so you are not losing potential revenue.
So, CPA or ROAS? Which one should you focus on? This really depends on the client’s objective and strategy.
If you have a subscription or repeat buying model, they you may be willing to sacrifice the initial first purchase to acquire that new customer (more commonly known as a loss leader). If, on the other hand, your business model relies on that first purchase being profitable, then you want to make sure that ROAS becomes your main metric.
I tend to look at both with my clients each month across each channel and use it to make strategic decisions on which channels to push further.
So – as a starting point in looking at the fundamentals relating to channel performance and KPIs, look closely at those conversion rates and have that discussion with your clients regarding clearly defined CPA and ROAS targets.
If you want to get the most out of your ecommerce activity speak to our digital specialists, who will be more than happy to help.