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How to Build a Data-Driven E-Commerce Strategy that will Outperform the Competition

This is a guest post from Nikhil Naidu. Nikhil is a Growth Marketing and Loyalty Expert at Swell, a customer engagement and retention platform for online businesses. Swell frequently blogs, runs webinars and produces industry-leading content on e-commerce, customer retention, and loyalty. You can follow them at

Data is becoming increasingly prevalent in the e-commerce world. Stores, platforms, and apps alike scramble to gain valuable insight and gain any edge in the race to success. So many terms and statistics are floated around that it can be difficult to keep track of what is actually important to your store.

Simply looking at your data is not enough. You'll need to intelligently utilize all of the information available to construct a winning plan of action.

[bctt tweet="A data-driven #ecommerce strategy will help you beat the competition. Here's how to implement one." username="skubana_erp"]

The benefit of using this information the right way is that a data-conscious store will nearly always beat the competition. In this post, we'll show you how you can build a data-driven e-commerce strategy that will take your store's performance to the next level.

Data Analytics | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Use Nuances in Your Performance to Build Effective Promotions

When utilized correctly, data will serve as your canary in the coal mine. A store that captures and uses data properly will be able to detect slight changes in performance and make adjustments quickly to avert any longer term issues. Small trends could be an early indicator of something as important as a shift in your market outlook, and the sooner you can make the appropriate adjustments, the better off your store will be in the long run.

Product-specific revenue and customer acquisition cost (CAC) are two e-commerce metrics that can be highly useful to detect larger market trends and build a sustainable high-growth e-commerce strategy.

Get the spreadsheet we use to capture and analyze our e-commerce metrics.

Product-Specific Revenue

Product-specific revenue measures how much revenue each specific product is bringing in for your store. In addition to understanding your store's overall performance, looking at each product will help you determine how to best allocate your marketing resources.

For example, if you notice a certain product begin to outperform expectations, it could be an indication of a change in consumer tastes or shift in the competitive landscape. Your store can reallocate resources to increase your focus on the product and capitalize on the shift. Run a promotion incentivizing customers to purchase your high-performing product or set up a referral discount for customers who get their friends to purchase that item.

Product Specific Revenue | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Customer Acquisition Cost

Customer acquisition cost helps to determine whether an e-commerce store is operating sustainably. CAC measures the cost of acquiring a new customer and is valuable for evaluating the effectiveness of your store's marketing.

An increase in CAC likely means that your spending has become less efficient. This can occur for a variety of reasons. For example, your customers' preferences may have changed or one of your advertisement channels may no longer be generating a good return on your investment. Recognize these nuances and diagnose the problem as quickly as possible to keep your store on the right track.

To drop your CAC, try running a referral program. Referrals bring in new customers without any effort required on your end, allowing you to reward your customers for their help and for the money they saved you.

Increase Average Order Size Without Compromising Your Conversion Rate

Sales and marketing strategies vary immensely from store to store, and one of the major contributing factors to these differences is average order size (AOS). Understandably, a store that earns $200 in revenue per purchase is going to position itself entirely differently than a store that earns $12 per purchase. But this doesn't mean that stores with a smaller AOS shouldn't strive to grow that value.

In fact, one of the most common ways to pursue incremental growth for e-commerce stores is to grow AOS, but the data-driven store should always be mindful of AOS with respect to their conversion rate. Stores that push customers to spend more per purchase often see a drop in conversion rate to accompany that increase in AOS, and so we've taken a look at how stores encourage larger cart sizes without risking their conversion rate.

Increase Average Order Size | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Show Related Products

The simplest way to subtly encourage your customers to purchase more from you is to put the right products in front of them. Amazon does this masterfully by studying each customer's individual purchases, but the same effect can be achieved by studying overall purchasing trends. By determining which products customers tend to purchase together non-coincidentally, you can make suggestions more likely to raise the sale value of a cart.

Often, the reason customers aren't spending more at your store is that they are simply unaware of all the products that your store provides. Using this type of targeted advertising won't interrupt your purchase flow and increases the chance of your customers buying more.

Show Related Products | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Image via Amazon

Set Achievable Targets

Giving customers tangible rewards for reaching a certain order size is another effective and noninvasive way to increase AOS while preserving conversion rate. The specific incentive that you offer can vary almost limitlessly. Stores see success with this method by offering a wide variety of incentives, ranging from free shipping to free products to a future discount.

