Find your business potential through marketing data / Part 1
The content of the following articles was created with the aim of creating a comprehensive overview of the most important data sources, which we recommend for e-shop management using the most well-known external tools. When working with data, a real-world context is very important in the first instance. For this reason, the author of the article Milan Merglevský describes the use of data in business examples from his practice.
In the realm of e-commerce business, you can have two best friends who will show you the way to success – online marketing and data. Based on results and analyses, you can find the right key to fulfilling your business potential.
So what data is most important for e-shoppers? -> The obligatory answer to an obligatory question: “It depends :-)”.
Author’s tip: if someone answers you with the phrase “it depends” and does not immediately follow up with “it depends on what’s the issue?”, do not talk to them anymore, it is a waste of time and money.
Why should every e-shopper track data about user behavior on the web?
Simply put, an e-shop works like a classic store. So a customer comes to your store, wanders between the shelves for a while, and with a little luck they buy something from you. With a classic store, it is very difficult to determine exactly from what source the customer came to your store (we know that they came through the door off the street, but it is already very difficult to acquire more details). An attentive salesperson can watch the customer move around the store (large players such as Ikea even have detectives in their stores who track the movement of selected customers and optimize the routes and locations where the goods are displayed based on the data collected), however, processing information obtained by observation is essentially mission impossible for most smaller retail stores.
On the contrary, the advantage of an e-shop is perfect knowledge of the source (marketing channel) from which the customer came to you, what products and pages they visited on your website and how many times before they finally ordered something. The advantage of an e-shop is that expensive rent does not have to be paid for renting a space in a busy place with a high potential for the arrival of customers. The disadvantage of an e-shop is the fact that each visit (even the visits from an organic search) costs you something. For a paid search (Google / cpc, Seznam / cpc) the price for one visit is usually between 2 – 15 CZK and from social networks, it is around 20 CZK.
It is necessary to realize that a visit, for which we paid 25 CZK thanks to a marketing campaign on social networks, does not mean that you paid 25 CZK for gaining a customer. Out of 100 people who come to your website, on average 2-3 people will buy something (= conversion ratio 2% – 3%). If you paid an average of approximately 6 CZK for each visit, one order would cost you 300 CZK at a 2% conversion rate.
Is 300 CZK per order (CPA) a lot or a little? In answering this question, it is first necessary to clarify:
- What is the average value of the order?
- What is the average margin on my order?
- What are the other operating costs associated with the order?
- What percentage of orders will be returned? (= return ratio).
If we have an average order value, for example, of 1,200 CZK, with a margin of 35%, we will be left with after deducting the marketing costs of obtaining an order (CPA) from the margin of 120 CZK (1200 X 0.35 – 300). If 120 CZK is enough to cover other operating costs (your salary, PPC campaign manager, packaging and transport costs, warehouse rent, etc.), you have earned a profit on the order. If 120 CZK is not enough to cover operating costs, you will end up with a company operating at a loss at the end of the month (which is unsustainable in the long run).
There’s no point in lying to yourself. The price for getting a visit to your e-shop is quite high nowadays (the range of 3 – 6 CZK is from dozens of domains for which we make analytics a fairly standard level depending on the competition of the selected segment of offered products/services.) and it should be taken into account that this price will continue to increase in the future. Always calculate the profitability of investments into individual marketing sources well. There is no value in getting orders at a loss (unless you do not have a correctly calculated “customer lifetime value” and are not driving your business in this direction, which is a professional discipline in itself). Less is sometimes more.
Calculate it, and calculate it well. Otherwise, you’re in a fight with evil. E-commerce is a tough industry. Mistakes are not easy to forgive.