4 Questions to Ask About Your E-Commerce Business

Modern shoppers are embracing the convenience of online purchases, the abundance of product information, and the range of unique goods available through e-commerce sites. In response, technology companies are introducing tools that remove barriers to entry and reduce the costs of running an e-commerce business. As a result, competition in the online retail space has never been more fierce.

The ticket to success resides in business data. When you can get your arms around your data—who your customers are, where they came from, how much they buy, and what they return—you can start to tell the story of your business. That is when you can discover interesting new approaches to doing business online, driving sales and increasing efficiencies in ways that weren't clear before.

How can you take a fresh approach to your business data? Start by asking and answering these questions.

Where do your customers come from?

When you're paying to acquire customers, it is important to know where they are coming from and how much it costs to bring them to your store. To which program can you attribute their acquisition? How many acquisitions have there been, and at what cost?

Once you know the source, you can look at the number of new customers it is delivering to your business. You can also group your most valuable customers—those who spend a lot, make frequent purchases, buy products with high margins, and rarely return items—to see where the highest-value customers are coming from and what you've spent on the source (or sources). Taken together, this information equips you to make the best-possible marketing decisions.

What are your most valuable referral sources?

It's no secret that your easiest business comes from currently satisfied customers. Every e-commerce business can boost marketing efforts with viral tactics, such as offering customers rewards or discounts for referrals. Are these referral tactics working? Or are you losing money through serial coupon research tactics? Who are your referrers? What are the characteristics of referred customers versus organically sourced customers?

Who are your most valuable customers?

You can use your transactional data to compute what a customer is worth to you, enabling you to focus your best efforts on those with the highest lifetime value. To calculate lifetime value, calculate the lifetime revenue less the cost of getting and maintaining the business. Somebody who buys a lot from you already may be a great person to target with specialized offers—for example, ones that build brand loyalty with minimal impact on margins—saving your discounts for customers you're trying to win over.

Things get even more interesting if you have referrals in the mix. You can calculate the lifetime number of referrals for a customer, calculate the value of all those referrals, and then determine the average value of a referral for the customer. Afterward, you can build different classes of referrers and create offers that incentivize each one appropriately.

What can you learn from returns?

Returns can provide valuable data too. Can you identify habitual returners? Do they tend to come from certain sources? Do returners have other characteristics or behaviors in common? Armed with answers to these questions, you might adjust your marketing spend away from certain sources or create promotions that better fit customer preferences.

Rev Up Your Data Analytics

Insights into customer behavior are key to capturing sales and powering innovation. Our company conducted a quick poll of top retailers attending Chicago's Big Data & Analytics for Retail Summit, and found that 66 percent of them believe the number one way to ensure a successful holiday season is to understand business data—improving engagement and boosting transactions, while keeping acquisition costs in check. Now is the perfect time to ensure you have the tools in place for discovering such business-critical insights.

Frank Bien is the CEO at Looker, a software company with a modern approach to data discovery and business intelligence. He has more than 20 years of experience in business intelligence, big data, analytics software, and data storage, with extensive experience in venture-backed software companies.

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