Much like a compass helps navigate a journey, data can help brands and ecommerce merchants navigate a path toward success. Tracking the right subscription metrics and ecommerce trends can gauge the overall health of your business, highlight areas for improvement and help brands and merchants make data-driven decisions for the future.
No matter the industry, there are several metrics critical to all businesses with ecommerce offerings. These are the top metrics brands and merchants should consistently measure. Learning how to measure ecommerce success should be a top priority for merchants looking to increase revenue.
The amount of revenue a company earns
Formula: Revenue ÷ Advertising Cost
Projected revenue that a customer will generate during their lifetime
Formula: (Recurring Average Order - Cost of Goods Sold) ÷ Churn*
Percentage of website visitors who place an order
Formula: Orders ÷ Website Visits
Average total of every order placed over a defined period
Formula: Gross Revenue ÷ Orders
Average number of days to receive a shipment confirmation from fulfillment
Formula: Mean # of days to ship
*There are several ways to measure Customer Lifetime Value. See other formulas here.
The successful subscription business model relies on customer loyalty to produce recurring revenue. Track these metrics to determine if your brand has a strong subscription strategy.
Percentage of initial orders (Cycle 0) that convert to a rebill (Cycle 1) order
Formula: Rebill Orders ÷ Initial Orders
Percentage of orders that cancel the same day as purchase
Formula: Day 0 Cancelation Orders ÷ Orders
Percentage of transactions that turn into orders*
Formula: Orders ÷ Transactions
Percentage of revenue that successfully charges after first declining
Formula: Declined Revenue ÷ Recovered Revenue
Percentage of revenue refunded
Formula: Refunded Revenue ÷ Total Revenue
*An order is a successful transaction. A decline is an unsuccessful transaction.
Once you begin tracking the metrics above, consider keeping a close eye on the following measures as well. The sections highlighted in orange only pertain to subscriptions.
Amount of money spent to acquire a new customer
Formula: Acquisition Cost ÷ Orders
Percentage of visitors that get to checkout page, but exit prior to completing purchase
Formula: Orders ÷ # Visitors From Checkout Page
Percentage of orders marked as fraud**
Formula: Orders Marked as Fraud ÷ Orders
Percentage of order refunded
Formula: Refunds ÷ Total Orders
Percentage of customers who stop their subscription
Formula: Lost Unique Customers ÷ Starting Unique
Percentage of orders that shipped
Formula: Orders ÷ Shipped Orders
Percentage of returned orders
Formula: Returns ÷ Orders
Average revenue generating for each active customer
Formula: MRR ÷ Active Customers
Percentage of transactions that successfully charge
Formula: Natural Orders ÷ Natural Attempts
Recurring revenue normalized into a monthly amount
Formula: Customers x Average Billed Amount
*Often referred to as Customer Acquisition Cost (CAC).
** Includes orders manually marked as fraud and orders caught by risk mitigation providers.
Subscription metrics are useless unless you act on the findings. For example, if churn analysis reveals customers stop engaging with a brand after four purchases, then brands need to strategize how to motivate customers to make a fifth purchase. Moreover, high fraud ratios and low recovered revenue ratio could mean money is being left on the table and it could be time to explore revenue maximization tools within an ecommerce platform.
It is also important to keep in mind that simply gathering this data should not drain valuable time and resources. Brands and merchants serious about these metrics should leverage an ecommerce and subscription management platform that provides high-level overviews of key metrics, and then drills down into trends or individual customers and transaction. Remember, the whole point of tracking metrics is to learn, adjust and grow your business.