Crealyitcs Insights


Break down silos in ecommerce to drive performance

7 Critical eCommerce Metrics for Optimization and KPIs

The top eCommerce companies are laser-focused on metrics, using them to inform strategy, provide better products, deliver customer service, and grow. Selling online without keeping a close eye on your KPIs is a lot like trying to run with your eyes closed — you might get to where you want to go, but it is definitely going to take longer. You also run the risk of getting lost in the process.

But — having access to large amounts of data doesn’t necessarily mean that you need to make things overcomplicated. There are dozens of metrics that can be used to measure success in eCommerce operations. However, it is best to boil things down to a few key metrics that speak to the overall effectiveness so as not to get lost in the weeds. By focusing on a few key metrics, you keep yourself from getting overwhelmed and can focus on improving in critical areas.

Here are vital eCommerce metrics that all companies should be tracking:

Conversion Rate

The most basic of all important eCommerce metrics. Your conversion rate plays a critical role in overall success. Are you actively turning your website visitors into customers? Are they buying your products? If they aren’t, you won’t be in business for long. Ecommerce companies should constantly work to improve the conversion rates of individual product pages, and more broadly the different sections of their sales funnel.

Average Acquisition Cost (AAC)

Average acquisition cost measures how much it costs your company to acquire a new customer, one of the most important metrics in your arsenal. The metric helps companies to optimize their overall marketing by ensuring that they pay for quality traffic, and keep advertising costs in check.

AAC should play a key role in your overall marketing strategy. Sometimes, paying higher amounts for higher quality traffic proves to be more profitable than focusing on quantity. Start by analyzing all of the traffic channels that you use — paid advertisements, review sites, referrals, and social media — and compare the average acquisition cost per customer through each channel to see where your time is best spent. It’s important to have a maximum cost in mind and never exceed that number, so you are never losing money through any channel.  

Average Order Value (AOV)

Average order value is pretty straightforward — it measures the average size of every order placed through your company. While this metric is dependent on the actual cost of the products that you sell, taking a long-term view of the metric can be telling. An average order value that consistently climbs shows that you are doing a good job of attracting your ideal customer and presenting them with items they are interested in during the shopping process.

Repeat Customer Rate (RCR)

How often do your customers come back to buy from you a second time? To measure your customer return rate, calculate the percentage of your total customers who come back to make a second purchase. Some would argue that your repeat customer rate is the most telling metric for long-term eCommerce success.

When a new customer makes a purchase, you’ve already spent money acquiring them. Sending marketing materials that facilitate a second and third purchase help to improve the lifetime value of the customer, and help the company get a lot more bang for their buck after acquiring them.

There are many strategies that you can employ to improve your repeat customer rate. Constantly working to improve the nurturing segments of your sales funnel can have a positive effect on your repeat customer rate, not to mention lifetime value numbers.

Customer Lifetime Value (CLV)

Customer lifetime value measures how much a customer spends with your company throughout the entirety of their customer lifecycle. There are several metrics within the category that you can use to calculate the lifetime value of a customer, but on the whole, CLV is an excellent metric for measuring your customer retention, just like repeat customer rate. Customers who make more orders through your company will naturally have a higher lifetime value.

As we’ve mentioned previously, getting everyone on board with integrating CLV into your daily workflows can cause challenges. People can be resistant to change, particularly if the pre-existing system is perceived to be “working.” Luckily, there are strategies available to help coax reluctant colleagues.

Unlike return on ad spend (ROAS), CLV can have implications for other departments, including Marketing and Customer Retention. Look for an advocate outside of your team to help your cause. If this fails, why not present the benefits of implementing CLV? As well as putting the facts on display, you could identify relevant audiences…and put it into action via a free trial.

Refund Rate

How often do your customers bring your products back, requesting a refund? Every eCommerce company has a certain percentage of orders that are returned, it just comes with the territory of selling products online. However, a high refund rate can mean issues with setting expectations on your order pages, product quality issues, or poor customer satisfaction. Ecommerce companies should always be working to reduce their refund rates.

Website Traffic

Website traffic gets a lot of focus because it is front-facing and visual, but it means very little without context regarding traffic quality and conversion rates. That doesn’t mean that website traffic is a completely useless metric, however. You should use overall website traffic trends to gauge market popularity and take big-picture views of your overarching strategies. Higher traffic levels give you more data to work with in the optimization process. In that sense, it is very important to have continually increasing levels of traffic as you carve out your market share.

 

Simple but Effective

When choosing the metrics that you will use to inform your strategy, it’s important to keep things simple. Every bit of data you have represents a KPI in one way or another. Many metrics have overlap with others and it wouldn’t make sense to track both so closely. Instead, try to boil your chosen metrics down to just the most important KPIs, based on your own operations. The KPI metrics in this article give you a good, well-rounded starting point for measuring your effectiveness and finding areas for improvement.

 


How to Use Google Showcase Shopping Ad Campaigns (and why they matter)

“40 percent of shopping searches are on broad terms…so they turn to search to discover and explore…”

– Google study (2015)

If you sell things online, the chances are you’ve heard of Google’s product ads. You’re probably familiar with their display ads too. But what about Showcase Shopping Ads? Since rolling out in July 2016, this format acts as an intermediate between its two older cousins.

Unlike product ads (relevant for shoppers targeting specific items) or display ads (which complement a shopper’s email or video experience), Showcase Ads allow you to show a variety of products at once.

According to Google’s own research, 40 percent of shoppers don’t know exactly what they’re looking for. As a result, you can use this format to entice inquisitive shoppers earlier in the buying process.

 

Upper Funnel (i.e. Showcase Ads): More general queries; User isn’t searching for specific products; Branding is more important; Expected clickthrough rate is lower

Lower Funnel (i.e. Product Ads): More specific queries; User is searching for a particular product; Branding is less important; Expected clickthrough rate is higher

 

The search giant pitches Showcase Ads as a “broad match type” for Shopping: they appear when a user searches for generic terms (“winter coats”, for example). Searches elicit relevant products, along with appropriate images that you’ve selected for each ad.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

How much do Showcase Shopping Ads cost?

The ads use a maximum CPE (cost-per-engagement) model. This means that you’ll get charged when:

  • Someone expands the ad and spends 10 seconds exploring it.
  • Someone clicks on the product or link in the expanded ad within a 10-second timeframe.

