Review: key metrics for e-commerce apps

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Steering an online businesses without metrics at hand is like flying an aircraft without a dashboard.

You need to know where you are headed and be able to predict the trajectory. Widely known tools like Google Analytics have been available since 2005, but even in 1993, when there were only 600 websites in the world, one of them was Webtrends that helped monitor the number of visitors.

Now that the Internet has advanced dramatically, metrics such as the number of customers, pages per visit, abandonment rate, average session duration keep track of everything. But for a store that makes money on sales rather than on ads, this data is less valuable. Also, tracking metrics not only for the website, but also for the app is really important now. More than 53% of purchases in the US are made from the smartphone. Most customers use apps of particular stores, and the conversion rate of such apps is three and a half times higher than from mobile sites (21% vs 6%).

Top e-commerce businesses use a whole lot of metrics helping improve the app and make ads more effective. The ongoing monitoring of these metrics is the key enabler of future success. myTracker’s strength is that it offers all it takes to handle them. You only need to know what and how to measure.

What is a metric?

Metrics are quantitative measures of your product's performance. They show how well your website or app is performing. An average order value, pages per session, abandonment rate and the number of visits are just a few examples of the hundreds of e-commerce indicators.

Parameters and metrics help you better understand your target audience and their behaviour. Who are your customers, where do they come from, what interests them, what attracts them and what discourages them? Decisions in an app are often made in a jiffy, but somehow you have to find out where the difference between buying and not buying lies.

What is a KPI?

A KPI is a key performance indicator. While a metric is any numeric measurement related to your product, a KPI is a parameter of a key metric, i.e. a target figure that you and your company want to achieve. Setting KPIs is good for you and your team – for people it is easier to work when they have a target to meet.

For example, an average order value is definitely a metric, but not a KPI. However, if you set the average order value of USD 40 as your target, it becomes a KPI. In football terms, the number of goals per match will be a metric and scoring five goals in a game will be a KPI.

The values of metrics keep changing, and it is not their current value, but the trend that matters. Still, by setting a clear KPI, you can understand whether the company is moving at the intended pace.

A KPI is a very subjective parameter. There can (and should) be several KPIs, which may change at various stages of your product lifecycle. You need to measure metrics anyway, these are valuable data. Although, which of these metrics will be the key indicators of your performance depends on your current strategy. If an e-mail newsletter is your key promotion tool, you should be looking at CTR (click-through-rate) for e-mails. If you sell casual clothes, retention rate (an indicator of how often your users remember about you and return to the website/app) may be more important.

For games and many apps, the most essential metric is the number of users. But for e-commerce, KPIs normally depend on orders one way or another. It does not matter how many customers you have, as long as only a fraction of them end up buying something. To start with, putting it simply, you can focus on increasing the number of orders and the average order value.

Key metrics at each stage of the conversion funnel

Different companies focus on different indicators. But all successful e-commerce businesses divide their strategy into four stages. And they concurrently manage these areas and reallocate resources depending on what indicators they would like to improve at any given moment. Sales funnel in e-commerce is a customer's journey from a person who has never heard of you to a regular shopper in your store. Traditionally, it looks this way:

  1. Product awareness
  2. Visit to your resource
  3. Purchase
  4. Repeat purchase

All the stages are important. Any one of them can be crucial depending on what your business is currently targeting. When you enter the market, the first two stages related to customer base acquisition are key. You should focus on raising awareness of your store and attracting people. But if you have been operating for several years and you are pretty well known – the fourth stage is your target. It is essential to maintain and improve customer loyalty, which means increasing the likelihood that users will become your regular customers and will not switch to your competitors.

Each stage of this sales funnel has its own metrics (and, accordingly, possible KPIs). Some metrics are better monitored daily, while others can help you make important strategic decisions on a long-term horizon. We will discuss the most importantones.

1. External ad metrics

This stage takes place outside the app. For users to visit you, they must first learn something about you. Here, everything depends on the platform you choose to be hosted by. Most of them propose to monitor the core metrics – likes, views, full-text reads and clicks. These metrics are generally divided into three groups:

Reach

The total number of your subscribers in social networks and visitors of the website sections that advertise you. In other words, the total number of all those who see your content when you publish it. This also includes e-mail subscribers.

