Guest Comment: Is conversion the only metric that matters?

With the explosion of ecommerce businesses in recent years there has been much discussion and buzz about successful online business models and how to measure them effectively. The focus on the debate of measurement has shifted from measuring success by ‘driving traffic’ to your website, to the perhaps more sophisticated metric of converting that traffic into consumers; conversion.

However, focusing on this one metric can lead to over-simplified and short-sighted evaluations. It is naive to think that we can measure and run our businesses on a single, oversimplified evaluation, such as ‘conversion at X% = success’ anymore than a brokerage can run theirs on the mantra of ‘buy low, sell high’.

By focusing on one single metric of business success, etailers can easily lose out on the wealth of information available on their customers’ online behaviour and your business’s own internal processes. Instead, we need a more pragmatic, balanced approach.

Don’t just measure traffic

Transactional measures should always include not only online metrics but also broader offline and brand impact measures. A cross section of traffic measures, online browsing behaviour and related metrics across email and other messaging platforms will shed light on how well visitors are behaving and how easily they are moving through the buying experience.

Monitor your returning customers

You should give greater emphasis to tracking your returning customers than simple conversion. Customers who return over and over again are evidence of a solid underlying value proposition, whether the value proposition is product, price or experience-based.

Repeat customer metrics should include not only the overall repeat purchase rates but also more granular breakdowns, including tiering of repeat customers, average valuation and migrations within each tier and new-to-repeat conversion ratios.

Check customer feedback patterns

Customer feedback measures can serve as early warning systems for bigger problems down the line. Methods such as one-to-one interviews, email surveys and simple loyalty questions such as “Would you recommend us to a friend?” can be used in conjunction with monitoring of return patterns and trends in customer calls to identify problems and determine areas which need to be the focus of improvement.

Be aware of your own processes

Internal process measures are the final set of metrics which cannot be found in a web analytics package but are probably equally helpful in improving your business. The goal of this set of measures is to gain insight into which activities your organisation is investing time — and those which you are not.

A high-performing online etailer will spread their time across a range of value-added activities. Average etailers, by contrast, will repeatedly get mired in a few areas (for example, endless iterations of the home page or design of the next email creative) while ignoring more productive activities like customer monitoring, experience optimisation and product presentation.

Track the time your team spend on value-added activities and you should quickly highlight some needed changes.

Once you’ve developed a checklist of measures, a baseline should be established for each set of metrics. From this point, your task becomes tracking and monitoring these metrics at meaningful intervals and investigating changes.

Taking the time to understand your business from each of these angles and implementing these changes may take some time initially. However, taking the steps to implement these measures enables you to understand the complex online customer journey, what issues your customers may have and whether your internal business processes are structured to yield impressive results — or not.

Being in a position to understand and monitor these fundamental processes provides you with a more insightful overview of your business performance and may shield you from making short-sighted, dangerous decisions, ultimately creating a more sustainable business model.

• Steve Davis is president of the European arm of ecommerce and multi-channel solutions specialist GSI Commerce, and Jeff McCall is the senior vice president of strategy services.