Guest Post: A Comprehensive Guide on E-Commerce ROI – How To Measure + Key Metrics To Look Out For

Sep 06, 2022

(Image Source: Edistera)

Whether they are retailers or digital signature companies, accurately tracking e-commerce ROI is essential for discovering the marketing strategy that works for them and their customers.

There are 2.14 billion online shoppers in the world in 2021. That number was up 900 million from 2020. That’s a huge market for any retailer to tap into.

Looking to stay relevant in the e-commerce logistics industry?
Sign up for free to access unlimited data insights!

But with so many sources of data available, it is often hard to pick the right metrics and measure them. If companies don't, they'll waste money on vanity metrics and underperforming campaigns. If they're in B2B, where every new customer could be a high-value key account, they'll end up losing conversions that could transform the company's future.

With that in mind, let's go over what e-commerce ROI looks like, how you can measure it, and what you can do to boost those numbers.

A Comprehensive Guide on E-Commerce ROI - Image 1

(Image Source: Unsplash)

What Exactly Is E-Commerce ROI?

E-commerce ROI is all about good reporting: making huge amounts of data easy to understand at a glance. Good e-commerce ROI reporting makes it easy to see how much sales income is being produced by your individual marketing efforts and they contribute to your bottom line.

Too frequently, the effectiveness of digital advertising efforts is determined by the volume of traffic they bring to a particular website or by the number of "likes" or "shares" they receive on social media.

These are what we call "vanity metrics", numbers that look good to management but are irrelevant to your ultimate business strategy. ROI reporting puts a hard numerical value on marketing projects, often boiling it down to income per dollar spent.

How to Calculate and Measure E-Commerce ROI?

1. Configure Google Analytics

Google Analytics is a powerful, free tool for tracking all kinds of analytics on your e-commerce site. That includes crucial metrics like website traffic, bounce rate, and conversions. Several activities, such as adding a product to a shopping cart or making a purchase, can be specified as your desired conversion for Google Analytics to watch out for. Google Analytics can also monitor e-commerce-specific metrics like shopping cart abandonment.

2. Start Tracking E-Commerce

Follow these instructions to add e-commerce tracking to your website. From the View column in Google Analytics, select Admin, then click E-Commerce Settings. Toggle the Enable E-commerce setting to ON, then select Done.

After that, you'll need to set up a tracking code for your site. Choose Admin from Google Analytics' settings menu and in Property, select Tracking Info then Tracking Code. Google Analytics will provide you with a Global Site Tag.

Copy and paste your global site tag onto each page of your website, in the "head" tag of your HTML templates. Once these update pages are live, you'll be tracking data.

3. Keep Track of Your Progress

While your conversion rate is the primary driver of e-commerce ROI, it's good to keep an eye on a few other key metrics like:

  • Bounce/exit rate.

  • Average time spent on each page.

  • Average order value.

  • Shopping cart abandonment rate.

A high bounce rate across all of your product pages may point to a few problems. Perhaps your site is optimized for irrelevant keywords or takes too long to load. But once you have this data, you're able to optimize your site to fix the problem.

A Comprehensive Guide on E-Commerce ROI - Image 2

(Image Source: Unsplash)

4. Analyze Your Google Analytics Data

You should regularly review your Google Analytics data for the best results. Weekly or monthly reports will help the whole team understand how the business is performing. For the benefit of the marketing and website teams, the report should also include data on e-commerce ROI.

The data in Google Analytics' Conversions tab will typically be the best source of ROI information. This tab shows data on the success of your e-commerce site as well as which channels are most responsible for getting conversions. However, your team should look at acquisition data in addition to conversion statistics. Your website's traffic sources are shown in Google Analytics' Acquisition tab.

Return on Investment (ROI) In E-Commerce Formulas

There are two ways you can calculate the ROI of your e-commerce site: one is straightforward but a little basic, and the other is more complicated but more informative.

1. ROI Calculation Basic Formula

In a back-of-the-envelope calculation, your ROI is just profit divided by investment. ROI as a % = (Return on Investment in $ / Investment in $) x 100. So if your $1000 LinkedIn campaign brought in 50 new customers, with an average order value of $25, then your ROI would be 125%.

A Comprehensive Guide on E-Commerce ROI - Image 3

(Image Source: Unsplash)

2. ROI Calculation Advanced Formula

However, the formula above only takes into account the first purchase those customers make. If you're good at retaining customers, this is just the start of your relationship with those customers.

Because of this, it's crucial to factor in the overall worth of each customer into your ROI report. Estimating those customers' projected lifetime value (CLV) and factoring that into your formula will give you a more accurate picture of your success in the long term.

In this view, your ROI = (Average Customer Lifetime Value in $ x No. of Customers) / Investment in $) x 100%.

In our example above, if you could count on those 50 new first-time buyers spending $25 a year for five years on average, that's an average CLV of $100. In that case, your $1000 LinkedIn campaign had an ROI of 500%. 

Since CLV differs from channel to channel for many firms, it is useful to determine ROI for each channel separately. If you're in B2B, you might find that your marketing efforts on LinkedIn get you much more valuable customers than on a site like Twitter.

Effective Tips on How to Actively Boost Your E-Commerce ROI

1. Examine Your Buyer Personas

When you and your competitors are all running your businesses on the same software, how well you understand your customers is the only thing you have to compete on. A poor e-commerce ROI might indicate that your buyer personas are too general or out-of-date. Keeping a close eye on who your audience is and how it's changing is essential.