Impressions

The number of times your content is shown to users, including ads, posts on your blog, search results and accounts in social networks. Many users who have had contact with you may not even know about you, but they already have the potential to become your full-fledged customers. It is important to use post-view attribution capabilities to measure your performance here.

Engagement

Essentially, it measures how many users (from your reach) interact with your content. There are several key performance indicators for your promotion that should be continuously monitored:

  • Banner views.
  • View-through rate or VTR (YouTube).
  • Clicks. You can measure for each ad or for a certain period (typically, a month). Again, it is not the figure itself that matters, but rather the trend that shows whether there is a development.
  • Likes per post. If your likes in social networks are not artificial, they can measure the quality of your material and its relevance for the audience. If the material is published on several platforms, likes show which materials are more popular. It is common knowledge that the audience of Odnoklassniki is different from that of Facebook.
  • Shares per post, also known as retweets, repins (on Pinterest) and so on. Often, it is even a more useful metric than likes, but it works only if your materials become popular enough to go viral and gain widespread Internet fame.
  • Comments per post. Not always an important metric, but sometimes comments are even more interesting than the material itself (e.g., this often happens on Habr and VC). The more comments, the more active community you managed to attract.

The main thing is to have a tracking link from an external ad to your app (or website). This will enable you to track the results of this campaign or activity going forward. Creating a tracking link is easy and will benefit you a lot in future. Ideally, you should create it for each ad campaign so that you can track which promotion options are better, and understand the specifics of users acquired through each of the marketing channels.

To create a tracking link in myTracker, add any campaign and go to its settings. There you can also set up postbacks, tariffs and adjustments to keep track of the costs.

2. Metrics of successful user acquisition

These help you see the outcome of your external activity. It is great that users learned about your product, but does it translate into real clicks and app installs?

There are many useful acquisition metrics, but we will focus on the most important ones.

Attributions

All users who clicked a tracking link are assigned an attribute, a certain tag. Thus, they become unique and linked to a certain channel that brought them. This is the key aspect of a mobile app tracker.

This metric shows the number of clicks on a link to install or re-engage a mobile application over a certain period.

With myTracker you can track not only the installations, but also app re-installations or re-engagements, if your campaign was aimed at reactivating old users. All this data is available in the Constructor, go to Device metrics → Main metrics.

Ratio of clicks to impressions (CTR)

How to understand the effectiveness of your advertising material and visuals? You can only find it out by benchmarking your ad impressions against the number of clicks. There is a click-through rate (CTR) metric for this purpose. It is calculated as the ratio of total (for a given period) clicks to impressions.

To find this important indicator in myTracker, go to Report constructor → Select from list → Metrics → Main metrics → CTR.

Click to install rate (CR)

The ratio of mobile app installs to clicks showing how effective a given advertising channel is.

In myTracker, the metric determined as the ratio of sum for report period of installs / clicks. To find this metric, go to Report constructor → Metrics → Main metrics → CR. The higher CR, the more fine-tuned your advertisement for the target audience.

Initial launches

Assessing the channel efficiency by installations alone is not reasonable. It is important to track the number of users who not only came to you, but also launched the app for the first time during the specified period. If the figure is low across all advertising channels, you may need to send push notifications or an e-mail newsletter to those users who “got stuck" at this stage.

To find the metric in the tracker, go to the Report constructor → Metrics → Main metrics → Initial launches.

Reattribution

After an app is installed, users often become dormant. Dedicated campaigns are initiated to return such users, including push notifications, retargeting and newsletters. It is crucial to separate these users from regular ones to see how successful the re-acquisition of "old" customers is going. Attribution in this case is called repeated attribution or reattribution. The reattribution metric enables you to understand the number of re-installs or reactivations of a mobile app.

This metric is a very useful indicator to check how well previously active users are attracted by any of your new features or promotions. To find it in myTracker, go to the Constructor → Main Metrics → Attributes → Reattributions. There are also useful indicators of advertising success, such as app re-installations and reactivations. These help you better understand the sources of return for your old customers and see their quality.

Cost per Action / Cost per Install (CPA/CPI)

CPA (cost per action) is a broader concept, a metric of how much you pay on average for each action or user acquisition you need. CPI (cost per install) shows you how much you pay for each install. Tracking links help break down CPA/CPI values for each ad channel and even for each ad.

The formula is simple:

CPI = Total cost of an ad campaign / Number of installs.

