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Guide to ROI Analytics For Ecommerce_blog

Tips & Guides — 06 Apr 2022

Guide to ROI Analytics For Ecommerce

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  • 5 Ways to Get the Best ROI Analytics For Your Ecommerce Business

5 Ways to Get the Best ROI Analytics For Your Ecommerce Business

Running an ecommerce business can be tough. There are so many factors to think of in order to be successful. From building an effective ecommerce site to considering your overarching customer service objective, it can get overwhelming at times. 

Because of this, it can be difficult to know if you’re making the right business decisions. This is why it’s crucial to evaluate your return on investment (ROI). This will help you determine whether your investments are profitable and worth your time.

We’ve created this guide to help better understand ROI analytics and the best ways to improve your processes.

Let’s begin!

What is ROI Analytics?

To put it simply, ROI analytics is the process of evaluating the success of an investment in great depth.

ROI dashboard

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This analysis is carried out by industry specialists, investors, and managers. Not only can it help businesses determine the profitability of an existing investment, but it can also be used to compare different investment opportunities.

A business can use the results of its analysis to confirm whether it should continue to invest in a particular product or scheme. Additionally, they can also use it to identify and understand flaws throughout the business. 

For instance, if the ROI of a recent blog investment is not showing to be worthwhile, further analysis may show that your SEO strategy is lacking. You could then use this information to improve your SEO plan and better optimize your keywords.

Failure to analyze the profitability of your investments in detail may mean you’re missing out on important investment opportunities.

And with the advancement of technology, software and helpful analytic tools such as Google Analytics allow ecommerce businesses to conduct analysis with ease.

KPIs vs Ecommerce Metrics

Before going into detail on ROI analysis and what the metrics mean for your ecommerce business, it’s important to understand exactly what a metric is. It’s also crucial to understand what a KPI is, and why not all metrics are KPIs.

KPIs vs Ecommerce Metrics

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KPIs and ecommerce metrics are terms that are often used interchangeably. However, there are clear differences between them and it’s important to understand these differences to ensure you are using them correctly.

An ecommerce metric is simply any quantifiable measurement of business performance. Conversion rates, website traffic, checkout abandonment rates, and new customer purchases are all examples of metrics that are relevant to ecommerce businesses.

On the other hand, a KPI is specifically an important metric that ecommerce businesses may track to grow and improve their success. KPI stands for key performance indicator and every KPI will be different from business to business. They will focus on a specific target that the company wants to reach, or a certain area they want to improve.

One important point is that while all KPIs are measurable metrics, not all metrics are KPIs. There are metrics for every business process, however KPIs are the most critical measures. KPIs support business strategies and should be tracked to make the biggest impact on business outcomes.

For instance, a conversation rate is certainly an ecommerce metric, but it may not be a KPI. It all depends on if your conversion rate is vital to your business strategy. Is it a key indicator of your business’s performance?

So, although KPIs and metrics are closely linked and both used within ecommerce businesses, there are clear differences between the two terms.

How is Business Analytics Useful for Ecommerce?

As a whole, business analytics are extremely useful for ecommerce businesses. Here are just two of the main benefits you could reap from effectively analyzing your data.

Business Analytics

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Boost cross-sell & up-sell revenue

The customer journey isn’t as straight-forward as it used to be. For one purchase, customers may check your website, search for discount codes, and read product reviews. They’ll do all this before finding their way back to your site to make the purchase, possibly on a different device.

Business analysis allows you to collect all of this data and create reliable, data-rich customer profiles. This data includes previous purchases, products they’ve viewed, and click history. Personalized product recommendations can then be pushed to customers based on the information your software has about them.

Over time, these recommendations can be improved with the continuous data being collected. As a result, customer experience will be greatly improved and you can more effectively cross- and up-sell.

Enhanced product research and development

Choosing which new products to add to your shelves and which existing items to discontinue can be tricky. And, making the wrong decision can have a devastating impact on your business. After all, if you stop selling an incredibly popular product, you could lose a lot of customers.

Carrying out regular business analysis can help with this. You can collect reliable data that tells you which products your customers are interested in buying, how much they’re willing to pay, and when they’re most likely to buy them.

Learning customer buying habits means you can prepare your stock levels in advance and never leave customers disappointed. You can also make decisions to discontinue products that aren’t selling. This can allow you to focus your efforts on new, potentially popular items.

