Key Long-Term Metrics Every Ecommerce Store Should Track to Boost Repeat Purchases

In the first two parts of this series, we explored how to measure the immediate impact of your digital advertising efforts, focusing on metrics like Click-through Rate (CTR), Conversion Rate (CVR), Return on Ad Spend (ROAS), and more.

While these metrics are important for understanding the short-term performance of your campaigns, they only provide 
part of the picture.

Understanding the long-term performance of the traffic driven by advertising is crucial for sustainable growth of your e-commerce business.

It’s not enough to just bring in traffic—you need to make sure that this traffic is engaging with your store, moving through the purchase funnel, and ultimately converting into loyal customers.

In this article, we’ll break down the key e-commerce metrics you should be tracking to understand the long-term impact of your advertising efforts and how to optimize them for small businesses.

How to Boost Your Store’s Visibility and Engagement for Long-Term Success

Your advertising campaigns are designed to drive traffic to your e-commerce store, but that traffic is only valuable if it leads to engagement and sales.

Small e-commerce sellers need a clear understanding of how visitors interact with their site to ensure that ad spend is being well utilized.

Understanding Sessions and Reducing Bounce Rate to Improve E-commerce Performance

The first metric to track is the number of sessions, which represents the total visits to your site. While having high traffic is good, you need to dig deeper.

If your bounce rate (the percentage of visitors who leave after viewing only one page) is high, it could mean that your landing pages aren’t resonating with your audience or that the traffic isn’t well-targeted.

For an eCommerce business, this is especially important since every visitor counts. If you notice a high bounce rate, consider testing different landing pages, improving page load times, or refining your ad targeting.

Engagement: Moving Beyond Sessions to Product Page Views

Once visitors are on your site, you want to see how many are exploring your products.
‍
Track product page views as an indicator of interest.

But it’s not just about the number - focus on quality engagement, like time spent on pages or the number of products viewed.

These are signals that visitors are interested in what you offer.

Improving this stage might involve enhancing product descriptions, investing in better images, or even adding customer reviews to build trust.

Maximizing Add-to-Cart Rates: How to Capture and Convert Purchase Intent

After visitors engage with product pages, the next step is adding items to the cart. This action shows that a visitor is considering making a purchase. For small businesses, understanding the behavior behind add-to-cart actions is key.

Shoppers may use their cart as a wish list, adding items but not immediately purchasing them. While this might seem discouraging, it’s actually a good sign - they’re interested enough to potentially come back.

To improve add-to-cart rates, consider offering incentives like discounts, free shipping, or a sense of urgency (e.g., limited stock notices).

Optimizing the Checkout Process to Boost Sales and Reduce Cart Abandonment

The checkout process is where interested visitors become paying customers. For small sellers, optimizing this stage is crucial.

Questions to ask before:

Break down the checkout into steps - are customers abandoning the process after entering their information?
Are they dropping off when asked for payment or shipping details?

Steps to take: Simplifying checkout (like enabling guest checkout) or adding trust signals (like secure payment badges) can make a big difference in reducing cart abandonment and boosting conversions.

Note:
In this step it's essential to measure both the number of begin check-out events, but also the purchases that happened. If there's a significant drop in this stage it might be indicating something that needs to be improved, such as shipping cost, speed or some other characteristic of the check-out process.

Repeat Purchases: The Key to Long-Term Growth

Repeat purchases are essential, when you are a small online shop.

Here are some effective strategies to implement to boost repeat purchases:

Tracking repeat purchases is key! Acquiring new customers is more expensive than retaining existing ones. . Look at how often customers return within a specific timeframe, whether monthly or quarterly, depending on your product cycle.
Implementing loyalty programs, personalized email follow-ups, and targeted ads to past buyers are effective strategies for small sellers to encourage repeat business.

Analyzing Funnel Abandonment: Where Are You Losing Customers?

Identifying where customers drop off in the purchase funnel is critical. Bringing traffic to your store is an investment, and by understanding the purchase funnel you can get a clear sense of inefficiencies that might need to be addressed.