CPI dynamics can be very informative. If the metric has increased dramatically, switching to another ad channel or optimising your campaigns could be helpful. Conversely, if the metric drops, your marketing expert is doing their job well. But keep in mind that CPI is just a setting. One active, paying, and engaged user usually costs two to three times more.

Remember that CPA and CPI metrics acceptable to you depend heavily on your average order value (AOV) and user LTV. If your CPI is USD 20 and your average order is USD 100, this is a decent result. But if your average order is only USD 30 under the same conditions, there is no margin for error, and every lost user becomes an awful tragedy.

You can reduce CPI (i.e. reduce your costs per user acquired) by precise targeting and using creative materials. If you understand your core audience well, you will be able to fine-tune your ad campaign and avoid overkill. You can also find your core audience in the tracker. Go to myTracker's Constructor → Dimensions, and you will see the country, region, city, age, gender of your audience, and even the screen size of their mobile devices, mobile operator, browser used and much more.

3. First sales performance metrics

App installation does not yet mean success – you need the user to make a purchase. But the question arises: is your app attractive enough for users? What should be improved? How effectively does your website or app convert a new user into a full-fledged paying customer? To find out, you can use specially designed metrics.

Sales conversion rate

Conversion rate is the total number of sales transactions divided by visits. Improving conversion rates is one of the biggest challenges. To make it clear, average conversion is usually as low as 3%, a bit higher for gift shops and pharmacies and a bit lower for stores selling car parts, cosmetics and decorative items. Electronics stores have the lowest conversion of 1.4%, with only one of sixty leads turning into sales.

Understanding your metrics and identifying which stage sees the highest disengagement rate is key to improving conversion and paving the way to long-term success. To do this, track conversion:

  • by channel (AdWords, Facebook, myTarget, SEO, etc.);
  • by product category (some products translate into first sales more often than others);
  • by company, especially if you work with bloggers or influencers or partially outsource the marketing function.

There is always a channel or a product category that outperforms others, but the question is if you have the right tools to measure it. If your marketing budget is limited, you can focus on this small segment and stop promoting the products rarely purchased by new users. At the same time, you should ask yourself if you can improve the situation and why this very marketing platform or product does not perform well.

For an accurate measurement of conversion into sales, you can set up first purchase tracking using custom events.

First time payers

This metric shows how many devices have converted from non-paying to paying during the selected aggregation period. It depends both on the success of your marketing efforts and your app's quality (how effectively it converts new users into profitable customers).

To find this metric in myTracker, go to Metrics → Financial metrics.

Cart abandonment rate

The more attention you pay to measuring disengagement at each stage of the user journey, the better for your business. But the key metric is the cart abandonment rate. The most common reasons for cart abandonment are the following (in order of priority):

  • need to register;
  • too complicated ordering procedure;
  • concerns over bank details security;
  • lack of desired payment methods;
  • poor delivery terms, costly delivery;
  • slow delivery.

To measure your abandonment rate and identify the cause, create custom events in the tracker. An average of 68% of users abandon their orders without making a purchase. Some e-commerce businesses manage to reduce abandonment to 50% or even 30%, while others face a staggering 90% abandonment even though they quickly direct their customers to cart. What is your position on this range?

Average order value

Average order value or AOV is the average amount customers spend when they make a purchase. This metric should normally be tracked over a period of time to see whether your customers have started spending more and whether your marketing strategy and the related business model are effective.

You can boost your AOV by cross-selling, introducing loyalty programmes, and improving such fundamental aspects as pricing, quality and presentation.

4. User retention metrics

Depending on the advertising channel, customer acquisition may be 5–25 times more costly than retention. The better you retain your customers, the more difficult it is for your competitors to expand their customer base.

To improve the key metric at this stage, you can leverage the same tools – loyalty programmes and campaigns to drive repeat purchases. You can also use the tracking data for retargeting ads to reach out to the existing customers who for some reason have not opened your app for a long time.

Retention rate

Retention rate is the percentage of customers you have retained over a definite time period following the app installation. The higher the metric, the better you retain.

On average, only 43% of users revisit the app at least once during the first month after its installation. By the third month, the retention rate goes down to 29%, which means less than a third of users still launch it. Your own metric may be much higher or lower.

To find out why users do not come back to your app and get a deeper insight into your marketing ups and downs, we recommend measuring retention rate by day, week and month. This will enable you to see if users are immediately alienated by something or stay with you for long. You should raise the alarm if your monthly retention drops following the app update or some of your advertising channels deliver low daily retention.

