Digital EQ's E-Commerce Glossary
A/B TESTING - A/B testing also called split testing is the process of showing two versions of a web page, email, or other marketing assets to different segments of visitors at the same time to compare which variant drives the most conversions. This is particularly useful in determining which type of content or messaging resonates best with a customer or potential customer. For example, an abandoned cart email with strong messaging about the scarcity of the product left behind, or a subtle reminder that their product is waiting in their cart.
AVERAGE ORDER VALUE - Average Order Value (AOV) tracks the average dollar amount spent each time a customer places an order on a website. This is a really good indication of how long customers tend to spend on your website in a visit and if they're purchasing multiple items or just one. To calculate your average order value, simply divide total revenue by the number of orders. For ideas on how to increase we wrote an in-depth guide.
BOUNCE RATE - Bounce rate is single-page sessions divided by all sessions, or the percentage of visitors to a website who leave the site after viewing only one page. These single-page sessions have a session duration of 0 seconds since there are no subsequent hits after the first one. Generally, for E-Commerce stores the lower your bounce rate the better as the success of your website requires a visitor to visit more than one page (e.g. to view several products, size guide, add to cart, checkout etc) and you should be looking to lower your bounce rate. However, there are some landing pages such as journals or blogs for which single-page sessions are anticipated (there are no links to read more, continue to shop) in this instance, a high bounce rate is normal.
CALL TO ACTION - Call to Action (CTA) is the heading or phrase on your page encouraging a visitor to take action and click your buy button. Most commonly within an online store, these are presented in the form of a button. For example, this could be a button on your homepage or the add to cart button on your product page. Having your call to action stand out and be easy to read and use is an effective way to increase the likelihood of a click.
CLICK THROUGH RATE - Click Through Rate (CTR) is the ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. Having a high click-through rate means people are clicking your ad/link which is a good thing!
CLICK TO OPEN RATE - Click to Open Rate (CTOR) essentially measures the effectiveness of email content. This metric is calculated by the number of unique clicks divided by the number of unique opens. As it is based on the number of unique clicks, it provides a good indicator of how interesting your content is - if your links, layout, copy and overall content are interesting, readers will click through to learn more.
CONVERSION - Is a point when a visitor converts to a customer after making a purchase or a lead after completing an action. To complete the action the visitor likely has to go through a call to action such as adding an item to cart or submitting their details to sign up for a newsletter. Within advertising, a conversion happens when a visitor clicks the advertisement and performs the desired action such as going through to a landing page, viewing a product, or purchasing an item.
CONVERSION RATE - Your conversion rate is the percentage of visitors to your website that complete a purchase out of the total number of visitors. This is one of the most crucial statistics of an online store where most will want this as high as possible. While a higher conversion rate indicates an exceptional checkout flow and navigation of the website it can also point out flaws if it's low. For instance shipping costs, hard to read terms and conditions or unsuitable payment options. Within the fashion and lifestyle industries, a conversion rate of 2% is what you should be aiming for - this means that out of every 100 people that visit your website at least 2 will purchase something.
CONVERSION RATE OPTIMISATION - In internet marketing, conversion optimisation, or conversion rate optimisation (CRO) is a system for increasing the percentage of visitors to a website that convert into customers, or more generally, take any desired action on a webpage.
COOKIES - Small text files a website sends to a visitor’s browser to store data related to that visitor’s interactions with the website. These text files are sent back to the server each time the visitor accesses the website. Cookies are mainly used for ad and content targeting, and for saving shopping cart information. It is crucial that you notify customers about whether you are collecting Cookies, and how you are using them. The form of notification required varies from region to region, but it is best practice to have this notification in either a pop-out bar or fixed in the footer.
COST PER ACQUISITION - Cost Per Acquisition (CPA) is a marketing metric that measures the cost to acquire one paying customer. We like to think of this broadly to encompass the overall cost for one purchase through your online store - this may include Facebook advertising, Google advertising, an abandoned cart discount code or even the cost of your internal or external digital experts.
COST PER CLICK - Cost Per Click (CPC) refers to the actual price you pay for each click in your pay-per-click marketing campaigns. It is important to remember that a ‘good’ CPC varies across the different channels and the stages of your sales channel. For example, $0.40 per click on an advertisement to a ‘cold’ audience on Facebook is quite reasonable, while we would expect this to be at least under $0.20 per click for your engaged audience.