Creating Showcase Shopping Ads

Be warned – Showcase Shopping Ads are only available in the new AdWords AI (and only in markets that offer Google Shopping). To create a successful campaign, you’ll need to switch to this format if you haven’t already. While you create the ads in Shopping, they can appear in both Search and Search Partner websites.

1. Using standard settings, create a new shopping campaign for your Showcase Ads:

2. Create a new ad group

Select “Showcase Shopping” as the Ad Type (instead of Product Ads). Then enter an ad group name, adjusting your ad group level CPE.

3. Targeting your products

Here’s where it gets interesting. You can choose to target all products from your campaign (a selection of jumpers, for instance) – or a selection of different product types. We recommend opting for the latter. Create product partitions based on:

  • Google Product Category
  • Product Type
  • Item IDs
  • Brands
  • Labels

 

4. Adding images

Next, you’ll need to adjust the images. Header images (JPEG/PNG) have specific requirements:

  • Dimensions: 1080 x 566 px
  • Space the important aspects 82 px from the top and bottom edge
  • Max file size: 10MB
  • Use a high quality, professional image with at least one product

For the collapsed ad either use a cropped version of the header, or a product image (which will be taken from your feed).

5. Adding copy

Finally, add the text you need (as indicated below). Both headline and description text are optional – but it’s worth being specific.

  • Headline: 24 characters
  • Description: 70 – 120 characters
  • Final URL: Needs to be relevant to the products shown
  • Display URL: 25 characters

 

Et voilà! Your ad is complete!

Early research suggests that Showcase Ads receive more impressions on tablets and mobile devices. However, it’s more than likely they’ll lead to increased brand awareness. To learn more about these and other PPC tips, follow our blog or contact us at info@crealytics.com.

 

 


Strategies for Staying in Touch With Your Customer Post-Sale

For eCommerce companies, your ability to attract new customers and keep them coming back plays the largest role in your company’s success. Acquiring new customers is expensive. On average, it costs five times as much to attract a new customer, compared to retaining an existing one. A five percent increase in customer retention can increase profits between 25 and 95 percent.

There is no time more important to your ability to retain a new customer than the hours and days following their first purchase. Your post-sale engagement with your customer should be outlined, tested, and optimized for retention success.

Your most important asset in retaining your customers is data. With new customers, you’ll have a limited amount of this to work with. But, with each new interaction, you gain additional insight into how to successfully interact with them to facilitate additional purchases.

Customer satisfaction is becoming an increasingly important KPI for eCommerce companies. To improve your customer retention rates and build relationships, consider implementing these strategies:

Confirmations and Status Updates

It may seem obvious, but quick and consistent communication is valued by customers. When an order is made, an immediate confirmation of the purchase sent to their email is expected. However, all eCommerce companies should go the extra step and continually update their customers throughout the ordering process.

Letting your customers know when their order was received, shipped, arrives at their local shipping depot, and when the package is delivered makes the order tracking process simple. It’s important to find the balance between providing order updates and emailing a new customer too often. However, when the updates are relevant to their order, you are less likely to find falling satisfaction rates.

Customer Support Outreach

Customers love a personalized service. Letting them know that you appreciate their business and are eager to help them if they need it can go a long way toward laying the foundation for a long-term relationship. After they place their initial order, try scheduling an automated email from one of your customer service reps, offering to help and answer any questions that they might have.

Receiving a personalized email from an actual employee of the company facilitates a feeling of security and creates a more personal relationship between your company and the customer. Additionally, it encourages them to ask questions when they do not want to take the time to go through the support ticket system. Having a customer support rep introduce themselves to new customers can help to facilitate conversations, which play a key role in customer retention.

Quality in-house support also goes a long way. If a customer has a problem (or question about) a product, they don’t want to spend a lot of time waiting on hold, speaking with someone that can’t solve their problem.

Empower your in-house support team. They should be able to provide quick answers and solutions to first-time customers, without referring the complaint up the chain. Great support wins the hearts and minds of customers. They can forgive a mistake. They can’t forgive terrible support.

Get to Know Them Better With Surveys

Want to retain more first-time buyers as long-term customers? Show them that you care about them and are learning from your interactions. As more eCommerce companies find innovative ways to use their data to deliver personalized campaigns, customers’ expectations grow. Consumers have grown to expect online retailers to deliver relevant marketing materials, based on their interactions with the company.

Asking that your customers fill out a short survey and providing something in return — like a coupon code on an item related to their original purchase — can help you to learn more about them while improving survey conversion rates. Keep your surveys short and simple to fill out. Learning something about a wide swath of customers is more helpful than learning a lot about very few.

Nurturing Email Campaigns

How quickly a customer returns depends heavily on your industry and the types of products that you sell. A retailer that specializes in holiday decorations is going to have a completely different sales cycle than someone that specializes in selling household necessities.

For both companies, nurturing is still important. Your sales cycle should inform the frequency and strategies of your nurturing campaigns, providing relevant and interesting content at opportune times during your sales cycle.

Online Retargeting

Similar to email nurturing, retargeting reminds customers to come back to your site and make another purchase.

Creating lists based on order value and order count per customer can be a highly effective retargeting strategy. In most cases, you would want to bid more for top ad placement for any customers you know have purchased two or more times in the last 60 days. Or you can go even further—and create combination lists with engagement metrics.  For example, you could combine “Purchased > 2x” and “Days since last visit > 15″.

Also, in case some of those customers are searching for your competitors’ brand terms, you might like to remind them of your loyalty program. Do this by creating a new ad group that targets a competitor’s search terms with an RLSA list.

Be mindful when engaging in retargeting activities. It’s difficult to prove incrementality in retargeting ads and you don’t want to pay for a customer that was looking for you anyway. We’ll have more on incrementality testing soon, so watch this space!

Relationships Turn First-Time Buyers into Repeat Customers

Once you’ve acquired a new customer your focus should shift toward building long-term relationships. By regularly reaching out through nurturing emails, special offers, and surveys, you put yourself in a position to learn more about them and deliver increasingly relevant materials as your relationship matures.

There is a lot riding on the customer’s experience during and immediately following their first order. Most customers will buy from a company more frequently after a positive initial experience. Taking the time to get to know them and deliver personalized marketing materials can go a long way toward building trust and earning repeat business.

