1.Gross Merchandise Value (GMV) is a metric that measures your total value of sales over a certain period of time. It’s a metric that is most commonly used in the eCommerce industry and is also sometimes referred to as Gross Merchandise Volume.
Gross Merchandise Value = Sales Price of Goods x Number of Goods Sold
2. Net Merchandise Value (NMV) is what you get after you deduct all the fees and expenses from your Gross Merchandise Value over a period of time. It’s a more realistic look into how your business is actually performing as it takes into account costs, refunds, etc.
NMV = GMV – All Costs (marketing, refunds, gateway payments)
3. Customer Acquisition Cost (CAC) is calculated simply by dividing all costs spent on acquiring customers (including software costs, marketing team salaries, etc.) by the total number of customers acquired in the time period the money was spent.
So let’s say you spent $5,000 on marketing in one month and acquired 500 new customers. Your CAC would be $10.
CAC = Total Marketing Spend / Number of acquired customers
This is an important metric as it essentially tracks the effectiveness of your advertising, and how much you are paying to get new customers. If this figure is too high, you’ll be eating into margins and wasting your budget.
4. Customer Lifetime Value (CLV) works out the amount of money customers will spend with you over the entire life of your relationship. To calculate CLV you’ll need to define LTV first, that is Lifetime Value:
LTV = AOV x Number of transactions x Retention time period
CLV = LTV x Profit margin
CLV essentially tells you how well you are retaining customers and how much they like your product or service. The higher this number, the greater your profits will be. If it’s low, you know you need to work on your customer retention strategy, or that something in your product or service isn’t meeting customer expectations.
5. Average Order Value (AOV) tracks the average amount a customer will spend each time they place an order. It’s simply calculated by dividing the total revenue by the number of orders.
AOV = Revenue / Total Number of orders
It’s clear you want this number to grow as it means your customers are spending more money with you, again this links back to CAC and increasing your CLV. If the amount is low you may need to look into ways of increasing your AOV.
6. Conversion rate (CVR). For eCommerce websites, this will be one of, if not the most important KPI to track. Conversion rate is an important metric that shows how your overall website is converting visitors into customers.
CVR = Number of transactions / Number of sessions
7. Profit Margin per Product (PMpP) will help you determine which products to push, how much you can discount, and where to keep a closer eye on things because margins are tight.
Product margin per product is easy to calculate. For example, if you sell a product for $25, and it costs $20 to make, the gross profit margin is 20% ($5 divided by $25).
PMpP = (Product price – Product cost) / Retail price
8. Net Promoter Score (NPS) is a customer loyalty and satisfaction metric. The score is taken from asking customers how likely they are to recommend your product or service to others on a scale of 0-10.
Satisfied customers mean returning customers so again this metric can help improve lifetime value and average order values as customers will be willing to spend more with you as they know the product or service will deliver.
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