Profitable online store. Part I: A Review of Metrics and Ways to Increase Profits
Each owner of an online store sooner or later thinks about activities aimed at increasing profits. As a rule, these events are reduced to random changes in the design of the site and testing of a new advertising channel. They do not have a system.
The fact is that the majority of managers do not have a vision, what and how the profitability of the store influences and with the help of which metrics one can track the current state of affairs. As a result, instead of real work to create a profitable online store, the manager decides to private issues, such as " pour money into the context or work on usability ."
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In a retail online store, profit is the difference between revenue and variable costs.
Profit = Revenue - Expenses
From the formula it is clear that in order to increase profits, it is necessary to increase revenues and reduce costs. Revenue online store depends on the number of orders and the size of the average check. The number of orders and the average bill ... In general, take a look at the scheme:
Red marked metrics, demonstrating, through which you can increase profits online store. Let us dwell on them in more detail.
Visitors come from different advertising channels. The main metric of any advertising channel is ROI - the return on investment ratio. To calculate the advertising channel ROI, we use the formula: (Additional profit / investment in advertising) * 100% .
The formula shows that the effectiveness of an advertising channel can be assessed only by the profits that they bring. Advertising channel ROI must be at least 100%. Otherwise, the channel is unprofitable and should be abandoned, or optimized.
Ways to increase online store profits:
The most favorite metric by most agencies is website conversion rate. Strictly speaking, the conversion rate should be considered in the context of specific advertising channels. However, you can make a small generalization and call the overall ability of an online store to turn visitors into buyers as a conversion rate.
There are many factors that affect conversion (subject of a separate article). In this article we will limit ourselves to listing ways to increase conversion:
A way to increase profits online store:
On repeat sales, some online stores do the cashier. If after the first sale you lose contact with the client, then with a high degree of probability you will have to “buy” this client again.
“Sell the customer again” VS “Buy the customer again”? The choice is obvious.
A way to increase profits online store:
As practice shows, most online stores have the potential to increase the number of goods sold to one buyer. The potential is realized through the sale of related products, the use of sets of goods and so on. Mark.
A way to increase profits online store:
To increase the cost of goods sold in two ways:
The second method is simpler, but works only for those visitors who take advantage of the recommendation. This is a smaller part of all traffic.
The method associated with lower prices for all products is fraught with the risk of lower sales. However, with the right marketing strategy, it is possible to increase prices without a significant reduction in sales. The key role in this issue is played by the positioning of the online store and increasing customer loyalty.
A way to increase profits online store:
The following articles of the cycle "Profitable online store", a detailed description of specific ways to increase profits.
The fact is that the majority of managers do not have a vision, what and how the profitability of the store influences and with the help of which metrics one can track the current state of affairs. As a result, instead of real work to create a profitable online store, the manager decides to private issues, such as " pour money into the context or work on usability ."
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What does online store profit depend on?
In a retail online store, profit is the difference between revenue and variable costs.
Profit = Revenue - Expenses
From the formula it is clear that in order to increase profits, it is necessary to increase revenues and reduce costs. Revenue online store depends on the number of orders and the size of the average check. The number of orders and the average bill ... In general, take a look at the scheme:
Red marked metrics, demonstrating, through which you can increase profits online store. Let us dwell on them in more detail.
Number of visitors
Visitors come from different advertising channels. The main metric of any advertising channel is ROI - the return on investment ratio. To calculate the advertising channel ROI, we use the formula: (Additional profit / investment in advertising) * 100% .
The formula shows that the effectiveness of an advertising channel can be assessed only by the profits that they bring. Advertising channel ROI must be at least 100%. Otherwise, the channel is unprofitable and should be abandoned, or optimized.
Ways to increase online store profits:
- Expanding channels with maximum ROI
- Optimize advertising channels with an average ROI
- Optimize or reject channels with low ROI.
Conversion rate
The most favorite metric by most agencies is website conversion rate. Strictly speaking, the conversion rate should be considered in the context of specific advertising channels. However, you can make a small generalization and call the overall ability of an online store to turn visitors into buyers as a conversion rate.
There are many factors that affect conversion (subject of a separate article). In this article we will limit ourselves to listing ways to increase conversion:
A way to increase profits online store:
- Improved user scripts
- Improving store information architecture
- Improved online store interface
- Online merchandising.
Average number of repeat orders per customer
On repeat sales, some online stores do the cashier. If after the first sale you lose contact with the client, then with a high degree of probability you will have to “buy” this client again.
“Sell the customer again” VS “Buy the customer again”? The choice is obvious.
A way to increase profits online store:
The average number of items in the cart
As practice shows, most online stores have the potential to increase the number of goods sold to one buyer. The potential is realized through the sale of related products, the use of sets of goods and so on. Mark.
A way to increase profits online store:
Cost of goods
To increase the cost of goods sold in two ways:
- Raise prices on all products
- Recommend visitors more expensive products than they originally planned to buy.
The second method is simpler, but works only for those visitors who take advantage of the recommendation. This is a smaller part of all traffic.
The method associated with lower prices for all products is fraught with the risk of lower sales. However, with the right marketing strategy, it is possible to increase prices without a significant reduction in sales. The key role in this issue is played by the positioning of the online store and increasing customer loyalty.
A way to increase profits online store:
- Implementation of the upselling system
- Improving the online store marketing strategy.
The following articles of the cycle "Profitable online store", a detailed description of specific ways to increase profits.
Source: https://habr.com/ru/post/225523/
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