 


How to choose the best KPIs for your eCommerce Business

When you run an online store, there are literally a thousand key performance indicators to measure. Keeping track of all of it, while necessary, can make your head spin after a while.

However, these KPIs can paint a picture of how your store is doing, where your customer’s biggest pain points are, and your ultimate opportunities for growth.

Every bit of data that you have is a KPI in one way or another. Whether or not it’s useful depends on the goals you set and if you know what to do with it.

How to Set KPI Goals for Success

If you’re choosing the best KPIs to focus on for your eCommerce store, you need to decide on an ultimate goal for your eCommerce site.

Choosing KPIs based on your overall goals will help you focus your attention on where you want to grow and what steps you should take next. Otherwise, it’s possible to get wrapped up in all of the data that you have.

I’ve outlined a few common scenarios that would drive common eCommerce goals and what KPIs would directly impact them:

Boosting Conversion

For example, say you’re getting a lot of traffic, but your conversion rate is low. You would choose your KPIs based on getting a higher amount of customers through your conversion funnel rather than driving traffic to your site.

 

 

 

 

 

 

 

 

KPIs for conversion

KPIs to focus on:

  • Visits/Traffic
  • Bounce Rate
  • Failed Discovery/Browse Abandonment Rate
  • Checkout Abandonment Rate
  • Conversion Rate

The theme here is to focus on the KPIs that are found along your sales funnel. If one of these is particularly high (or particularly low, like your conversion rate) that is where you need to focus your test and action plan.

Driving Traffic

However, if your conversion funnel is yielding a higher conversion rate, but your traffic isn’t as significant as you’d like, you’d focus on KPIs around your traffic, where it’s coming from, and how to improve it.

KPIs for traffic 

KPIs to focus on:

  • Channel Group
  • Channel
  • Visits
  • Bounce Rate
  • Conversion

For driving traffic, you want to look at your traffic and sources, and how well those convert. After all, there’s no point in driving traffic if they’re not going to boost your conversion too. For your on-site metrics, focus on where your visits are coming from and look for opportunities.

To illustrate in the screenshot above, we can see that, at 5.6 percent, there is a pretty significant conversion rate for Google AdWords. It might be worth it to push more budget towards that channel to bring even more valuable traffic to your site.

Alternatively, you could test other channels where you aren’t bringing in very much traffic at all. While Twitter, Youtube, and LinkedIn aren’t doing much for your conversion rate, Pinterest only brought in 10 visits, but had a 10 percent conversion rate. It might be interesting to test a few Pinterest ads for your action plan.

There are also a few off-site KPIs you should look at through each of your channels’ analytics, for example:

  • Social CTR (click through rate)
  • Engagement rates
  • Social shares

Improving Average Order Value (AOV)

You might be in a situation where your traffic and conversion are great—but your customers aren’t quite spending as much as you’d like. In this case, you’d want to focus on customer behavior on your site and personalization KPIs.

KPIs for AOV

KPIs to focus on:

  • Order Count
  • Revenue
  • Average Order Value

AOV= Revenue / Order Count

While AOV is a KPI in itself, you want to take a look at the revenue that’s generated as well as your order counts. It would also be a good idea to measure this against visits and your channel sources, which will show you which of your channels are providing customers who spend the most.

For example, if you can see that there’s one channel where customers are ordering a little less than others, you can offer bundled products to these customers in particular, or implement a threshold for a coupon.

Let’s say your Instagram traffic is purchasing a bit under the average for your store. Create a 10% off coupon that’s Instagram exclusive with an attainable spending threshold to drive up AOV for this channel.

On the other hand, seeing which of your channels bring in customers who spend the most can also help you reallocate your resources into that channel to boost traffic and conversions from it.

AOV= Revenue / Order Count

While AOV is a KPI in itself, you want to take a look at the revenue that’s generated as well as your order counts. It would also be a good idea to measure this against visits and your channel sources, which will show you which of your channels are providing customers who spend the most.

For example, if you can see that there’s one channel where customers are ordering a little less than others, you can offer bundled products to these customers in particular, or implement a threshold for a coupon.

Let’s say your Instagram traffic is purchasing a bit under the average for your store. Create a 10% off coupon that’s Instagram exclusive with an attainable spending threshold to drive up AOV for this channel.

On the other hand, seeing which of your channels bring in customers who spend the most can also help you reallocate your resources into that channel to boost traffic and conversions from it.

Increasing Repurchase Rate

Perhaps your problem isn’t necessarily conversion, traffic, or AOV, but more that your customers don’t reconvert as much. Then you would focus on the KPIs geared towards bringing your customers back to your store.

KPIs for Repurchase Rate 

KPIs to focus on:

  • Channel
  • Repeat vs New order
  • Order count
  • Revenue
  • Average Order Value

To focus on your repurchase rate, look at your new vs repeat customers and orders. Notice that your repeat customers order more than new customers, so put an action plan in place to turn your new customers into repeat customers.

A great way to do this is to incentivize these new customers with a great email campaign. Offer something special to get them to come back, like an exclusive look at new products and priority on ordering them. You could also offer a discount or free shipping if you don’t already offer it.

Reducing Marketing Spend

Maybe everything is more or less going well for your online store, but you’d like to ideally drive down your marketing costs to improve your bottom line. The KPIs around your marketing spend and ROI would be the most useful for this goal.

Reduce marketing spend KPIs

KPIs to focus on:

  • Paid Channels
  • Visits
  • Order Count
  • Revenue
  • Total Marketing Cost
  • Cost/Order
  • ROI
  • Customer Acquisition Cost (CAC)
  • Conversion Rate

In the case above, I’ve filtered for only Facebook to show how it’s performing. There’s a lot to analyze if you think you’re spending too much on marketing, but the most important metric is ROI. While the example, in this case, is 129.4 percent, which is rather good, we can ultimately boost this by improving the conversion rate from this channel.

As we can see above, we’re spending €7,313 on Facebook ads, which is bringing in €17,582 in revenue. This means that each visit we’re bringing in only costs us €0.18, but the conversion rate is only 0.4 percent.