In myTracker, you can drill the retention rate down to an hour, by tracking both app installs and attributions. To find this metric, go to Report constructor → Select from list → Periodic metrics → Retention or Rolling retention Read more on the difference between these two metrics in the guide.

Paying audience

The number of users who made payments during the selected reporting period. Customers making multiple purchases are counted only once. It is important to track this metric over a period of time, especially during crises, as the growing user count may not translate into an increase in paying customers.

To find this metric, go to Report constructor → Metrics → Financial metrics. If you want to track the total number of purchases, see the Transactions metric in the same section. This metric will always exceed the number of paying users.

Repeat customer rate

The retention rate is more relevant for apps with ads or stores selling cheap FMCG products. If you offer more expensive items or goods purchased occasionally, i.e. new iPhones or Valentine's Day gifts, you should focus on the number of repeat customers, regardless of how often they open your app.

Return rate

A lot of purchases is a good thing, but what if a significant portion of products is returned? Which group of customers makes returns more frequently (age, sex, acquisition channel)?

In many cases, users acquired through some specific channel (e.g. through one of YouTube bloggers) return their purchases more often than others. This may happen, for instance, if your adds set unrealistic expectations.

You should segment returns by category and product to see if some goods had better be deleted from the portfolio to avoid customer disappointment and damage to your image. Negative reviews from unhappy customers on social media would not do your business any good.

To reduce return rates, you can do the following:

  • help your customers gain a better understanding of the product and its quality by providing HD photos, descriptions of manufacturing materials or accurate dimensions (especially for clothing and shoes);
  • ship the product you have been advertising, not a similar one in different colour or size – your customers want to get exactly what they have paid for;
  • track your returns, examine the reasons and minimise chances these issues pop up again.

5. Common e-commerce metrics

None of the above metrics will tell you about the overall success of your store. Even if you return rate is low and retention is high, it is not indicative of your profitability. To this end, there are global metrics you must track.

Average revenue per paying user

Average revenue per paying user or ARPPU is calculated as

app revenue / number of unique paying users.

This is an invaluable metric to measure profitability per user and compare traffic sources (the higher is the ARPPU the better performing is the source). This metric also shows how your audience responds to price hikes and cuts.

To find ARPPU in myTracker, go to Report constructor → Metrics→ Financial metrics. Please note that this metric takes into account total app revenue, ignoring subsequent payments of retail taxes and charges. In real life, the state of things may look less optimistic than the statistics.

In myTracker, you can also compute such useful auxiliary metrics as DPU, WPU and MPU. This is the number of unique payments made by app users in the past day/week/month. With each user counted only once, you can see the actual number of paying customers and track the evolution of that number over time.

Lifetime Value (LTV)

Total revenue received from new devices for a certain period following app installation or user registration.

LTV is an aggregate metric taking into account repeat transactions, average order value and abandonment rate. Though it does not enable you to gain a deep insight or find a weak spot, it is a great tool for assessing the overall health of your e-commerce business. LTV also helps segment customers into “whales” and “minnows” and instantly find out where “whales” come from.

LTV is a cornerstone metric to assess your overall performance. If LTV is lower than CPI or CPA, your business is definitely loss-making. You spend more to acquire new users than you earn from them over the time they use your app.

To find this metric, go to Report constructor → Metrics → LTV. You can measure it after app installation or attribution.

Alternative metrics are Revenue LT and Revenue AT to be found in Report constructor → Metrics → Financial metrics → Revenue. Unlike LTV, they are not limited by a certain period after mobile app installation or attribution.

Return on Investment (ROI)

Advertising campaigns profit. This is a very important metric that helps you measure the success or failure of your marketing efforts in each area. It is calculated as

the ratio of total Revenue for the reporting period to the Cost of campaigns.

The metric helps assess how fast your investment pays back and which campaigns should be continued. Your ROI must be higher than 100% (1) and ideally trending upward, for you to gain profit from advertising campaigns.

To find this metric, go to Metrics → Financial metrics → ROI. myTracker will collect revenue data on its own and calculate advertising campaign costs (in selected currency) in accordance with tariff selected during campaign creation. You can make relevant adjustment in campaign settings any time if there is a change of tariff terms and conditions.

Also see here for our extensive overview of other useful metrics for mobile apps.