"Basics of e-commerce" (part 4): Introduction to web analytics

It's time for the next part of the "Basics of e-commerce" series. Until now, I had the opportunity to share my knowledge on such topics as how to take care of the content marketing, 12 ways to improve your SEO and principles of effective email marketing. Now it's time to talk a little bit more about analytics, the repeatable process that can be divided into four points:

1. Determining the goals and measurements on which you want to focus
   The most important thing in the analysis is to have a specific goal. Just knowing the values of the indicators only gives a picture of the current situation and is showing changes that happened during analyzed period. While the thorough analysis should be perfomed in order to optimizatize and grow your business. Taking into account strategy of the company and marketing plans, you should ask yourselves whether you want to increase sales (specific category of products or total sales), increase income, improve conversion rate, increase brand recognition or maybe increase the number of customers.
2. Establishing Key Performance Indicators
   KPIs are specific measurements closely associated with the business objectives of the company, connecting strongly with questions mentioned above. They allow to determine the objectives you want to achieve or improve. Examples of KPIs include for instance achievement of conversion rate (number of purchases per number of customers) or reducing the number of abandoned shopping carts to minimum.
   
3. Selecting the tools
   This point refers to choosing the analytical system that you want to use for gathering data and the analysis. Some platforms have built-in statistics of sales, abandonment of shopping carts and list of frequently visited pages. Despite that, a lot of needed data have to be acquired through external tools. The most commonly used ones are Google Analytics or Piwik Kissmetrics. In addition, if you would like to focus on qualitative analysis, these might come handy: Survey Monkey, Survicate or Opiniac.
   
4. Data gathering and analysis
   This is the point where you actually work with the data. Firstly you should prepare the data in a way to facilitate the proper analysis. The keep the high quality and good organization of the gathered information you should use tools for filtering and segmentation. As it comes to Google Analytics it has a vast filter configuration settings that allow actions like exclusion of the traffic from a specific IP address or domain, which skips the traffic from the specified address like your company for instance. You can also exclude traffic from a specific region (or outside your country), filter out traffic from a particular sales campaign that was only dedicated for a short-term increase of the users numebr. It's also possible to exclude users who use specific hardware or browser. Next to that, segmentation is often used to compare different sets of data, such as results of two marketing campaigns, behavior of the users from different geographical areas, conversions broken down into types of devices or the performance of a specific group of keywords.

To analyze the collected data you should know about the basic measurement indicators that can be found in the analytical tools or used to convert the raw data gathered from the sales platform.

Most commonly used indicators are:

1. Indicators related to traffic and popularity of the page - number of potential buyers, compliance with the target group
   
2. Number of users
   You can specify how many people are using your site and the larger the group is, the greater are the chances that one of them will purchase something. Of course, an important aspect here is the quality of movement - if your offer is addressed to Polish users, and you have a lot of users from India, this movement will not translate into sales. It advised to check why they are on your site and what to do to increase movement of your target group.
3. Number of visits
   Much like in the case of the numebr of users it tells how popular your website is, but the main difference is that one user can perform many visits. It is very common for e-commerce users to visit one site multiple times in search of products, additional information, products comparison before they decide to make a purchase.
4. Most visited pages
   It directly means the most visited subpages in your e-shop. By monitoring this measurement, you will distinguish the most popular pages. It could be a page dedicated to particular product, but it might also be valuable blog post that is attracting users. With this indicator, while creating additional content (guides or articles), you will be able to determine what brought the attention of the potential buyers in the past. In combination with the user retention measure, you will know which content is the most engaging.
5. Leaving the page and the bounce rate
   Opposed to most visited sites, it will show you pages that are frequently abandoned by users. The bounce rate determines the percentage of sessions where user browsed only one subpage and left the store.
6. Channels
   Analysis of channels allows you to check where your traffic comes from. These may include: direct entries (by typing the website address), organic search (visits from search engines), by refferals from other sites, social media, campaigns or email. The share of individual channels is determined as a percentage, and the structure may vary depending on your offer, target group or marketing activities. If you put emphasis on optimization, relevant content and search engine positioning, you can expect that the share of inputs from search results will be the biggest.
7. Sales indicators
   
8. Sales volume / number of orders
   The relevance of this measurement probably does not need additional explenation. It should however be noted that it is quite important to monitor changes occurring in sales volume and number of orders (monthly, annually or seasonally - comparing the pre-Christmas and holiday periods). This will allow you to distinguish when users are particularly active and notice certain patterns that will help in better strategic planning.
9. Client Lifetime Value (CLV)
   It's very interesting factor that allows to roughly determine how much your client "worth", that is to say what sales value is expected from single user. This indicates the total amount of sales revenue that the client will generate for the company. In practice, however, it would be difficult to pinpoint, and any estimation would be burdened with high statistical error. Therefore, you should consider assuming some values for shorter periods, such as one year. For example a customer who makes a purchase every 4 months and is buying a 10 pound bag of dog food for the amount of 120 PLN. The annualized "value" is 360 PLN (CLV = 360 PLN). This measurement can be used in the sales campaign planning to determine the maximum cost you can spend to acquire a new customers or a value of gratification for your regular customers that would be profitable for your business.
10. Conversions
    A conversion in e-commerce is a ratio between the number of purchases to the number of users. It shows the efficiency in converting a user into a buyer.
11. Abandoned Shopping Carts
    Abandoned shopping carts ratio tells you what percentage of users, who ever added products to the shopping cart, never finalized the purchase. It is often identified with lost clients and unrealized income. If this ratio is high, it is necessary to quickly identify for the cause. It is vital to understand why users who have added a product to their basket did not make the purchase, you can use surveys to ask users why they have abandoned the process. By identifying an e-mail of such user you can send him an e-mail with an additional incetive to buy (eg. a promotional coupon), this may be your last resort to make a conversion out of it.

All this information is only the beginning of full data analysis for your online store. Nevertheless, this article should make a good base to acquire adequate knowledge and open the path to business optimazation and sales improvement.

This article is the last in the series of "Basics of e-commerce", but it is certainly not our last word in the subject of e-commerce. We hope that this whole tutorial helped you learn the basics of running an e-commerce business. Stay tuned and check out our other blog entries!