AOV= Revenue / Order Count

While AOV is a KPI in itself, you want to take a look at the revenue that’s generated as well as your order counts. It would also be a good idea to measure this against visits and your channel sources, which will show you which of your channels are providing customers who spend the most.

For example, if you can see that there’s one channel where customers are ordering a little less than others, you can offer bundled products to these customers in particular, or implement a threshold for a coupon.

Let’s say your Instagram traffic is purchasing a bit under the average for your store. Create a 10 percent-off coupon that’s Instagram exclusive with an attainable spending threshold to drive up AOV for this channel.

On the other hand, seeing which of your channels bring in customers who spend the most can also help you reallocate your resources into that channel to boost traffic and conversions from it.

What’s really to look at here is cost-per-order, which ends up being €44.81 per order. To get a good idea as to whether or not this is a high number, look at your average order value:

Reduce marketing spend KPIs #2

This means you’re giving up a little more than 40 percent of your margins for these orders, though you’re bringing in tons of traffic with these ads.

What can you do?

Test your Facebook Ad targeting so you’re not casting such a wide net. It’s great that people are clicking on your ads, but if they’re not converting, they may not be the people you want to target.

Tracking your KPIs for the Best Results

In order to properly understand your eCommerce store’s performance, you need to be a scientist. It’s time to test and track the KPIs you’ve selected for a determined length of time. I recommend, at the minimum, one month to get enough data to analyze.

If you have a lot of traffic, you might be able to track your results after a shorter amount of time, but in the long run, this will depend on your eCommerce site and the flow of traffic and purchases you have. If you have less traffic, or are in more of an ebb part of the natural ebb and flow of business, you might need to extend your testing period to two to three months.

Make sure you’re comparing your results to comparable time periods. Ecommerce stores have natural business cycles, like any other business. It’s important to compare it to a similar stage in your business cycle and growth. We recommend testing it against the same time period for the previous year.

Once you’ve determined your goals and what KPIs you’re going to track, keep detailed records of your results, and set concrete goals for each of your KPIs.

For example, if your traffic was “X amount” during the same time period last year, say you want to improve it over a three month period by 20 percent. Setting concrete goals will allow you to measure the success of your campaigns over the time period that you test. It will also show you how aggressive to be in your campaigns when you create your action plan.

Putting Together an Action Plan Based on Your Results

When you put together an action plan to achieve your results, think about your ultimate goal that you first defined. Look at your results and think about the concrete goals you want to achieve. Ask yourself based on your past results how you can achieve those goals.

Let’s look at a practical example:

Say you get decent traffic and conversions, and you want to test a campaign to bring customers back to your store for purchase. Let’s say you have a lot of new customers, but your churn rate is far too high.

Time to think like a scientist:

Say you want to bring 5 percent of your new customers back to purchase from you within three months. You think that a remarketing email campaign will bring that many customers back and push them to convert. That’s your hypothesis.

Outline exactly how your plan will take place:

  • What is the overall strategy of this remarketing email campaign?
  • How often will you send these new customers emails?
  • Which customers will receive the campaigns and why have you chosen those customers?
  • What incentive are you giving your customer to come back (discounts, free shipping, loyalty points, etc)?
  • Is your result measurable, and what KPIs will you focus on to measure your results?

Once you have your plan in place, all that’s left is to implement it and record your results. Focus on the KPIs you’ve chosen as your most important metrics, and measure the data over your test period.

Compare your results with the same KPIs from the same period last year. This will show you the differences that your tests have made. Be sure to note any potential variables that might skew the results of your campaign, so that you can replicate the test again later.

When your test is finished, analyze your results. Write down every change that you saw over your test and see if you’ve reached your goal. Then, take a look at other KPIs that you weren’t focusing on and see if there was an impact on those instead. You might be surprised how many of them are linked based on customer behavior.

With your results, you can see how you’ll implement future tests on your eCommerce site and what you can expect from your campaigns. Maybe your campaign didn’t meet your goal- that’s perfectly fine. It means your hypothesis was a bit off, or maybe you can tweak your campaign so it works better for your customers.

Think critically about your results, and always ask yourself how you can improve your tests for next time.

While all KPIs are useful in one way or another, keeping an eye on the KPIs that directly impact your goals will help you keep your campaigns focused. Concentrating on goal-oriented KPIs for your eCommerce store will help you zero in on the exact data that you want to analyze.

By choosing the most important KPIs to track, you can clearly follow your store’s progress and growth, as well as measure the effectiveness of your campaigns.

 


The Holiday Season Presents Big Opportunities and Risk for eCommerce Companies

The holiday season presents big opportunities for eCommerce companies and retailers alike. The months of November and December represent the biggest spending months of the year and, as a result, many companies place a lot of focus on executing during these months. As they should. A poor holiday season can mean missing your mark on annual KPIs and the revenue generated during a successful holiday season can mean surpassing those marks. For eCommerce companies, a lot is hinging on their holiday marketing strategies.

The festive period has seen increased eCommerce sales, offsetting falling sales in brick-and-mortar retail locations. As consumer spending shifts to favor online shopping during the holiday season, big chain stores are following close behind and shifting their resources toward their eCommerce operations.

The Holiday Season and eCommerce Growth

Online sales are growing with each passing year, and that fact is never more visible than it is during the holidays. Every year, we see significant growth in online holiday spending:


 

Black Friday is the single biggest spending day of the year, with more than $655 billion spent in 2016. The popular post-Thanksgiving shopping holiday became the largest shopping day of the year in U.S. markets in 2003 and has never looked back since. Both Thanksgiving and Black Friday have seen significant sales growth through online each year:

 

eCommerce companies are not only benefiting from increased interest during Black Friday. Cyber Monday has become a behemoth of a spending holiday on its own. Cyber Monday 2016 generated the largest single-day sales figures in the history of eCommerce, with $3.45 billion in total sales.

So, the season is already important and becoming increasingly so. 2017 is predicted to have an extremely strong holiday season. Adobe estimates that total holiday eCommerce shopping will surpass $107 billion in 2017.

However, not all companies share equally in the reward of growth. Smaller retailers see disproportionately smaller bumps during the holiday season due to shoppers increasingly relying on Amazon and other large retailers for their online shopping. So, while all eCommerce companies must make plans and execute them effectively during the holiday season, it is in their best interest to keep their primary focus in the long-term.