2.Concentrate on Qualified Traffic

Executives might love it when marketing tells them there's more website traffic. But if that traffic isn't a well-qualified, relevant audience, it's just a vanity metric. More website visitors might lead to more conversions, but they may also represent low-quality traffic that isn't serious about the solution you offer.

Unqualified traffic increases the number of page views on your website but has no bearing on your revenue. They're a waste of ad spend, and they might use up other limited resources like A/B tests that should only be running on potential customers.

If you're seeing high traffic but low conversions, you might need to rethink your SEO targeting.

A poor SEO approach targets keywords that are related to your sector but not your specific customers. Redirecting your SEO efforts to qualified traffic - e.g. more narrow, long-tail keywords - can significantly increase your marketing ROI even with less traffic in total.

Understanding your target audience isn't just good for marketing, it's also good for your product. What does not match with agile manifesto thinking beloved by startups is changing your marketing around the audience without changing the product. Iterating and iterating the product until it meets your audience's needs better than anyone is a sure path to product-market fit.

3. Long-Tail Keywords Should Be Targeted

When almost nobody looks past the first few search results in Google, SEO is a winner-takes-all game. If you have a limited marketing budget, you don't have the resources to compete on sought-after keywords. Instead, you should target long-tail keywords. Although there is less traffic there, there is also less competition. If your long-tail keywords are well-chosen, they're exactly what your target audience is searching for.

4. Enhance Your Sales Funnel

If you have a great SEO strategy but you're still not seeing an uptick in your ROI, you must look beyond content and keywords. Consider the whole sales funnel from the advert to the checkout page. If your website doesn't provide a user-friendly experience, visitors will quit and shop with your competitor. Consider your target audience when evaluating your website and respond to the following questions:

  • How many clicks does it take for users to find what they're looking for?

  • Can customers easily see product images?

  • Is it simple to follow the payment process? Are there fallback options?

  • Does your checkout page make it clear you can be trusted with users' payment information?

5. Create More Captivating Content

Good content is necessary, but not sufficient. A blog post may be well-written and chock-full of your company's expertise, but that doesn't guarantee conversions.

Your content marketing has to be relevant to what your customers are searching for. Luckily, you don't have to guess at what that is. It's easy to examine search trends related to your site and your audience with tools like Google Analytics or Google Search Console.

Keep your buyer persona in mind while you write new content for your e-commerce website. Your chances of converting website visitors increase when you write only for your ideal customer.

6. Utilize Your E-Commerce Data

Do you feel that your targeting could be more precise? More information than just keyword and conversion data may be obtained from web analytics. Utilize your dashboards to collect data such as:

  • Geographical regions.

  • Which devices they're using, and what time they're accessing your site.

  • Which purchase pages they convert on and what segments/personas that data might suggest.

Think about other sources of data like social media audience research or app user testing. You can feed product data into your marketing campaigns to reach more relevant audiences.

7. Experiment With New Campaigns and Channels

Have your results on search or social media suddenly dropped? Even though your strategy hasn't changed? It could be that you've been hit by a change to the platforms' algorithm. You can use tools like Google Alerts to keep up with marketing news sites, they'll often be the first to know about changes to the algorithms and publish articles on how to adapt.

8. Product and Landing Page Optimization

Do your marketing efforts generate a lot of site traffic but have low conversion rates? Your emails, social media posts, and adverts may all have great targeting. The linked landing pages, however, might be failing you.

To increase your landing page conversion rate, you can:

  • Make sure each page loads quickly.

  • Review the payment procedure and look for points of friction.

  • Try including relevant case studies and success stories on your page.

  • Remove anything but the essential information and build carefully on top of that.

  • Check that the page works well on all devices.

Think about the customer journey and continue the email/advert's messaging through to the page.

A Comprehensive Guide on E-Commerce ROI  - Image 4

(Image Source: Unsplash)

9. Boost Customer Loyalty

Marketers talk a lot about CPA: Cost Per Acquisition. It costs money to get new customers in the door, and that's a sink for your e-commerce ROI. If lowering CPA is proving to be too difficult, consider concentrating on your existing customers.

If your customers are happy with products they've bought from you before, they're more likely to buy from you than a total stranger. Once you've acquired the customer, you can raise their "lifetime value" and improve ROI by increasing their brand loyalty. Here are some suggestions for motivating clients to make further purchases:

  • Incentivize customers to post about you in relevant hashtags, exposing them to a community of other brand evangelists.

  • Reward loyal customers with a loyalty program or special offers.

Wrapping Up

Measuring your e-commerce ROI takes some upfront investment. You have to figure out who your customers are, and the value of those customers from different channels, and set up the tooling to measure and present that data. But once you've got that set up, even integrating Google Analytics with a CRM like Salesforce, you'll have a reliable indicator as to how your marketing efforts are performing.

About the author

Emily Rollwitz - Content Marketing Executive, Global App Testing

A Comprehensive Guide on E-Commerce ROI  - Author bio

Emily Rollwitz is a Content Marketing Executive at Global App Testing, a remote and on-demand app testing company helping top app teams how to improve quality of product, deliver high-quality software, anywhere in the world. She has 5 years of experience as a marketer, spearheading lead generation campaigns and events that propel top-notch brand performance. Handling marketing of various brands, Emily has also developed a great pulse in creating fresh and engaging content. She’s written for great websites like Airdroid and SME News.  You can find her on LinkedIn.

Interested to have your work featured? Share your knowledge with our community by submitting an original article here!

Share this with your network

Also worth your time

Follow us on LinkedIn
Stay connected with us

Track your parcel here