Not only will this boost revenue through increased sales, but you will also save money by no longer investing in obsolete products.

How Do You Calculate ROI For ecommerce?

Calculate ROI For ecommerce

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Calculating ROI for your ecommerce business is fairly easy, and it doesn’t require a mathematician to do it. The formula to establish ROI is simple:

ROI = (RETURN – INVESTMENT) / INVESTMENT x 100

Let’s look at how this calculation might look in real life.

Perhaps, an ecommerce business spent $2000 on an SEO strategy that generated an average customer lifetime value of $6000. In this scenario, the investment is an amount of $2000, and the return is the average customer lifetime value of $6000.

So, the formula would look like this:

(6000 – 2000) / 2000 x 100 = 200% ROI

Of course, this formula can be used to calculate the ROI of any campaign or activity. For example, you may choose to calculate the average order value (AOV) on your ecommerce platform following an email marketing stint. Or, you may want to determine how useful a social media campaign is in securing new customer orders.

Whatever you’re looking to analyze, this formula will give you the answer.

ROI for your ecommerce business

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What is a Good ROI for ecommerce?

This is a common question asked by ecommerce businesses, and it’s only natural to want to know if your ROI numbers match the norm. But, unfortunately, the answer to this question isn’t as simple as many may think.

ROI figures can vary greatly depending on your industry and your company’s targets. For example, the ROI from a single social media post won’t be the same as that of an ongoing campaign. 

You also need to consider whether you’d like to look at the short-term or long-term results. Depending on what you choose, your figures will differ.

So, instead of asking the vague question of “what is a good ROI?”, decide what you’d like to focus on and be more specific.

Let’s look at two important factors within an ecommerce business – online sales and SEO.

Online sales

Online sales is arguably the most important element of running an ecommerce business. After all, if you’re not selling anything on your online platform, what’s the point in maintaining it?

Because of this, online sales is one of the easiest ways to calculate ROI for an ecommerce platform. It’s the most obvious measurement of success.

For example, say you have launched a social media campaign promoting your new seasonal products. You’ll want to analyze long-term benefits and, for this campaign, you choose to focus on order value.

Perhaps you spent $5000 on this campaign and it saw an increase in total order value of $9000. Using the ROI formula, you will see an ROI percentage of 80%. That sounds good, doesn’t it?

It all depends on your targets and ultimate goals. But, it’s important to remember that most of your ROI won’t happen overnight. It takes time.

SEO

A search engine optimization (SEO) strategy is one of the best ways to draw potential customers to your ecommerce store. By including keywords and phrases on your landing pages, product pages, and across the rest of your website, apps, and social platforms (amongst many other activities), you will be increasing your chances of showing in a high position on a relevant online search.

This optimization can extend your reach and, when done right, it can also boost your SEO ROI.

The average ROI for SEO is roughly $2.75 for every $1 invested. However, as mentioned previously, ROI can vary depending on different factors. And SEO is no different. There are several influential elements, such as the industry and investment type, that can alter how much a business makes from its SEO tools and marketing strategies.

SEO

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There are also some challenges of measuring the ROI of SEO, such as its difficulty to measure. As SEO is about gaining natural visibility (rather than buying it), there’s no fixed cost with each click. 

This makes it more difficult to measure than other campaigns such as pay per click (PPC). PPC comes with set costs so it can be easy to reach an accurate investment figure. SEO isn’t as straight-forward.

Additionally, it’s worth noting that you won’t see overnight results with SEO strategies. This is a long-term investment and you may not see the positive effects for a few weeks or months.If your digital marketing strategies are strong, you will see good ROI on your SEO, however it will take time. 

Best Ways to Improve Your ROI Analytics

It’s clear that ROI analytics is crucial to running a successful ecommerce business. However, if your analytics process is not up to scratch then you may not be getting the most out of your investments.

We’ve constructed five of the most effective ways to improve your ROI analytics:

1. Review your audience

Like all ecommerce marketing strategies, when it comes to ROI analysis it’s important to understand your customers, audience, and subscribers.

Knowing exactly who your audience is and what kind of people are purchasing your products and/or services can help you tailor your strategies to them. 

Reviewing your audience will give you a detailed comprehension of who you are trying to reach. Understanding your audience’s needs and values will allow you to create accurate buyer personas in order to provide the best service and strategies possible. Not only will this result in an improved ROI but it can also help you build brand awareness by tailoring your strategies to your audience.