We recommend setting your target 5-10% higher than your current AOS. The goal is to put customers on the cusp of earning a discount and allow them to make the decision as to whether they'd like to earn the incentive by purchasing another item that they might not have intended to purchase in the first place.

These targets should not interrupt your checkout process, but should rather be advertised on your home page and product pages so that customers know they have the option to be rewarded by slightly increasing the size of their cart.

Setting Achievable Targets | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Image via Sokoglam

Offer Bundled Discounts

Offering product bundles can expose your customers to different products at your store and can have long standing benefits beyond the initial purchase. While incentivized targets tend to impact a customer's individual purchase, product bundles can serve as an educational tool.

Offering a new product in a bundle with one of your popular current products will entice customers to try out new products and ideally become regular users of your new product as well. For example, a cosmetics brand rolling out a new line of eyeshadow may want to bundle the new product with a popular and complimentary lipstick. Customers who purchase the bundle may continue to purchase eyeshadow from your brand consistently in the future.

Create the Ideal Customer Experience

We've spent a lot of time looking at data that directly measures your revenue and performance numbers, but arguably the biggest factor dictating your store's success is your customers' feelings. Understanding how your customers view your brand and products is essential to running any business, but words like "feeling" and "experience" aren't exactly quantifiable...

So how can you use data to optimize them?

We may never be able to precisely measure customer emotions, but there are several commonly used metrics that you can use to approximate your customers' feelings. Statistics such as customer lifetime value (CLV), conversion rates, and channel-specific clicks can follow changes in customer behavior. Maximizing positive changes to these measurements will ultimately yield the best possible customer experience.

Customer Experience | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Optimize conversions by providing customers with the right options at checkout

The most directly impactful area to study your customers is at checkout. Understanding your customers' behaviors and actions surrounding the entire checkout process should be a major priority. Here are a couple key checkout-related statistics to keep an eye on:

Time Spent at Checkout: A Baymard Instutute study showed that more than 1/4 of all cart abandonments occur because of a complicated and drawn out checkout process. The more time your customers spend at checkout, the more time they have to reconsider the purchase they're making. This extra time directly translates to additional cart abandonments, so a quick and effortless checkout process is a necessity.

This time frame can be optimized by limiting the fields necessary for customers to fill out in order to complete a purchase and by providing as many payment options as possible.

Discount Redemption Rate: If you provide discounts to your customers, what percentage of them are actually using them? Sometimes, a lower discount redemption rate can be attributed to a convoluted discounting process. For example, customers often have to navigate a popup or return to their email to search for a discount that they then need to copy and paste. Like the time spent at checkout, this additional time spent searching creates more uncertainty. The ideal discounting process and customer experience keeps this uncertainty to a minimum.

Stores that allow customers easy options to implement their discounts minimize the chances that their customers will drop off before converting.

Checkout Options | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Image via Vanity Planet

Determine which channels are most effective

One of the central rules of modern marketing is to advertise to your customers through their medium of choice. Understanding where to locate and communicate with your customers will allow you to create the most successful interactions.

Start by breaking down your store performance by channel. Look at the performance of your social media posts, retargeting ads, blog posts, and newsletters. If your customers aren't engaging with your newsletters but are highly responsive to Facebook posts, make the appropriate adjustment.

Sending customers communications that they ignore develops a negative association with your brand. By sending more unwanted emails, you make customers less and less interested in your store.

Find Effective Channels | Build a Data-Driven E-commerce Strategy to Outperform the Competition

Learn from your high-performing customers

Another trait consistent across high performing e-commerce stores is a high customer retention rate. One of the best ways to improve customer retention is to study the behaviors of your high performing customers.

Isolate your customers with the highest total lifetime spend and study their spending habits and interactions with your brand. Once you have an understanding of what defines your best customers, you'll be able to incentivize other customers to adopt the same habits. For example, if your best customers tend to purchase a particular product, increase that product's visibility. If your best customers typically follow you on Facebook, run a Facebook ad campaign designed to increase your page's outreach.

Learn From Customers | Build a Data-Driven E-commerce Strategy to Outperform the Competition

There is no one correct formula for building a successful e-commerce store. Each store is vastly different and requires vastly different actions in order to reach its full potential.

Data is your key to determining what those actions are, and the key to finding your formula for success. A store that evaluates all the data available to it and reacts appropriately will always beat out uninformed competition.

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