While it’s tempting to spend all your time focusing on the peak season, an equal amount of time should be spent making sure the rest of your year is as profitable as possible.

One key element of this lies in shifting your focus from ROAS to Customer Life Value (CTV). Although it’s a relatively well-known concept at this point, older eCommerce companies may be reluctant to adopt it (in favor of more traditional metrics).

However, our research shows that when advertisers focus on long-term revenue goals, they make about 5 percent more revenue in the first year than when they focus on short-term goals like ROAS.

Falling Retail Revenues Increases Online Competition

While holiday eCommerce is booming, physical retail stores are starting to see falling holiday revenues as more customers move their shopping and research toward online channels. According to the retail data analytics firm RetailNext, total sales fell by over 5 percent, while total transactions dipped 7.9 percent during Thanksgiving and Black Friday. During Black Friday alone, retail brick-and-mortar chains saw their Black Friday sales dip 10.4 percent.

There are multiple reasons for the declining retail holiday sales, the most prominent of which is the rise in eCommerce shopping. While retail sales dipped, online sales jumped over 3 percent during the 2016 holiday season. Along with this, more retail stores have started offering huge sales earlier in the month of November to attract early shoppers. Black Friday has always been seen as the official kickoff day of the holiday shopping season, but with declining sales, retailers are coming up with creative ways to attract shoppers before and after the holiday.

While this should come as good news for eCommerce companies, it also comes with its own drawbacks. With retail sales declining, big box stores are increasing their focus on holiday eCommerce efforts. This means large increases in advertising competition during the holidays. The benefits of increased online shopping for eCommerce companies could be rendered useless by the increase in competition.

Despite this competition, Black Friday and Cyber Monday still bring a windfall of extra traffic to your site— but with this can come inflated data points, skewing your bid calculations.

The right tools can give you an advantage. At Crealytics, we allow you to exclude any extreme traffic outliers, so that your Google Shopping bid optimizations stay at the right level for the rest of the year. As a result, automatic bid optimization runs safely…even during exceptionally busy times.

The Problem With Holiday Marketing in eCommerce

Holiday marketing simultaneously presents a huge opportunity and a dangerous trap for smaller eCommerce companies. A well-executed holiday strategy can pay dividends in a big way, but placing too many resources into your holiday marketing and coming up short can have a negative effect on the rest of your year.

A common mistake that many eCommerce businesses make is beginning their holiday push too early. By putting their resources into holiday planning from September onward, the entire last quarter of the year can easily be spent making arrangements for the holiday season, neglecting other areas of your marketing strategy and ultimately hamstringing your holiday success. If the holiday season were to come up short of expectations, they have then lost valuable time that could otherwise be spent making long-term improvements.

Many marketers overlook the fact that maintaining focus on long-term marketing efforts lends itself well to the holiday season. Improving your KPIs in the months leading up to the holiday season will make the season more fruitful. Focusing on holiday-centric campaigns is important, but devoting too many resources to them can actually hamper your growth. A well-rounded marketing effort that simply makes shoppers aware of sales and discounts can often be enough to attract shoppers during the holiday season.

Basic marketing campaigns mixed with a solid long-term focus can provide the biggest return to eCommerce companies. A healthy balance of the two is the safest and often, the most effective strategy.

It’s more than possible to capitalize on this busy period without blowing your budget. Adjusting budgets early, amending messaging (slightly) and knowing your merchandise are all things you can do to optimize Christmas campaigns.

Fundamentals First

The holidays are undeniably an important time for retail and eCommerce companies. But with a rapidly changing shopping landscape, this time of year is becoming increasingly volatile for companies of all sizes. With declining brick-and-mortar sales and increases in online competition, it is more important than ever for companies to focus on their fundamentals and move away from gimmicks and holiday deal-chasing.

A sharp focus on fundamental marketing and advertising concepts will not only make you more effective when it does come time to run holiday promotions, but it will also make you less reliant on the holiday season to hit your goals.

With substantial eCommerce growth during the holidays, it is still important to ensure that you are well-prepared without putting all of your eggs in one basket. While all eCommerce companies should shift some resources to ensure that their holiday season is successful, they should also make sure not to lose sight of the bigger picture.

 


The Importance of Competition Monitoring

ECommerce is growing 23 percent year-over-year, and that growth means increased competition. Every day each category has new entrants in the form of new eCommerce companies and established brands branching out. It is more important than ever to ensure that you are keeping a close eye on your industry and competitors to maximize sales and prepare for new competitive threats.

There are a number of off-the-shelf tools that provide powerful insights into the competition within your industry. Monitoring the product pricing, advertising placements, and organic reach of your competitors will make your company more agile in dealing with the ups and downs of your industry. Additionally, it provides you with a trove of high-value data that you can use to inform your own pricing and marketing strategies.

There are a few reasons why every eCommerce company should invest in competition monitoring:

Competitor Price Monitoring

One of the most important aspects of competition monitoring is price monitoring. 87 percent of customers cite price as the most important factor in their decision-making when shopping online. We also know from our own research that price is an important algorithmic factor in PLA networks – if your price is too high you may not appear in the search results no matter how high your CPC. Monitoring the prices offered by your competition is critical for tailoring your own pricing strategies and staying competitive.

Today consumers have more access to pricing information across brands than ever before. With a few clicks, they can easily see the price of a specific item across dozens of companies and websites. There are many search engines that allow customers to conveniently compare the price of an item across many different brands. They use them, too. According to a study from AYTM, 78 percent of shoppers compare prices between two or more brands, then opt for the lowest price.

Competitor price monitoring allows eCommerce brands to better prepare their inventory and predict future sales. For instance, if a competing company drops the price of a popular item to serve as a loss leader, it makes sense to predict that other brands will see a decrease in sales for that item. The dip in interest can cause necessary changes in ordering and inventory, which can be prepared for in advance with proper competition monitoring. In terms of Performance Marketing, knowing which products you’re most competitive for is essential because you don’t want to waste your ad spend trying to promote products priced well above the average. Conversely, identifying the products for which you are very competitively priced allows you to use them as gateway products into your site.

At Crealytics we can help retailers identify a few high impact products and provide price recommendations based on the competitive landscape and search data.