Google Analytics Funnel View

Look at the journey from sessions, to product page views, to add-to-cart, to checkout. Are customers abandoning their carts frequently? If so, analyze the process. Is the checkout process too long? Are there unexpected costs like shipping fees?

Customer Lifetime Value (CLV): The Long-Term Impact of Customer Relationships

Customer Lifetime Value (CLV) is one of the most important metrics for small e-commerce businesses. It represents the total revenue you can expect from a customer over the entire relationship with your store. Understanding CLV helps in determining how much you should spend to acquire customers and whether your current marketing strategy is sustainable.

Calculating CLV: A Simple Approach for Small Sellers

Here’s a basic formula for calculating CLV:

CLV 
 = (Average Order Value) × (Number of Repeat Purchases per Year) × (Customer Lifespan in Years)

Let’s break it down with a small business example:

Average Order Value: $40
Number of Repeat Purchases per Year: 3
Customer Lifespan in Years: 2

In this case, your CLV would be:
CLV = $40 × 3 × 2 = $240
‍This means that each customer, on average, brings in $240 over their relationship with your business.

Segmenting customers into cohorts can provide an even better picture of CLV. For instance, you might find cohorts of customers with a higher AOV or a higher number of repeat purchases, influencing your customer acquisition efforts.

Customer Acquisition Cost (CAC): Balancing Acquisition and Retention

Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer. For small businesses, keeping CAC in check is critical to maintaining profitability. While CLV tells you how much a customer is worth, CAC tells you how much you’re spending to bring them in.

Calculating CAC: A Simple Formula

The formula for CAC is:

CAC 
 =
Total Marketing and Sales Expenses
Number of New Customers Acquired

Example:
If you spend $2,000 on marketing in a month and acquire 40 new customers, your CAC is:
CAC = $2,000 / 40 = $50

This means you’re spending $50 to acquire each new customer.

It’s crucial to keep marketing costs lean. Digital advertising can be one of the main expenses, so it is essential to focus on channels that deliver the best ROI.

Experimenting with additional approaches like organic social media, content marketing, and email campaigns can also complement and even enhance digital advertising campaigns.

Don’t forget that customer retention efforts (like loyalty programs) can lower your overall CAC by driving repeat purchases.

Evaluating CLV and CAC: Balancing Profitability and Growth

Comparing Customer Lifetime Value (CLV) to Customer Acquisition Cost (CAC) is essential to determining whether your business model is profitable and scalable.

While a common benchmark is a CLV-to-CAC ratio of 3:1, this ratio alone isn’t sufficient to gauge the health of your business.

It’s crucial to evaluate this ratio in the context of your overall profitability.

Example:

Low margins and High CLV/CAC ratio

Let’s say your CLV is $300, and your CAC is $100. A 3:1 ratio might seem ideal, but what if your margins are very thin? If you’re only making $20 profit per customer after accounting for all expenses (including product costs, overhead, and operational expenses), even a 3:1 ratio might not be sustainable.

High margins and Low CLV/CAC ratio

On the other hand, if your business has high margins, a lower CLV-to-CAC ratio could still be profitable. For instance, if your CLV is $200 and your CAC is $80, giving you a 2.5:1 ratio, it might still be highly profitable if your margins are strong.

What to do?

The key is to assess your CLV and CAC in relation to your profit margins. A healthy CLV-to-CAC ratio should not only cover your acquisition costs but also generate sufficient profit to reinvest in growth. Small businesses should regularly analyze this ratio alongside profitability metrics to make informed decisions about how much to invest in acquiring new customers and how sustainable their current marketing budget is.

In summary, achieving a good CLV-to-CAC ratio is important, but always evaluate it in the context of your margins and overall profitability to ensure you’re building a healthy and scalable business model.

A Practical Approach To Measuring Analytics In Google And Shopify

Now that we’ve covered the key long-term metrics, let’s look at how small e-commerce sellers can track them using Google and Shopify Analytics.

