I thought it was worth spending some time on the differences in e-commerce of measuring success related to conversion.
Many investors focus purely on visits and conversion especially around e-commerce. They say conversion rate is fantastic, all we need to do is grow visits. Easy eh?
In the food industry there seems to be quite an elastic demand curve relating to order value and LTV. The higher the price you are asking the lower the conversion rate.
So I wonder if there is a better way to calculate the effectiveness of visitor conversion.
In this worked example (which google analytics reports), you can see the revenue per visitor to your website.
Business 1 has the same number of visitors as business 2, but the second business has 5 times the average order value even though conversion rates are broadly the same.
Business 3 has a lower conversion rate but the AOV is much higher – you need less customers and therefore arguably it is an easier business to scale. In subscription businesses, like Diet Chef it is more complex as the average order value is the total value of the plan the customer signs up to, not just the first week or month of this.
So when analysing the business, don’t just take conversion rate and visitors as the metrics, look at the value of your average visitor to your website and do everything you can to improve this metric.Tweet