Understanding E-commerce Metrics Through a New Lens: Volume vs. Efficiency and Fast vs. Slow
“How are we doing?”
“How does our Brand’s performance compare with last year?”
These are the questions always on top of the mind of ecommerce founders, leaders, and executives.
They are broad questions requiring a thorough analytical approach to come up with an acceptable answer.
While there are a range of metrics that help measure and understand various brand performance metrics, there is one particular category of metrics that gets to the core of the brand performance right away.
We call them Slow-Moving Efficiency Metrics.
Slow-moving efficiency metrics, taken together, provide core vitals of any brand covering customer loyalty, return on marketing, and operational leverage.
Before we further explore what these metrics are, let us first learn about two unique lenses to analyze ecommerce metrics:
- Volume vs. Efficiency
- Slow vs. Fast
Volume vs. Efficiency
Volume Metrics measure aggregate numbers, giving a quantitative measure of certain aspects of the brand's performance. For example:
- Sales Volume : Total number of products sold.
- Sessions: Total number of sessions or visits to your website.
- Total Revenue: The total dollar value of all sales completed.
Efficiency Metrics, on the other hand, are ratio-based and offer insights into the cost optimality, returns on investment, and productivity of the business operations. Examples include:
- Conversion Rate : The percentage of visitors who complete a desired action, showing the efficiency of conversion relative to the number of visitors.
- Cost Per Acquisition: The average cost spent on acquiring one customer, illustrating the efficiency of the marketing spend.
- Return on Advertising Spend: The revenue generated for every dollar spent on advertising, a direct measure of marketing efficiency.
Fast vs. Slow
Fast Metrics are volatile metrics that fluctuate widely from day to day. They provide a dopamine rush on a good day and alert to anything that might have broken on a bad day. Some fast-moving metrics include
- Daily Sales: Sales recorded on a daily basis.
- Daily Ad spend : Ad spend across all marketing channels for a given day
- Daily conversion rate: Website purchases per user session on a daily basis.
Fast moving metrics are useful for tactical decisioning and to get an early read on any major changes - for example launch of a new product or a PR campaign. However, they are not so useful for strategic planning or measuring broader initiatives.
Slow Metrics, on the other hand, evolve over a longer period and are less susceptible to daily fluctuations. These metrics reflect deeper, systemic changes in a brand's operational and strategic posture. Examples include:
- 30 day sales average: This is a running average of sales designed to smooth out fluctuation and provide a broader trend.
- Repurchase Rates: The rate at which customers are returning to the brand and repurchasing.
Slow-Moving Efficiency Metrics
Using these two lenses, slow-moving efficiency metrics then become reliable measures of brand’s strength and operational efficiency. Here are some examples of metrics that fall in this category:
- Average 12-month customer lifetime value: This is the average amount of actual sales realized from customers within 12 months of their first purchase.
- 90-day repurchase rate: The rate of repeat purchases from customers within 90 days of their first purchase.
- Quarterly average discount rate: Discount rate averaged across all orders in a given quarter.
While these metrics are extraordinarily useful, they require analyzing large amounts of data across all of your platforms. However, unified analytics tools make tracking metrics like these much easier! These tools help break down the data silos and assemble all the individual pieces of the puzzle together, so you will get an accurate read on your brand.
At an organizational level, most successful brands have monthly and quarterly rituals to track and analyze these metrics. While exact metrics may vary, having the lens of Fast vs. Slow and Volume vs. Efficiency provides a great framework to grow a modern brand.