Learn more: Get the Product Price Right for Google

Using Competitive Data in Dynamic Pricing

Pairing ongoing competitive pricing data with your own dynamic pricing strategies can be extremely beneficial. Dynamic pricing does rely heavily on internal metrics, but you should also look at outside data sources to inform strategy. Tying your competitive analysis directly into your dynamic pricing systems allows you to be more agile in your response to pricing changes.

Identifying when competitors have undercut your pricing on a particular item allows you to adjust your own pricing. Pulling data from multiple sources allows you to take a top-down view of your industry’s pricing for specific items and find opportunities to take advantage.

Monitoring Marketing Campaigns

Half of the battle in eCommerce advertising is figuring out where to place your product ads. A single product could display across thousands of keywords and dozens of networks. Identifying profitable places to advertise your products is important for longevity. But, finding these sources on your own can be like looking for a needle in a haystack.

Tracking where your competitors are advertising both their brand and individual products is critical. There are more software solutions available to eCommerce brands than ever before. In fact, we are seeing nearly 100 percent growth year-over-year in new marketing tech software solutions that are designed specifically for eCommerce businesses.

Tools like AdBeat allow you to monitor the platforms, websites, and keywords that your competitors are using in their advertisements. You can also monitor how competitors are performing in organic search using tools like SEMRush, which can open your eyes to new keywords and organic search tactics.

A recurring theme among upstart eCommerce companies is knowing that they aren’t able to keep up with their competition, but not having a clue as to why that is. Using tools to help you monitor your competitor’s advertisements and general digital marketing activity can help you to identify gaps in your own strategy.

Stay on Top of Industry Trends

An often overlooked reason to implement detailed competitor monitoring is in staying on top of current industry trends. The retail industry moves fast. While reading trade magazines and industry publications can provide some insight, they are often weeks or months behind the actual shift in a trend. There is no replacement for hard data and analysis for understanding your industry.

Monitoring the pricing of competitors can open your eyes to new consumer demands and preferences. For example — if you were a fashion retailer, a sudden uptick in advertising within a particular category can signal a sudden increase in consumer interest. Perhaps a popular actress wore a certain type of sunglasses in her latest movie, and suddenly customers want a pair of their own. Without keeping a close eye on the competition, you might not even be aware of this trend until it has run its course and you are unable to capitalize on it.

Competitor price monitoring doesn’t just let you stay on top of trends in pop culture. Competitors carrying more high-ticket items could be a sign of a shift in the winds of consumer taste. Two competing brands getting into a pricing war for a popular item can skew averages and may be a battle you’d rather not get involved in. Competition monitoring provides the data that you need to assign context to complicated situations.

The value from competitor analysis comes from the broader insights that it provides, not just the hard data that influences each individual decision. Staying afloat in highly competitive industries requires that you have the foresight to see where the winds are blowing and make preparations to deal with those trends.

Identify and Prepare for New Competitive Threats

Another big reason to keep a close eye on your competition is to quickly identify new threats that arrive in the marketplace. Whether it is a new company that is quickly gaining traction, or a larger brand that is moving into your category — seeing and preparing for these threats before they begin to have an effect on our business is important. It may surprise you how many businesses sell products which overlap with your own.

Identifying a new competitor that is rising through the ranks gives you the ability to analyze their efforts and duplicate their strategies that have helped them to gain traction quickly.

A Well-Rounded Approach

Some eCommerce experts will tell you that while competitor analysis can be beneficial in the upper echelons of the industry, most companies would see better results by shifting their focus internally. While it is true that getting caught up in what the competition is doing can do more harm than good, it is always best to take a well-rounded approach.

Keeping a close eye on your competition provides you with data that allows you to prepare for new threats within your market, stay on top of industry trends, find new sources of revenue, and improve your pricing strategies. It provides an opportunity to learn from those that have been successful in your category, and better understand your industry as a whole.

For a comprehensive report on how you stack up against the competition in PLAs get in touch with us on sales@crealytics.com.


Why Lifetime Value is the Most Important Metric in eCommerce

If you were one of the kids who sat in algebra class, half paying attention, wondering when you would ever use what you are learning – it’s time to dust off those algebra skills. In eCommerce, we spend a lot of time sifting through a long list of metrics. Conversion percentages, new customer rates, cost per order — it can all get a little overwhelming. But, what if I told you that there was one metric to rule them all? One singular metric that you could use to inform all future marketing and sales decisions and increase your bottom line?

Enter, customer lifetime value (CLV).

In eCommerce, CLV is the value that a customer will contribute to your company over their entire “lifetime” (usually 12-24 months). Essentially, it is the amount of money that they will spend on your products and services after the expenses of acquiring them as a customer. There are numerous types of CLV. The two most popular forms of CLV calculations are historic and predictive.

Historic CLV is a simple calculation. It is the sum of the gross profit from historic purchases made by a specific customer. This takes into account the expenses associated with the purchases that the person made.

Predictive CLV is generally a more worthwhile metric, albeit a bit more complicated to produce. Predictive CLV uses previous transactions, mixed with a variety of behavioral indicators that forecast a lifetime value for an individual customer. With each new purchase and new behavioral data, the Predictive CLV will change and become more accurate over time.

Why is Customer Life Value the Most Important eCommerce Metric?

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Source: Kissmetrics

Customer Lifetime Value is an extremely important in eCommerce applications. In digital marketing, it gained prominence with the rise of software-as-a-service but quickly found its way into eCommerce as well. The value of the metric has made it a staple among modern eCommerce businesses.

CLV is the single most important metric for measuring gross profit and success over time. The most expensive endeavor for eCommerce businesses is generating new customers. Customer acquisition can be cost prohibitive, and returns are often difficult to forecast. CLV attempts to answer that question.

Knowing the CLV of a customer will help you to strike the ideal balance between customer retention and acquisition. Knowing at what point a customer becomes profitable, is an essential part of knowing how much budget you can allocate to a particular channel or market.

Additionally, CLV provides real insights into your customer retention strategy. A steadily climbing average CLV shows that your retention and upselling efforts are paying off and having a real effect on your customer’s chances of returning.

