They call the practice conversion rate optimization, but that’s not really the whole picture. Conversion rate isn’t the only thing you want to optimize.
ARPU, or average revenue per user, is generally the most important metric for online stores. ARPU is calculated using a blend of two metrics: average order value (or AOV for short) and conversion rate. Put another way:
Both conversion rate and AOV matter:
And most importantly, you can have a flat conversion rate, increased AOV, and still end up with significantly higher profit. So why do people call it “conversion rate optimization” if the actual goal is to work more holistically and increase the business’s profit? (The real answer is to call it simply “optimization” – or “value-based design” if you want to score points with us.)
The takeaway from this is that you should always think of more blended, subtle metrics that map to your own business’s needs. For example, if you run a subscription business, blending customer lifetime value (LTV) & conversion rate (CVR) is another good way to measure success – and calculating lifetime value is a factor of monthly recurring revenue and churn rate.
ARPU makes the most amount of sense for online stores because you usually have a consistent stream of visitors, some of whom place orders with you. And when they do place an order, they spend a certain amount of money in the process.
Google Analytics offers a similar metric called Per Session Value which is somewhat comparable to ARPU. If you’re just getting started, this may be a good place to begin.
If you want to go a little deeper on ecommerce metrics, focus on reorder rate, upsell rate, and subscription percentage as a share of overall orders. All of these metrics matter, especially when you’re trying to win back customers.
Nick Disabato is the founder of Draft, “making the numbers go up in a way that is hopefully not gross since 2012.” You can take a look at Draft’s recent work at https://draft.nu.