How to Grow
Welcome to our sixth lesson.
In this lesson, I’m going to show you the equation that’s at the heart of eCommerce, how it works, and how understanding it will help you create and grow your business.
The value of your sales is the number one KPI (Key Performance Indicator) in your business; if you’re not getting the value of sales you need, you’re not going to stay in business.
The value of your sales is determined by the other three metrics.
This is how many people you get to your website.
It doesn’t matter whether you track unique sessions or just sessions, just stick to tracking one. I recommend sessions.
If no one gets to your website, no one can buy from you!
Average Order Value (AOV)
This is how much each order is on average.
Usually the higher your AOV, the lower your conversion rate but the more you can afford to spend on marketing.
The lower your AOV, the higher your conversion rate, but you can’t afford to spend so much on marketing because the profit from each order is also lower.
The AOV sweet spot tends to be around £50.
This represents how likely your traffic is to buy. So it’s the number of orders you’ve taken divided by the number of sessions during the same time period.
The only thing you should be benchmarking your performance against is yourself.
How does this month look against last month, against this month last year—that’s the important comparison to make.
And if it’s not looking how you want it to, do something about it.
How to Use This Equation to Grow
Traffic, AOV, and Conversion Rate are the three levers you can pull to increase your sales.
Look at your performance last month and consider where you want to grow to.
• How much do you need to increase traffic to get there?
• How much do you need to increase conversion rate to get there?
• How much do you need to increase AOV to get there?
It’s unlikely you’ll only pull one of the levers to create the growth, but you will probably focus on one of them as the main route to growth.
To improve traffic:
• Find new marketing methods
• Get more traffic from your existing marketing methods
To improve conversion rate:
• Use Conversion Rate Optimization methods to make the route to purchase more streamlined
• Identify the marketing methods that bring the traffic that converts the best and get more of that traffic to the website
• Improve your product offering
• Improve your delivery and returns offering
To improve AOV:
• Increase your average product price
• Create promotions to encourage customers to spend more
What’s the easiest one for you to do?
Catch up tomorrow, when we’re going to look at your products and promotions.
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