Hidden insights: Four critical analytics e-commerce businesses often ignore
by December 20, 2024
In today’s competitive e-commerce environment, many businesses are prioritizing tracking metrics like sales volume, traffic, and conversion rates. While those attributes are important to monitor, there are several other critical metrics that are often overlooked, leading to missed opportunities and inaccurate compliance reporting. In this blog post, we’ll outline four key analytics that e-commerce businesses should also be monitoring.
1. Cost per acquisition
Cost per acquisition (CPA) refers to the total cost associated with acquiring a new customer, including marketing expenses, discounts, and promotional offers. While many e-commerce businesses track their advertising and marketing spend, they often fail to take it one step further and calculate the cost of acquiring each customer. This can lead to unfounded marketing strategies.
Why it matters: Understanding CPA enables businesses to evaluate the effectiveness of different marketing channels and campaigns. This knowledge helps allocate budget more efficiently by prioritizing the channels with the lowest acquisition costs relative to their effectiveness. By optimizing CPA, a business can achieve sustainable growth while maximizing its profit margins.
2. Economic nexus thresholds
Economic nexus thresholds refer to the specific sales and revenue amounts that create a tax obligation in a particular state. Understanding these thresholds is essential for e-commerce businesses to ensure compliance with state tax laws and avoid penalties.
Why it matters: State laws and product taxability rules vary, so many e-commerce businesses may not realize they have tax obligations in states where they sell taxable products. Monitoring nexus thresholds helps businesses stay compliant as they grow their customer base to new states.
However, with 46 different state economic nexus laws, manually monitoring thresholds is time consuming. That’s why many companies turn to a tool like TaxJar, which can automate nexus monitoring and alert a business when they are reaching a nexus threshold in a new state.
3. Authorization rate
Authorization rate is the percentage of approved payment authorizations compared to the total payment attempts. A low authorization rate can signify issues in the payment processing system, customer payment issues, or a high rate of fraudulent attempts.
Why it matters: By tracking authorization rates, e-commerce businesses can pinpoint and address potential barriers in the payment process. A low rate not only affects immediate sales but can also erode customer trust. Enhancing authorization rates ensures more successful transactions, leading to an improved customer experience and increased revenue. If you’re looking for a way to improve your authorization rate, Stripe has an authorization tool that can help.
4. Customer lifetime value
Customer lifetime value (CLV) represents the total revenue a business can expect from a customer throughout their entire relationship. Understanding CLV provides a holistic view of customer health and helps in making strategic business decisions, like making product improvements or pricing adjustments.
Why it matters: A high CLV allows businesses to allocate more resources towards customer acquisition and retention strategies. It also highlights the importance of fostering strong relationships with customers, an area account management or customer success managers could provide valuable support.
Strengthen your e-commerce business strategy
These four e-commerce essentials have something in common: they’re likely to be overlooked. This is likely due to being somewhat technical, difficult to set up, or just something new sellers often don’t realize they need.
Every business does better with a solid foundation and infrastructure, and your e-commerce website is no different. Paying close attention to these analytics not only helps in optimizing your business strategy but also enhances customer experiences and ensures regulatory compliance. Prioritizing these metrics can empower e-commerce businesses to drive growth and achieve long-term success.
Ready to automate sales tax? Sign up for a free trial of TaxJar today.
