Analytics for Retail E-Commerce
Every business has good intentions - to fulfill customer needs in the best possible way. However, most businesses operate with insufficient customer insight into various aspects of their business, resulting in suboptimal performance as a business. This lack of insight can be resolved by capturing, visualizing and analyzing all customer actions and trends on their e-commerce business. This data provides customer-centric analytics, leading to data-driven decision making in all functions.
Following are various dimensions of analytics that help retail e-commerce businesses manage all functions efficiently and gain a competitive edge through a better understanding of their customers. These metrics provide a basis to set performance goals, track growth and identify potential issues systematically.
The primary purpose of a business is to grow by continuously creating and retaining customers. New customer acquisition, conversion of new customers to repeat customers, retention of repeat customers and average customer value are top level drivers for any business. These drivers define the overall success of a business and are influenced by all the other dimensions mentioned below.
In order to continuously retain and increase the average customer value, it is critical to understand the customer lifecycle grid - cohorts of newly acquired customers, rising customers, stable customers and drifting customers. This ensures the strengthening of the customer base of the business. In addition, customer segments (based on customer value, acquisition channel, products purchased, location or any other parameter) help in slicing and dicing all other dimensions mentioned below to understand the impact on these customer segments better.
The next critical factor is understanding how well the products meet the needs of customers. Key inputs such as the popularity of each product (also category or brand) or the value proposition to purchase a product could be measured through customer engagement metrics such as click-through rate from a category page to the product page and conversion of product views to checkouts. Product selling rate, inventory churn and reorder management are other key aspects of managing the product.
Marketing is a major area of expenditure for most e-commerce companies. Channel and campaign wise spends and returns on investments are key measures to optimize this expenditure. However, attributing customer acquisition to specific channels or campaigns is usually complex and erroneous. This requires detailed monitoring of all visitor sessions to understand each touch point involved and the path that resulted in an acquisition, potentially through various channels and campaigns. With this detailed information, the efficacy of each channel and campaign can be measured in terms of introducing the brand/ product as the first interaction, reinforcing the brand or closing an acquisition as the last interaction.
In addition to direct sales measures such as revenue and margin, an understanding of the impact of pricing and promotions are key factors to sales optimization - especially for e-commerce, where sales is heavily driven by pricing and promotions. Tracking sales at multiple price points or with different promotions for various product and customer segment combinations, provides inputs to maximize sales performance and average customer value.
Operational metrics such as delivery time, product reviews, package/ shipping feedback are direct measures of customer experience. In addition, grouping of customer issue categories is required to monitor and resolve root causes of customer pain points. A derived Net Promoter Score based on customer cues from orders, product review/ feedback, customer care communication and other interactions can also be a fair index of customer perception of the business. All of these assist with customer retention.
Social media has become a major contributor to e-commerce success, as a trust builder. It is critical to track and manage the online/ social media reputation of a business through positive and negative mentions. Identifying and promoting positive influencers amongst customers can also provide a boost to the online reputation of the business, leading to increased referral and better acquisition.
The website plays a critical role as the storefront. Monitoring heat-map on the website interaction points, website page load times, responsiveness to various device sizes, unhandled exceptions/ crashes and other subjective measures on ease of navigation/ filtering/ searching contribute to better customer experience in the store.
These analytics dimensions can be captured and monitored through integration with commercial analytics tools or through custom built infrastructure. When regularly tracked, they help businesses harness the power of information and lead to better decision-making at all levels, effective management, higher revenues and satisfied customers.
As Jeff Bezos, Founder of Amazon mentioned, “Just good intentions never work, you need good mechanisms to make anything happen”. Effective usage of advanced analytics is a well-defined mechanism to run a Retail E-Commerce business efficiently and transform good intentions to customer ecstasy!