Useful Tips on How to Use Google Analytics on eCommerce Websites

Assessing the performance of an ecommerce store will depend on different indices. The report from the analyses or assessment will determine what might be done to improve the site performance. This could include things like reading user surveys, customer posts on social networks, and frequently asked questions, but these cannot offer so much insight.

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The most valuable information is real user data that must be collected by specialized software. The statistics and metrics gathered by these types of software arm the ecommerce website owner with robust and actionable data. Since 2005, Google Analytics has become the most popular analytics software due to its ties to the Google search engine and Google Adwords. This, combined with the fact that it is completely free for the majority of its users has given Google Analytics a dominating market share. A paid premium version does exist for enterprise ecommerce websites.

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What is Google Analytics?

Google Analytics is a web analytics software and service that tracks all website traffic to your website. The data gathered can then be viewed in a number of intuitive, customizable reports. It is by far the most frequently used analytics software around, due to its robust feature set and alluring price tag (free for the majority of users). Additionally, GA isn't just for websites; it can be used with mobile apps, digital kiosks and more.

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How Does Google Analytics Work?

Simply collecting data can be valuable, but without meaningful extraction that data is just a pile of numbers. As such, this data must be analyzed and displayed in a meaningful way. Google Analytics utilizes a four step system to accomplish this feat:

1. Data Collection

The first step, of course, is to begin collecting data in real time as users navigate and interact with the website that is being tracked. After JavaScript code is placed in your website's markup, it is able to collect and transmit information back to Google Analytics servers. Tracking of more sophisticated actions on the website, such as certain events or interactions, may require specific snippets of JavaScript to be placed within that specific element. For ecommerce websites, this data is collected in real time.

Every time a visitor arrives at your site, the JavaScript code is executed by the user's web browser. At this point, as much information about the visitor as possible is collected, including date and time of the session, device type, operating system, screen resolution, location, etc. Some of this information may not be readily available to the JavaScript code depending on the specific settings of any given visitors browser and computer. After this initial information is collected, the code creates and stores a few cookies with some basic information about that visit on the visitors hard drive. Since Google has now required all searches be run under the https protocol, even less user information is available to the JavaScript code.

2. Data Processing

Raw data is only valuable if it is processed and displayed in a meaningful and understandable way. After data is collected by the JavaScript code, it is sent to Google's service for data processing. This is when Google computes the data into useful metrics that can be used to evaluate site performance. Google has a number of "reports" that show different facets of the information collected, accessible within their GUI dashboard.

For an ecommerce site, one of the most important metrics available is revenue. Data processing allows you to view what search engines your revenue is being generated from, the average dollar value per transaction, etc. These are the types of meaningful metrics that are available only after the raw data is processed. It is then displayed in the Google Analytics admin, often combined with graphs and / or other visual elements to make for an even more intuitive experience.

3.Data Configuration

After your analytics data is processed, the data is manipulated to satisfy your specific settings and configuration. For example, you may have chosen to exclude your office's IP address from the data so that your company's use of the website does not affect your data. Once this data has been processed, it is sent to the a Google database for storing. Once this data has been processed, it cannot be altered. This is why it is important to create several different views of your website in Analytics, leaving an unfiltered view of your website's data so that you always have the most accurate raw data, just in case you ever need to go back and look at something that your configuration may have prevented from tracking.

Setting up custom filters allows you to exclude specific IP addresses and much more from affecting your analytical data.

4. Data Reporting

Google Analytics presents this information to its users utilizing a web interface typically accessed at google analytics webpage. This data can also be retrieved by a third party interface using Google's Core Reporting API. For most purposes, Google's interface is robust and intuitive enough, but some of the gigantic ecommerce sites may decide to choose a third party software that can better be customized to their exact needs. In fact, some of these companies don't even use Google Analytics to collect the data, but use a third party service for that as well.

Google Analytics provides the ecommerce website owner with invaluable metrics and insight regarding how users are interacting with their website. From there, the webmaster is able to make informed decisions on how to best improve their ecommerce store.

Key Ecommerce Metrics to Monitor With Google Analytics

The most successful eCommerce businesses make decisions based on metrics. Knowing the state of your estore performance will help you know which metricto push forward at any point in time. There are lots of metrics you can track, but only a few of them directly represent the state of your business and can be turned into actionable insights that help you grow.

Let’s now look at the most important eCommerce metrics. These metrics are most important, but there are plenty more that can provide value and help your understanding of website data.

Be Guided By The Statistical Significance of Your Data

Before you draw conclusions, you should bear in mind that the accuracy of your predictions are closely tied to the statictical significance of your data. Basically, statistical significance is a way to measure your confidence in a measurement. It’s a way to determine if your metrics are reliable. This way, you can decide if there’s really a relationship between your decisions and your results.

Statistical significance relies on two variables: Sample size and effect size.

Sample size refers to the amount of data you measure. The larger your sample, the more confident you can be in the result. If the sample is small, there’s a higher chance that the data will over represent things aren’t predictors of future outcomes.

Effect size refers to the difference in your results. For instance, a 0.5 percent conversion rate change isn’t a very big effect, so you would need a big sample to determine whether the new result is significant or just random chance.

What does statistical significance mean for eCommerce stores? It means that making decisions based on your data is harder when you don’t have much data to measure.

If you’re a large store with tens of thousands of visitors every day, you have the data to accurately track your metrics and make good decisions, but if you only get a few hits each day, you won’t have much confidence in the patterns you see.

That said, you should be tracking data regardless of how much of it you have. You’ll struggle to make decisions until you have a lot of data, but it’s better than making unsupported decisions.

The important eCommerce metrics

These are the eight most important metrics we believe every eCommerce store owner/marketer should track.