Not knowing who your target audience is can lead to inadequate marketing strategies which will inevitably hinder your ROI.

So, keeping your customers at the center of everything you do, and focusing on improving user experience, is definitely the way to go.

2. Focus on qualified traffic

It can be tempting to spend an unnecessary amount of time concentrating on vanity metrics like website traffic. 

Indeed, an increase in website traffic can result in a higher conversion rate. However, it can also mean an increase in unqualified, meaningless traffic. 

Many page views may look good on the outside, but views alone won’t help you reach your ultimate goals. In fact, an average of only 1.94% of ecommerce website visits lead to a purchase.

qualified traffic

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Unqualified traffic is attracted by poor content marketing strategies such as baiting your readers with irrelevant keywords. Channeling your marketing efforts towards qualified traffic will have an incredibly positive impact on your ecommerce ROI.

So, remember, rather than focusing on everyone in your industry, hone in on your specific target market.

3. Long-tail keywords

Securing a ranking for high-value keywords can be difficult due to the competitiveness of the ecommerce industry. This is why it can be useful to incorporate long-tail keywords into your SEO marketing strategy.

Long-tail keywords are three, four, or more word phrases that are more specific than short-tail keywords.

Although long-tail keywords draw less traffic, they also come with less competition and can help you reach your target audience more efficiently. 

For example, the short-tail keyword “men’s shirts” is a vague term that will generate countless results and generate high search volume. However, targeting a long-tail keyword like “red men’s plaid shirts” instead will produce specific results that will draw qualified traffic to your site.

By tailoring your products and marketing to your target buyer across all marketing channels, you can maximize your marketing and SEO ROI and, in turn, your profit margins.

4. Focus on best-selling products

When it comes to improving your ROI, it’s crucial to look at the direction in which your strategy is focused. 

It can be easy to spend all your time trying to improve small elements that can always be addressed later. For instance, there’s no point spending all your time trying to improve your cold calling techniques, when you could be researching what our customers’ pain points are.

If your team is spending all its time concentrating on the optimization of all your products, it’s highly likely that you’ll be missing out on significant profit.

Instead, start by focusing only on your best-selling products. This will help you achieve maximum results on a selected amount of products, rather than less significant gains across the board.

Prioritizing your most profitable products, will increase your chances of ranking higher on online searches which will result in an increase in sales. In turn, this will lead to an improved ROI.

This doesn’t mean you need to neglect the rest of your products and/or services that are not within the best-selling bracket. It simply means you need to prioritize your workload in order of importance. 

You’ll get to the rest of the products eventually. Not only will this boost your ROI, but it’ll also help with your conversion rate optimization.

5. Website usability

Providing the best service and improving ROI goes beyond your SEO strategy and marketing campaigns. If you’re pulling out all the stops in these areas but are still not seeing the results you want to see, it may be time to focus your attention elsewhere.

It’s clear that providing high-quality customer service should be the main aim of all ecommerce businesses. Besides, it’s been shown that 58% of people will stop buying from a business if they receive poor customer service.

Website usability

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That’s why it’s important to ensure all aspects of your customer service are up to par, and that means improving all different types of communications channels, including your website.

If your website is difficult to navigate or isn’t visually appealing, it could cost you sales which will result in a poor ROI.

To evaluate your website, put yourself in your customers’ shoes. Imagine you are a new customer trying to navigate your website for the first time. Are you able to find everything you need quickly and easily? Is the relevant information available to you? Is the checkout process easy to follow?

If the answer to these questions is no, then steps need to be taken in order to improve your website usability.

The Bottom Line

It’s clear that ROI analytics is a fundamental element of running a successful ecommerce business.

It’s important to focus on the important metrics that will help you improve your business, rather than the numbers that only look impressive. By doing this, you will be able to strengthen your strategies to improve those relevant KPIs which will, in turn, boost your ROI.

And by focusing on your target audience, improving the service they receive, and tailoring your marketing strategies to them, you will see a great improvement in your ROI. Not only this, but you will be setting yourself apart from your competitors.

So, start small. And remember, there’s more to running an ecommerce business than meaningless, vanity metrics.

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Jessica Day

Written by

Jessica Day is the Senior Director for Marketing Strategy at Dialpad, a modern business communications platform that takes every kind of conversation to the next level—turning conversations into opportunities. Jessica is an expert in collaborating with multifunctional teams to execute and optimize marketing efforts, for both company and client campaigns.