📊 Unlocking Success: Smart Benchmarking for Small Ecommerce Businesses
This conversation can make marketers a little uneasy. Let’s unpack it… 🧳
Defining benchmarks at smaller or recently launched companies can be an imprecise science at times.
And while KPI’s serve to measure the performance of critical components of your business, benchmarks serve as the target to achieve in each of those areas…ultimately, to drive revenue and profitability.
Large and mid-size companies often have the upper hand with this because of the longevity and depth of operating data available to them, and the resources to access proprietary and industry data.
Yet, not all is lost for smaller companies. It just takes a little more of a thoughtful approach:
1. Look Beyond Conversion Rates 👀The temptation is to default primarily to the ecommerce conversion rate (orders/visits to website). This can tell you if you are driving enough traffic – and the cost of that traffic – to achieve the revenue and profitability goals you have set.
That may not be best as a singular benchmark, especially for early-stage companies. If the number falls short of expectations, it’s an indication that work needs to be done further up the funnel to optimize efficiency, or perhaps increase marketing spend.
2. Look at related metrics 🔗Average commerce conversion rates are touted at around 2.5% to 3%. A comprehensive survey of Shopify stores places the conversion rate at 1.4%.
Alas, this conversion rate alone doesn't tell the whole story. Also track metrics like average order value, customer acquisition cost, and customer lifetime value to get a more complete picture of performance.
3. Analyze Traffic Sources 🚦Different channels yield different results. Break down your conversion rates by source (organic search, paid ads, email) to get a nuanced view of performance.
4. Factor in your business model 💼Your pricing, product complexity, and sales cycle length can all impact conversion rates. A company selling high-ticket items may have lower conversion rates but higher average order values.
5. Segment your data 🧩Look at conversion rates for different product categories, customer types, or geographic regions within your business. This can reveal more actionable insights than overall site averages.
6. Set realistic, incremental goals 🎯Instead of aiming to immediately match top industry performers, set achievable short-term goals to gradually improve your conversion rate over time.
Remember, benchmarks are guides, not rigid standards. Use them to inform your goals and identify areas for improvement. By focusing on your unique business characteristics and continuously optimizing based on data, you'll be well on your way to ecommerce success!
What's your approach to benchmarking? Have you used Shopify's benchmarking tools (not available on the basic plan)? Share your experiences in the comments below! 👇
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