Calculating CLV

In order to make use of CLV in your eCommerce business, you first have to know how to calculate it. As we said earlier, there are multiple CLV versions that are commonly used. Let’s look at how both historic and predictive CLV, the two most common, are calculated:

Historic CLV

Historic CLV is a straightforward metric. You simply add all of the gross profit value up from all of their transactions. Here is the equation:

Historic CLV = (Transaction1+Transaction2+Transaction3…) X AverageGrossMargin

This is simple enough to be calculated in Excel as long as you have all of your transactional data on hand for a given customer. This should also take into account any expenses like service costs, returns, acquisition costs and other expenses to provide a clear picture of individual profit.

Of course, it can be complex to put together these expenses on an individual basis. Attributing certain costs to an individual customer is often problematic. When in doubt, use average to estimate until you can properly track expenses individually.

Predictive CLV

Predictive CLV tries to obtain an accurate CLV value for past and future purchases within your company. Here is the equation:

PredictiveCLV = ((AverageMonthlyTransactions x AverageOrderValue) AverageGrossMargin) AverageCustomerLifespanInMonths

This is a simple way to calculate predictive customer lifetime value. It provides a good picture of what the value of each individual customer is for your business. With that said — every industry is different and you may have to make specific changes to your CLV equation over time to have it accurately reflect the value of customers. There are more advanced versions of the Predictive CLV algorithm out there, and you should explore how well those options may fit your business model.

CLV vs ROAS

Return on Ad Spend (ROAS) is the most commonly used profitability metric in eCommerce. It measures how much money you get back for every dollar that you spend on advertising. While similar to standard ROI metrics, it provides specific measurements for each individual marketing channel.

You calculate ROAS using this formula:

ROAS = (Revenue – cost) / Cost

While both CLV and ROAS have their place, it is important that you not rely too heavily on ROAS  to gauge overall performance. ROAS-based models focus on whether your advertising is efficient but ignore if that’s the most effective way of growing your business. ROAS is all about winning that impression, click or customer engagement, but it doesn’t take into account the ultimate business measurements of profitability, margins, and new customer acquisition.

Customer Lifetime Value provides a bigger picture look at the value of each customer and sheds light on the real world effect process changes are having within your company. While both metrics attempt to account for the expenses and spending associated with every purchase, only CLV provides a clear long-term picture of expected profits from individual accounts.

Getting Everyone Onboard with CLV

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You may find it difficult to get everyone on board with integrating CLV into your daily workflows for a few different reasons. Primarily, people like to stick to the status quo and are resistant to change when current systems are “working,” despite the benefits that CLV could bring to the table. A few strategies that you can use to bring the rest of your team on board include:

Find an Advocate

Chances are, you aren’t the only person that sees the value in optimizing for CLV. Ask around, and see if you can find another advocate for your changes. Try looking outside your own department as well. One of the benefits of optimizing for CLV is that, unlike ROAS, it can have implications in other departments like Customer Retention and Merchandising.

Present the Facts

If you can’t find someone that understands the value, you’ll have to put it on display. Try to schedule a small meeting with relevant stakeholders that can help you to implement CLV into your workflows, and present them the benefits of doing so. Try to include real-world examples of CLV being used by eCommerce businesses.

Offer a Trial

Your team will be unlikely to re-work all processes to include CLV without seeing it in action first. Try to identify a few small areas of your business where implementing CLV into the workflows would make a substantial difference, and ask for approval to use it within those contexts. PLAs provide a great place to test this kind of optimization. You can select a small group of products and see what optimizing for CLV does over time and compare it with a similar set of products that are optimized for ROAS.

Customer Satisfaction and CLV

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One important thing to consider with CLV is the fact that customer satisfaction (CSAT) plays a huge role. The better your customer service is, the higher the lifetime value of each customer will be. Great customer service makes them more likely they are to buy from you in the future and stick around as a customer. With that said, poor customer service can also have a large negative impact on your CLV data as well.

Adopting CLV

Customer Lifetime Value provides important insight into your operations as a whole. The big question is how much you should spend on all your advertising channels in order to achieve your total long-term revenue goals. Any eCommerce business should implement and use it frequently to measure their marketing and sales efforts.

Although it is a relatively well-known concept at this point, older eCommerce companies may be reluctant to adopt it and instead opt for more traditional metrics. In these cases, it is important to lobby for its usage and show examples of how it could have helped your business. Our research shows that when advertisers focus on long-term revenue goals, they make about 5 percent more revenue in the first year than when they focus on short-term goals like ROAS.

CLV can help to shed light on the areas of your business that must improve to increase your bottom line. Knowing customer lifetime value and profitability at the product level allows for improved paid media placement, intelligence in product pricing, and better inventory optimization.


How competitive intelligence can maximize your ROAS

Digital advertising spend in retail eclipses all other industries, but at such a substantial cost, everyone selling online wants to know how they can boost their return on ad spend (RoAS). eMarketer reported in 2016 that retailers spent $16 billion on paid digital advertising and forecasted that figure would jump to $23 billion by 2020.

Marketers in retail have a wide range of responsibilities to get customers in the physical or virtual door, such as driving brand awareness, customer loyalty, and retention. The role also covers increasing website and in-store traffic and multi-channel growth. Not to mention, development and management of best-in-class eCommerce and integrated marketing strategies that increase the retailer’s digital footprint.

All of these central tasks that make up a marketer’s role in retail all boil down to traffic and conversions. The questions that keep retail marketers up at night include: are we getting enough traffic to hit our sales and revenue projections? If not, how do we drive more people to our stores and website to buy? Digital advertising helps with this, but with the massive amount retailers are pouring into ads, maximizing the return on that ad spend is only half of the challenge. The other side is from a competitive intelligence standpoint. All retail marketers should ask themselves often: do we have a good idea of what our true tier one competitors are doing from a marketing perspective?

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Why Lifetime ROI is the only metric that (really) matters in search marketing

Why Lifetime ROI is the only metric that (really) matters in search marketing

It can be tempting, when measuring the success of your search marketing campaigns, to judge them based simply on your Return on Advertising Spend (ROAS). Or, you might want to concentrate solely on winning new customers and measure your campaign success by cost per new customer or just the number of new customers.

But, we think the true value of your campaigns is slightly more complicated. Gaining lots of new customers might sound great, but they can be very expensive to attract. And let’s not forget about returning customers. Sure they may not spend as much per purchase as new customers, but you wouldn’t want them buying a competitor’s product.