1. Sales conversion rate

Your conversion rate, quite simply, is the percentage of visitors who make a purchase. This is the metric you’ll worry about the most—that’s why it’s first on this list.

According to Marketing Sherpa, a fair conversion rate for eCommerce stores is between one and five percent.

Most analytics tools will tell you the conversion rate, but you can find it manually by dividing the number of people who bought a product by the total number of visitors.

Technically, there are little micro-conversions all over your site that lead to a macro-conversion (the purchase). For instance, a shopper clicking on a product on a category page is a micro-conversion because it’s the path to a sale.

2. Email opt-ins

Email marketing is one of the most powerful tools eCommerce stores have to drive repeat business. It delivers a 4,400 percent ROI. That’s $44 for every $1 spent. Plus, your mailing list doesn’t make you dependent on another platform (like Facebook or Google) to drive traffic.

Ideally, you want to get as many people on your email list as possible, even if they don’t buy your products. So it’s important to track your total opt-ins and your opt-ins by source. That is, you want to know the individual opt-in rates of every form on your website.

You can track email opt-ins in two ways:

  1. Use the built-in analytics in your email marketing tool
  2. Set up a conversion goal in Google Analytics to track your opt-in’s “thank you” page

3. Customer lifetime value

Your customer lifetime value is a metric of the total you earn from a typical customer over the course of their life. If you earn $25 over six transactions from a typical customer throughout their life, your CLV is $150. (You’ll have to subtract your acquisition costs, we’ll get to that in a moment.)

Knowing your customer lifetime value tells you how much you can spend to acquire a customer and how far you should go to retain them.

There are actually three ways to calculate customer lifetime value. They might be a bit confusing, so try this calculator first.

There are lots of ways to increase your customer lifetime value, but they boil down to increasing your average order value (more on this in a minute) and building long-term relationships with your customers so they become repeat buyers.

4. Customer acquisition cost

Naturally, it costs something to acquire a new customer. This value is called your customer acquisition cost.

In order to make money, your customer acquisition cost needs to be less than your customer lifetime value. Ideally, your acquisition cost should be less than your average order value so you make money off every new customer.

Some businesses can afford to lose money on the first sale and make it up off that customer later, but eCommerce businesses don’t usually have margins to support that.

You can calculate your CAC by dividing your total marketing spend by your number of customers. That’s an overall figure, however. It’s also useful to calculate your CAC by source. You want to know your CAC for each traffic channel.

How do you lower your customer acquisition cost?

  • Improve your site for conversions.
  • Optimize your paid ads so you spend less for the same results.
  • Invest in nearly-free marketing channels that you control, like email marketing, social media, online communities, or content marketing.
  • Create a referral program so your customers refer you to new customers. This usually costs something, but it’s a fixed price you only pay when you make a sale.

5. Revenue by traffic source

Some traffic sources send visitors who are more likely to become customers. It’s important to stop spending cash on sources that don’t work well or don’t work at all, and invest that money in sources that do work.

How do you identify which ones work? By calculating your revenue by traffic source – a metric that shows you which channels send you actual customers, as opposed to visitors who never buy. How you raise your traffic by source depends on the source.

6. Average order value

Your average order value is, quite simply, the average value of each purchase. To discover yours, divide the total value of all sales by the numbers of carts.

Naturally, you want customers to spend as much as possible so you earn as much as possible. You need to know your average order value so you can find ways to raise it.

How do you drive this metric up?

  • Bundle products together so the customer gets a slight discount on the products as opposed to buying them separately.
  • Upsell your customers additional features or premium versions of your products.
  • Recommend products that complement their purchases.
  • Offer free shipping for higher total purchases. (E.g., If your AOV is $54, offer free shipping at $60 to tempt your customers to spend more.)

7. Shopping cart abandonment rate

This metric is the percentage of shoppers who add items to their shopping cart, but then leave your store without making a purchase. Nearly 70 percent of shoppers abandon their carts, but some of that revenue is recoverable, so it’s important to lower your abandonment rate as much as possible.

You can track cart abandonment by using a cart abandonment tool or setting up a funnel in Google Analytics.

How do you reduce your cart abandonment rate?

  1. Simplify your checkout process so the customer can order smoothly.
  2. Use remarketing to bring would-be customers back to your store.
  3. Send cart abandonment emails. These prompt the shopper to return and complete their purchase.

8. Net Promoter Score

Net Promoter score is a simple survey that measures your customers’ satisfaction with your brand and products. It asks two questions:

  1. How likely are you to recommend us to a friend? (Scale of one through 10.)
  2. Can you tell us why you responded with that number?

You can track your Net Promoter Score by prompting your website visitors as they use your site with a tool like Customer.guru, SatisMeter, Wootric, or Promoter.io.

Pro tip: Segment your respondents according to their scores for email marketing. Divide them into categories:

  1. Detractors: People who score six or lower. These are not excited about the brand and most likely won’t purchase again.
  2. Passives: People who score seven or eight. They are somewhat satisfied, but may buy again.
  3. Promoters: People who score nine or ten. These are your biggest fans. They will purchase from you again and will promote you to their friends.

Reach out to your detractors and passives. Ask them for more information regarding their responses and why they dislike your brand and if there’s anything you can do to improve the experience. If they have a small problem, this is your chance to solve it.

You should also reach out to your promoters. Thank them for your support and reward them in a small way to make them even more loyal.

Conclusions

Any store, small or large, should be paying attention to these metrics. As we noted initially, statistical significance plays a part in whether you can accurately measure changes in these metrics. Stores with smaller data sets should focus on improving non-rate metrics to start, like AOV, lifetime value, and customer acquisition costs. As your store grows to process a higher volume of orders, and therefore has more data points, you’ll be able to more accurately track and influence change on other metrics, like conversion rate, to make the best decisions for your store.

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