COST PER THOUSAND - Cost Per Thousand (CPM) also called cost per mille, refers to the cost of displaying an advertisement one thousand times (known as "impressions"). The CPM pricing structure is used for some display ads and is an important metric for E-Commerce businesses placing ads. For example, if an Online Magazine runs advertisements on its site and charges $2.00 CPM, that means an advertiser must pay $2.00 for every 1,000 impressions of its ad. It is also useful to monitor the CPM of your adverts on other platforms that don't necessarily charge on a CPM basis - e.g. Facebook - the lower your CPM the better!
CUSTOMER LIFETIME VALUE - The Customer Lifetime Value (CLV) represents the total amount of money a customer is expected to spend in your business, or on your products, during their lifetime. To calculate customer lifetime value you need to calculate average purchase value, and then multiply that number by the average purchase frequency rate to determine customer value. Then, once you calculate average customer lifespan, you can multiply that by customer value to determine customer lifetime value.
CUSTOMER SEGMENTATION - Customer segmentation refers to putting your customers (both existing and prospective) into groups or segments with common needs and who respond similarly to a action. This enables companies to target different categories of customers who have different needs and values to others. With the different digital and physical touchpoints available to communicate with customers, customer segmentation helps to ensure the right message is being portrayed to the right customer at the right time. For example, if you have a segment of customers that have been engaging with your social media content about a particular product becoming available soon, it is beneficial to be able to specifically target that group of customers with emails or advertisements when that product becomes available.
IMPRESSIONS v REACH - These are defined differently by each platform, for example, what Facebook calls impressions Twitter describes as reach. But at a high-level impressions are the number of times your content is displayed on a screen, regardless of whether a single user has actually 'seen' your content. Whereas, reach refers to the total number of people who have seen your content. So for example, if your piece of content had been seen by 100 people, that is the reach, if that particular piece of content has appeared on those 100 peoples screens 3 times, 300 is the number of impressions.
LANDING PAGE - A landing page is a page your customers will land on, either from paid traffic or search traffic, designed to maximise the chances of conversion on a desired action. In some cases, a landing page will be used to capture email addresses, or will simply pitch a product directly to the website visitor.
OPEN RATE - Open Rate is the total number of opens divided by the number of delivered emails. If you mailed to a list of 750 people and 180 of them opened, your open rate would be 24%: a nice average. Of course, lots of things influence your open rate, but a healthy open rate is typically in the 20-40% range. If you have a high open-rate, this generally means you have great subject lines, and are sending your emails to the right people and at the right time.
PAYMENT GATEWAY/METHOD - This is in reference to the payment processor used to handle transactions on your E-Commerce store, your payment gateway can be either on-site or off-site, depending on what works best for your model. Some examples include PayPal, Shop by Shopify, Laybuy and Afterpay.
PAY PER CLICK - Pay-per-click (PPC) is a model of internet marketing in which advertisers pay a fee each time one of their ads is clicked. Essentially, it’s a way of buying visits to your site, rather than attempting to “earn” those visits organically.
RETURNING CUSTOMER RATE - Returning Customer Rate (RCR) is the ratio of people who completed an initial purchase to those who come back and make a second (or third or fourth) purchase. Within our industry for discretionary retail stores that stock a variety in types of products - pants, shirts, knitwear, coats, for example, good RCR is around 50%. For more higher value, one-off purchases, we’d like to see this sitting at least at 20%.
RETURN ON INVESTMENT - Return on Investment (ROI) is the ratio between net profit and cost of investment. A high ROI means the investment's gains compare favourably to its cost.
SEARCH ENGINE OPTIMISATION - Search Engine Optimisation (SEO) is the process of optimising your online content so that a search engine likes to show it as a top result for searches of a certain keyword. When it comes to SEO, there’s you, the search engine, and the searcher. If you have an article about the best skincare for dry skin, you want the search engine (which, in 90% of all cases, is Google) to show it as a top result to anyone who searches for the phrase “skincare for dry skin.” SEO is the magic you have to work on your article in order to make Google very likely to include your post as one of the top results whenever someone searches for that keyword. The same applies to every element of your website.
TRAFFIC - Traffic is designed to drive people to your website or app, within internet marketing this is relayed in how much traffic can you generate for your website. The most common traffic sources are search, direct, social, and email. The traffic source cannot always be determined, so an unknown traffic source is also common.
VISITORS - A website visitor is someone who views/goes to your website. A visit is one individual visitor who arrives at your web site and proceeds to browse. A visit counts all visitors, no matter how many times the same visitor may have been to your site.