Operating a successful eCommerce business can be difficult, and knowing what specific terminology means and which metrics to pay attention to is crucial. We dive into 10 of our favorite metrics and terms, and how paying attention to these can help merchants make better decisions.
Active subscribers are customers who are currently enrolled in your subscription program. In terms of growth, active subscribers, AKA subscription counts, is a crucial data point because it provides an overarching view of the subscription program for merchants. If you do something that your customers do not like, it will show up at this point first, making it important to pay attention to any increases or decreases and overall trends.
Annual recurring revenue is a metric based on yearly subscriptions that shows the revenue that comes in each year for the life of a contract or subscription. Recurring revenue from subscription models can be a great way to generate predictable, long-term income for your business. Similarly, you can also look at monthly recurring revenue (MRR) if monthly subscriptions are more of your business’s focus.
Arguably one of the most important metrics for merchants, average order value is a measure of the average total a customer spends per order on your website, calculated by revenue divided by the number of orders. AOV can be improved through strategies like order add-ons or rewards programs to incentivize customers to increase the number of products in their cart. Place strategic up-sells based on product launches or customer personas to craft a curated journey and improve AOV.
Brand affinity refers to what individual customers think about your brand, especially describing consumers who believe a certain brand has similar values to them. Strengthen brand affinity by building an emotional connection between your brand and customers. Brand affinity is a powerful way to create long-term customer relationships and increase the likelihood of customers becoming brand advocates, meaning they will promote your brand through word of mouth. Brand advocates create opportunities for organic growth through their credible, trusted insights. While brand affinity is tough to measure directly, the number of repeat purchases, loyalty programs, and referral counts are all helpful gauges to determine a customer's level of brand affinity.
Churn is the rate at which customers have unsubscribed over a period of time. For eCommerce companies that operate on a subscription basis, churn is especially important because it affects CLTV. Churn is fairly meaningless if you consider it as an absolute number for your brand; instead, it is best to look at churn in a matrix over time. What most brands should be interested in is “how long did it take for a subscription or subscriber to churn” or “how long was the subscription retained”, and not "what is our annual churn rate."
Often a neglected metric, cohort analysis is one of the best ways to measure retention by segmenting customers into groups based on shared qualities, versus using a broad view. Often the most useful in reducing churn, cohort analysis can help you focus on your most important customers, boosting engagement, retention, and lifetime value.
The customer journey is the phases of interactions that a customer has with your brand or product, spanning from awareness to advocacy. Mapping your customer’s journey is key to perfecting your marketing strategy. Each map of a customer’s journey is unique and depends on varying customer needs, affecting how you leverage your marketing touchpoints for each customer segment.
Gross merchandise value is the total value of products sold over a certain period of time, making it a great growth indicator. It measures the value and volume of products sold, meaning that if GMV is high, business should be doing well. To get a well-rounded view of a company’s health, GMV should be looked at along with numerous other KPIs, such as ARR and AOV.
Lifetime value (LTV), also known as customer lifetime value (CLTV), is the revenue a company expects from a given customer during the course of the business relationship. LTV is another essential metric for brands in making decisions focused on the most valuable customers, shifting the focus from short-term revenues to profitable long-term relationships. A low LTV means that the customer retention strategy needs to be revamped.
Touchpoints are at the core of your customer journey. Defined as any customer interaction with your brand before, during, or after a purchase, touchpoints alter how customers feel about your products and overall brand. Examples of touchpoints throughout the customer journey include email marketing, social media platforms, product pages, checkout pages, order confirmations, and more. Smartrr’s subscription portal creates a seamless experience across all interactive touchpoints, allowing customers to easily skip, cancel, pause, and even gift subscription orders.
Keeping a pulse on sales by specific products and churn over time helps merchants see what their overall growth is in subscriptions on a weekly and monthly basis. By leveraging that data, brands can see if they are growing, how fast they are growing, if they need to promote their subscriptions more, or if they need to make any changes to their strategy.
For example, we have seen brands offer a large discount for a customer’s first order and then decrease the discount for recurring orders. But after analyzing how long it took for subscribers to churn, the brand found that customers were canceling their subscriptions after their first order. By keeping a pulse on these metrics, the brand was able to discover that offering a large discount for first orders helps acquire customers, but does not develop long-term customer relationships.
Based on the previous example, if a brand is looking to increase CLTV, they should consider getting rid of large, upfront discounts and instead, reward based on loyalty. Brands should also utilize different frequency options by looking at the most popular frequency choice currently and make that their default, which will allow for longer-term customers.
When you start breaking things down by cohort, you have a clearer mechanism with which to iteratively test offerings (discounts, new products, shop UI, etc.). If you offer a new discount to May subscriptions, and 70 percent of the May cohort is still active three months out, while only 30 percent of the April cohort is active three months out, you have a clear data point for the offering.
These terms and data points allow merchants to analyze their offerings, discounts, and overall design in order to improve customer satisfaction and increase CLTV. Smartrr’s advanced analytics offers deep insights into your subscription business, specifically with a dashboard that helps you understand how customers are engaging with your subscription offerings.