Rush Order, Inc - Full Service Order Processing and Fulfillment Company

E-Commerce Metrics to Live by

No, this is not another article about how to create new sales

You and/or your company have spent days, months, and probably even years experimenting with methods to increase e-commerce sales. If you have been working at it for years, you are probably doing something right. However, how do you know if you are squeezing the most benefit (and profit) out of each new order?

This article discusses seven easy-to-implement metrics to help ensure you are effectively supporting your e-commerce sales initiatives. You may refer to these items as a "checklist", or a "dashboard", or a "control panel". Regardless of what you call it, our true motivation here is to help you build an easy to use tool that will keep your e-commerce business on track.

If implemented correctly, you will almost immediately know when critical pieces of your business have fallen off track. The result is something similar to the check engine light on your car's dashboard. Hopefully, these reports will yield "normal" data points day after day. Eventually, when something is wrong, you can quickly gauge when and where further investigation is needed.

Although no single metric below is incredibly ground breaking, finding yourself in the habit of reviewing them on regular basis will yield substantial benefits. In addition, looking at a combination of these reports simultaneously may yield interesting insights. For example, if your inbound call volume spikes higher than usual at the same time your advertising source for a particular market segment spikes, you may want to re-evaluate any prior notions regarding the profitability of that particular market segment or advertising campaign.

Not only do these values provide quick insight into your daily operations, the combined gestalt of this data may also hint at a number of high level trends.

In deciding which metrics should be included in such an exercise, we used two basic criteria:

Use metrics tied directly to cash flow, operational efficiency (and resulting appearance of the organization to customers), and cost control.
Use metrics that are relatively easy to calculate and easy to interpret. The last thing we want is a daily report that requires an entire day to prepare. In most instances, it should be possible to compile and interpret all of these reports in a matter of minutes.

Report	Frequency	Purpose	Calculation	Notes	Examples of problems detected
Billed, Booked, & Backlog	Daily	Monitor cash flow and ensure customer satisfaction	Booked - Billed = Backlog	Definitions: Booked = Orders entered Billed = Orders invoiced (revenue recognized) Backlog = Orders booked but not yet billed	Delays in shipments Slow cash flow
As you analyze daily operations, calculate each of the three variables in this calculation (in terms of total value, $). If the equation does not hold true, you have a problem. Also, if the backlog value is higher than usual, you have a problem. When this occurs, analyze reasons why orders being held up. This situation hurts your cash flow. The resulting delays also hurts customer satisfaction.

Inbound Call Volume	Daily	Monitor customer service costs and spot problems early	Total inbound calls during the day, divided by total orders booked (results in a percentage, %)		Some percentage of recently manufactured products is defective New content on the website is confusing customers New packaging is confusing customers
We all wish increased customer contacts are the result of customers calling to tell us how great their experience was. However, in reality, we know an increase in call volume is the result of a problem. So, keep track of call volume to spot any major problems as early as possible and avoid unnecessary customer service costs.

Average Inbound Call Length	Daily	Monitor cash flow and ensure customer satisfaction	Total minutes reps are on the phone, divided by total number of calls for the day (results in a percentage, %)		The product instructions are not clear Reps are struggling to find the product specifications or other information needed to answer customer questions
A quick look at the average call length for each day can quickly tell you if something in your operation is increasing or decreasing the complexity of customers' issues. This metric will also give you an indication as to how efficient your customer service reps are on an ongoing basis.

Advertising / Marketing Source	Daily	Monitor activity for each promotion, advertisement, and PR campaign in progress	Tally total quantity of orders by source, by day	This requires an accurate system for tracking order source. Sources may be online and offline.	A particular promotion is not generating the sales you were expecting A promotion is running past its expiration date An advertisement is not running at all
Knowing the messaging and promotions that drive sales is an obvious goal of any marketer. Keeping a close eye this data is critical. A daily metric for order source quantity may explain any spikes or declines in other metrics in this exercise. Following the trends in this metric may also clue you in to when it is time to re-evaluate a particular marketing campaign.

