The Undisputed Secret to a Successful Ecommerce Business
If you want to grow your ecommerce business, there are three primary levers you need to be focused on.
Lever 1: Traffic
The number of people that visit your ecommerce store.
Lever 2: Conversion Rate
The percentage of that traffic that makes a purchase.
Lever 3: AOV
The average value of a checkout through your ecommerce store.
Is this the way that you organize your thinking and strategize your everyday business operations?
The Simple Equation
These levers may seem simple or straightforward, but they are not so simple or straightforward to influence.
If you do manage to increase any of these though, you are sure to predictably grow your revenue.
Now obviously this is not rocket science. It’s just simple algebra.
Revenue = Traffic X Conversion Rate X AOV
So if you have a revenue goal of 1M next month and your current conversion rate is 3% with an AOV of $100, that means you need to drive over 330K in qualified traffic in order to meet your goal.
How To Manipulate Each Lever
In order to grow, you should have a plan on how to increase each lever in order to have the best chance of success.
Here are few ways we recommend exploring to increase each one.
Increasing Quality Traffic
To increase quality traffic, make sure to focus on segmentation, targeted marketing, quality content, retargeting, etc. While the aim is to increase the quantity of traffic, remember that quality is more important than quantity. You don’t want to lose one in search of the other.
And once you’re got quality, here are some tips to increase quantity.
Increasing Conversion Rate
Unless your conversion rate is 100% (which we’ve never seen), there is room to grow. Most likely your conversion rate is just in the 2-3% range.
Just a small increase in conversion rate can have massive implications for your revenue as you drive traffic to your store, so focus on optimizing your onsite experience and reducing friction in your purchase process through a conversion rate optimization tool.
You might think increasing your average order value is as simple as increasing your prices, but it’s not. In fact increasing your prices could even have the opposite effect on your average order value depending on your brand and the price sensitivity of your customers.
Instead, we challenge you to think outside the box. Look at different types of promotions, offers, and consider including intelligent upsells in your cart. Or, offer a free shipping tier that is just a bit above your current AOV. This is as close to a surefire way to increase your AOV as there is.
Almost all business owners are aware of their AOV. And the vast majority also pay close attention to the conversion rate of their ecommerce store. However traffic is a different story. While an overall traffic number is easy to come by, it is actually quite difficult, requiring significant insight and expertise in order to truly understand traffic. And this is key because understanding whether or not your traffic is qualified (and through what channels) informs where to invest more money in advertising and where to take a step back.
Interested in more keys to success? Check out the Metacake formula for success.
Or if you’re just starting out, here’s a blue print for how to start from scratch.