To truly understand, and be able to optimize, the value of your search marketing campaigns, you need to calculate the Lifetime Return on Investment (ROI) of each market or campaign. Lifetime ROI is primarily driven by two factors:

  • Expected market specific lifetime values (Customer LTV)
  • Campaign efficiency based on marketing investment (ex. ROAS)

A unified approach is essential to know how much you should be investing in retention vs new customer acquisition. Let’s look at each of those factors, in turn, starting with Customer Lifetime Value (LTV).

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Why top retailers are investing more in Google Shopping than Text Ads (and you should too)

Google Shopping is more popular among shoppers — and marketers — than ever before. In 2016, retailer spending on Google Shopping ads grew 36% compared to 2015. In the US and UK, spend on Google Shopping has already surpassed that of Text ads. And this increase shows no signs of slowing down.

According to Adobe’s Digital Index study of online advertising, retailers spent 47% more on Google’s shopping ads in 2016 than they did a year ago. Even Amazon has started to dip its toes in the PLA waters.

Why the shift in spend to Google Shopping ads? Because marketers at some of the world’s largest retailers see more value in them.

While Text ads probably won’t be disappearing completely anytime soon, Google Shopping is clearly taking e-commerce marketing by storm. Here’s where all that added value comes from, and why you should join the ranks in bumping up your investment in Google Shopping over Text ads.

Enticing to shoppers

First and foremost, Google has made its PLAs enticing for shoppers to click on. Search Engine watch reported that while PLAs accounted for just 37 percent of the 8 billion total paid search impressions generated on those keywords during Q2, half of all clicks were on PLAs.

And that makes sense when you compare the two side by side. If you’re looking for a product, Google Shopping ads give you far more information at a glance than a block of Text ever could.

We live in a world where images and video dominate the media we consume. It’s getting harder and harder to catch the attention of your would-be customers, so having an ad that surfaces all the relevant information quickly, and in one place is key. Shopping online is a very visual experience, and shoppers browsing online rely on images and visual content to bring them closer to products.

From a retailer’s perspective, Google Shopping allows them to present all the most important product information up front, meaning those who do click on the ad are more likely to want the product. Shopping ads show product-focused images and description, as well as price. The result is more qualified traffic that leads to stronger conversions.

On the other hand, text ads — by their definition — don’t include visuals. Product price is also not typically displayed in text ads. This means shoppers can’t select listings based on their price sensitivity, which can lead to costly, unqualified clicks.

Long story short, online shoppers like clicking on Google Shopping ads. In 2016, Google Shopping accounted for 43% of all retailers’ Google search ad clicks and 70 percent of non-brand related search clicks.

Mobile experience

Despite the meteoric rise of mobile shoppers, retailers have struggled to convert that traffic into actual sales. However, when it comes to reaching shoppers on mobile, Google Shopping ads have clear advantages.

For one thing, they absolutely dominate the screen.

Google has created an inviting and easily scrollable carousel with product images, price and brand prominently displayed. Infinitely better than a lot of mobile pages we’ve come across.

Squeezed in at the bottom of your phone screen, with much less visibility and no visual component, Text ads command much less attention on mobile. According to our data, Google Shopping ads on mobile perform 61% better than their Text ad equivalents.

Conversions

If you think about the mindset of someone who would click on a PLA, it shouldn’t come as a surprise that they have a higher conversion rate than Text ads.

To click on a Google Shopping ad, the searcher needs to be interested in the product. Because all the relevant information is presented up front, there is far less risk of shoppers clicking an ad only to find that the product is too expensive or doesn’t look like they thought it would.

The data backs up this theory quite nicely. When we normalize the conversion data to make Text ads on Desktop 100, we see that Google Shopping ads bring in more than double the amount of conversions.

Unsurprisingly, since Google Shopping ad clickers tend to be closer to a buying decision, they tend to convert sooner (and after fewer clicks) than those who click on Text ads. In fact, 80% of Shopping conversions happen in the first five days.

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This is because Google Shopping ads are designed to reach people searching for product-specific terms like brand name, product name, color, etc, making them a much stronger ad format to convert shoppers who have done their research and are closer to purchase. As an added benefit, these long-tail queries in Google Shopping are less competitive, less expensive, and better converting than generic search terms.

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Text ads, on the other hand, are much better at capturing general traffic, because they can be directed to a general listing page for products. The problem is that the space has become quite crowded and getting your ad displayed for ultra generic terms like “heels” is now quite expensive.

Google is making the investment

It seems Google really wants Shopping ads to work. They released a steady stream of updates in 2015 and 2016 that increased visibility and improved the experience of PLAs.

Google Shopping Updates in 2015

  • Available as part of the YouTube ad offering
  • Increased the size of shopping ads on mobile
  • Shopping ads became part of the Google image search

Google Shopping Changes 2016

  • Merchant Feed Center overhaul
  • GTINs now required for all products
  • Constant experimentation with where to put Google Shopping on the results page

In February 2016, Google dropped text ads from the right side of the SERP, dedicating more space to Shopping ads at the top and right side of the page.

The enhancements show no sign of slowing down. So far in 2017, Google have added search filters to the scrollable carousel format, included a bunch more countries, and incorporated an automatic currency converter.

There’s also some evidence that Google is pushing more and more generic queries in the direction of its Shopping ads in an effort to make them more appealing to shoppers at the beginning of their journey. The proportion of generic queries we’ve seen coming through Shopping rose to 21% in 2015 – up from 6% in 2014.

The volume and velocity of Google Shopping updates show that Google is committed to delivering on its promise of putting retailers’ products in front of the right consumers.

And that can only be a good thing for the future of Shopping ads.

An advertising powerhouse

When it comes to digital retail advertising, Google Shopping is becoming the reigning powerhouse. And now is definitely a good time to jump on the bandwagon.

But, if you want to stay competitive, you do need a specific Google Shopping strategy. Google Shopping can’t just be a line on your Paid Search report. It has the potential to be a massive revenue driver – 90% of PPC revenue for some of our clients – but only when it’s handled properly. Google Shopping is a unique medium and it deserves its own unique strategy and tooling.

Not sure what that is? Sign up for our FREE 5 week Google Shopping mastery course and find out!

And if you’re looking to get a read on the performance of your own campaigns, get in touch with us for a free account check to find out how Camato’s machine learning and automation can help your business.