Shopping Cart Drop Off Rate	Daily	Monitor changes in customer purchasing behavior and website performance	Tally drop offs as a percentage of visits by checkout page, by day	A drop off occurs when a customer abandons the checkout process	Website content is confusing Shipping and handling is too expensive Website is offline
Tracking the pages at which your potential customers leave your site is critical to optimizing the checkout process and converting more sales. A common drop off point is when customers see the shipping and handling charge. Amongst other potential purposes, use this in tandem with the shipping and handling audit to surmise what customers are willing to pay for shipping and handling.

Returns Ratio	Daily	Monitor product performance and ability to meet customer expectations.	Total returns in the last 30 days, divided by orders booked in the last 30 days (results in a percentage, %)		The product was defective The product was not what the customer expected
Although you should be tracking the reasons why customers are returning products, this metric will at least give you a quick snapshot as to which direction your business in trending. You may also want to consider adjusting the 30 day metric if your refund policy dictates a shorter or longer time period.

Fraudulent Transactions	Daily	Monitor the risk of chargebacks.	Total orders flagged as fraudulent, divided by total orders booked		Your website is targeted by a crime ring. This may sound like a long shot, but it is more common than you may imagine. If the problem spirals out of control, the costs can potentially be life threatening for your company.
Fraudsters randomly target websites whose products they believe are valuable. If they successfully submit a single transaction with a stolen credit card, you can be certain that more transactions will follow. This results in (hyperlink to fraud article) costly chargebacks.

Internal List Growth	Monthly	Monitor the growth of your internal mail and email lists	Increase or decrease in email addresses in your database, divided by increase or decrease in sales transactions	Your internal customer list is comprised of the email addresses, physical addresses, and phone numbers of people who have purchased products from you.	Database issue mistaken deletion of records
Internal customer lists are one of several critical assets for any e-commerce merchant. Your best future customer is someone who has already opened up his or her wallet to purchase your products. However, very few treat these lists as such. Internal lists should be monitored as closely as the company checkbook. As your sales increase by a certain percentage, your list of physical addresses and email addresses should grow by a very similar margin. Although you can assume degradation of approximately 10% per month (people move, change email addresses because of a job change, etc.), your list should generally grow at the same rate as your sales. Calculate the average correlation between sales growth and list growth. Check the performance regularly (probably monthly). When you exceed or fall short of the average, find out why.

Shipping and Handling Audit	Monthly	Audit your shipping and handling charges to customers and ensure you are covering your freight costs	Shipping and handling charge - freight cost = net effect on your profit margin		Customers are being charged to much for shipping and handling, thereby reducing your sales You are not charging enough for shipping and handling, thereby reducing your profit margin
Of course this seems obvious but we are always amazed by how few merchants actually do it. One approach is to audit the entire carrier bill (from UPS, FedEx, DHL, etc.) versus total shipping and handling revenue collected from customers. Another approach is to spot check individual orders and make sure you are covering your cost. If you charge flat rate shipping and handling fees across the country, or if you offer free shipping, this becomes a bit more complicated. Regardless, every merchant should feel confident in what they are charging for shipping and handling. This is especially true in light of frequent UPS and FedEx rate increases.

Returning Customers	Monthly	Validate (or invalidate) benefits of internal lists and monitor overall marketing and operational efficiency in creating repeat business	Total quantity of returning customers in a given time period	Tracking the total quantity of returning customers can be accomplished in a number of ways and fully depends on the features in your order management system.	Marketing email blast to existing customers did not go off as planned Negative reviews about your product are killing repeat sales
As mentioned above, internal lists are a critical piece of successful e-commerce sales. Not only are existing customers more likely to buy from you again, they are generally your biggest advocates that spread the word about the great product and customer service you offer. If the rate of repeat purchases decreases, there is likely a piece of your business in need of attention. If the rate of repeat purchases increases, you should probably find out why it did so and how you can replicate such a result again.

If you would like clarification or have any questions regarding these reports, please do not hesitate to contact us. In providing this complimentary service, we hope you will keep Rush Order in mind as a valued partner.

Also, please remember to browse our additional order processing and fulfillment articles.

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