Analyzing Metrics with Google Analytics

Google Analytics provides metrics across the different categories in the Reports page. A more effective way to monitor metrics is to create custom reports under explorer, bringing together the key metrics and dimensions that are important to monitor your business.
One key report is the funnel report, showing the number of events or users across the different stages of the process.

Looking at this screenshot below, we are visualizing sessions, item view events, add to carts, checkouts and purchases across different session sources:

Analyzing Metrics with Shopify Analytics

Shopify provides useful tools and reports that can help you calculate CLV (Customer Lifetime Value) and CAC (Customer Acquisition Cost). Although Shopify does not directly display these metrics, you can easily gather the necessary data and compute them using built-in reports and apps.

1. How to Calculate Customer Lifetime Value (CLV) on Shopify

CLV represents the total revenue a customer generates for your business over the duration of their relationship with your store. Here’s how you can calculate it on Shopify:

Step-by-Step Process:

1. Determine the Average Order Value (AOV):

Go to Analytics > Reports > Sales over time.
Look at the “Average order value” metric. This shows the average revenue per transaction in your store.

2. Determine the Average Purchase Frequency Rate:

Go to Analytics > Reports > Customers over time.
Under the "Returning Customers" section, you can track how frequently customers make repeat purchases. The average purchase frequency rate can be calculated by dividing the number of orders by the number of unique customers over a given time period (e.g., one year).

3. Estimate the Customer Lifespan:

Shopify doesn’t provide this metric directly, but you can estimate it by analyzing the behavior of your most loyal customers over time. Consider how long (in years) the average customer continues making purchases in your store.
For a simple estimate, you might consider a customer lifespan of 2-3 years for most e-commerce stores unless you have more precise data.

4. Calculate CLV:

Use the formula: CLV = Average Order Value × Average Purchase Frequency × Customer Lifespan.
For example, if your average order value is $75, customers make 3 purchases per year, and the average customer lifespan is 2 years, the CLV would be:
CLV = $75 × 3 × 2 = $450

2. How to Calculate Customer Acquisition Cost (CAC) on Shopify

CAC represents the cost of acquiring a new customer. To calculate this metric, you need to gather the total marketing and sales expenses and divide them by the number of new customers acquired.

Step-by-Step Process:

1. Determine Your Marketing and Sales Costs:

Track the total expenses related to customer acquisition. This includes ad spend on channels like Google Ads, Facebook Ads, influencer marketing, and other campaigns.
If you’re using Shopify’s marketing tools, you can find your total marketing spend under Marketing > Campaigns.

2. Determine the Number of New Customers:

Go to Analytics > Reports > Customers over time.
Look at the "First-time customers" section to see the number of new customers acquired over a given period (e.g., the past month).

3. Calculate CAC:

Use the formula: CAC = Total Marketing and Sales Expenses / Number of New Customers.
For example, if you spent $3,000 on marketing and acquired 100 new customers, your CAC would be:
CAC = $3,000 / 100 = $30

Key Takeaways

Understanding and monitoring key e-commerce metrics is crucial for evaluating the long-term impact of your advertising efforts. Balancing short-term wins with long-term growth is the key to building a sustainable business.

Here is a rule of thumb:

Track store visibility, engagement, the purchase funnel, CLV, and CAC, to ensure that the traffic generated by your ads is being effectively utilized and contributing to lasting success.
Remember that growth doesn’t happen overnight.
Consistently analyze your data.
Gradually implement optimizations, and focus on both acquiring new customers and retaining existing ones, you’ll be well on your way to mastering digital advertising for your small business.
Keep experimenting, testing, and refining your strategies based on these metrics, and watch your e-commerce business thrive. The combination of data-driven insights and strategic decision-making will not only help you optimize your marketing efforts but also drive consistent revenue growth.

By focusing on both the short-term and long-term health of your business, you can build a solid foundation that ensures your e-commerce store remains competitive.

Stay patient, stay informed, and continue to adapt as you learn what works best for your unique business!