Which Web Metrics Should You Track? Online Business Analytics Explained6 minute read
If you own an online business, whether you are selling online courses, coaching services or physical products, you know that it is important to analyze web metrics.
There are so many metrics to track that oftentimes business owners either get overwhelmed or do not focus on the right metrics.
In today's article, you will learn which business analytics you should track to better understand how to grow your business.
What are "Vanity Metrics"?
Vanity metrics are data about your website or business that make you look good but do not really help you understand your performance and don’t necessarily translate to any significant business results.
The most common vanity metrics that entrepreneurs track in their business are their follower count and their website visitors.
Having a high amount of followers and website visitors doesn't necessarily mean anything unless they're driving sales for you. While these vanity metrics can help you with social proof and content validation, it doesn't mean that they are the right customer for you.
So unless you can attribute sales to those followers, then you should not focus too much on these metrics. There are many small businesses out there with less than 10,000 followers, and they're making over a million dollars a year.
Depending on your business, followers and website visitors may be more or less important for you.
However, until you can directly attribute sales to those followers, it isn't helpful to spend too much time constantly checking vanity metrics.
So if website visitors and social media followers do not matter, which metrics should you track as a business owner? Let's see them below.
Which Web Metrics Should You Track?
As a business owner, you should focus on tracking web metrics that directly affect your bottom line. These are analytics such as your conversion rate, CPA (cost per acquisition), LTV (customer lifetime value), number of email subscribers and so on.
While social media followers, likes and website visitors do not have an impact on your sales and revenue, the metrics we will list below are going to directly impact your business.
Let's see which metrics should you track for your online business and what they mean:
The conversion rate is the percentage of website visitors who take a specific desired action (for instance, purchase a product or service from you).
So from the number of website visitors, how many of them are actually converting into sales?
Higher website traffic does not automatically mean a higher conversion rate, which is why the metric of website visitors by itself is considered a vanity metric.
How can you increase your conversion rate? To make sure that you get conversions at all, you will want to ensure the visitors to your site are your target audience. If your website views are coming from people interested in your product, you will get a higher chance of conversion and an increase in sales from those visitors.
So the first thing you should focus on is not increasing your website visitors, but increasing the quality of your website visitors. Once you manage to drive targeted traffic to your site, you'll be able to find your true conversion rate.
Once you know your conversion rate, you can take steps to improve it and make sure that your website is designed in a way that is beneficial for your target audience. Answer the most common questions that your audience may have, create a clear contact page, add social proof and plenty of calls to action to make it easy for them to purchase your products. From there, your goal is to continue optimizing your site to improve your conversion rate and to increase similarly targetted traffic of your ideal audience.
Customer Lifetime Value
The customer lifetime value (LTV) is the average total amount of money that a customer spends on your business during their lifetime.
The LTV can be calculated by multiplying the monetary value of the customer by their average lifespan.
This metric is especially useful to help a business identify how much revenue they can expect to earn from a customer over the time span of their relationship with the company.
To increase your LTV, research how many times a customer purchases from you. If all the customers you have ever had only purchased once from you, you might want to try to increase their lifetime value.
A low LTV means that either you are targeting the wrong customers, or your product is not helping to solve your customers' pain point, or simply you are only offering one product or service.
If you want to increase your customers' lifetime value, start by differentiating your services and adding more product offerings to your business. Make sure that you are guiding new leads through a value ladder and that your products are actively solving the main pain points of your audience.
Customer Acquisition Cost
Customer Acquisition Cost or cost per acquisition (CPA), is the total amount of money you are spending in order to acquire a new paying customer.
To calculate your CPA, divide the total cost of conversions by the total number of sales. In other words, how much money did you have to spend on average to acquire a new customer? That is your customer acquisition cost.
Your CPA is an important metric especially if you are promoting your business with paid advertising. If this is the case, you should have a clear understanding of how much you are spending per new customer. Understanding your CPA can make a difference in the way you decide to market your business, set your pricing and define the lifetime value of your customers.
The cost per acquisition is linked to the customer lifetime value. It is important to have a clear idea of how much your CPA and customer lifetime value (LTV) is in order to make important business decisions. Here is a simple example of this:
Imagine you are selling multiple digital products for different prices. Your lowest-priced product offering is an eBook that you sell for $20, while your highest product offering is an online course of $500.
You are running paid ads to promote the $20 eBook. The paid ads are expensive and not optimized yet so it costs you $50 to acquire a new customer who buys the eBook. So at this point, you are losing $30 per customer (plus all other costs you had to produce the eBook). If the eBook was the only product you were selling, this business model would not make any sense.
But you know the lifetime value of your average customer; you know that oftentimes the people who purchase the $20 eBook, after a few months and after receiving your email marketing campaigns also purchase your $500 course. So this is a much better scenario. Now by spending $50 per customer in paid ads, you get a total revenue of $520.
Obviously, not all customers who buy the eBook will buy your online course as well, but the average lifetime value of your customers tells you that a CPA of $50 is worth it for your particular situation.
This is just an example of how the CPA is linked to the customer lifetime value, and it is important to have a clear idea of both metrics before spending money on paid ads and expensive marketing campaigns.
Don't Overfocus on the Metrics
Many entrepreneurs and online course creators make the mistake of overfocusing on their metrics and obsessing over vanity metrics as their follower counts and website visitors instead of taking action in directions that will truly grow their business.
Even when it comes to more important metrics such as the ones described above (conversion rate, CPA, LTV), it simply does not make sense to stress over them too much. Especially at the beginning, if you just started with your online business and do not have enough data to analyze, it does not help you to look too closely into these metrics, as small amounts of data cannot yet paint an accurate picture.
When you are getting started with your online business, what is really important is not focusing on the metrics, but attracting the attention of your audience, getting sales and receiving feedback.
From there, the optimizations that you make in your business will provide the potential for you to really make some big leaps in the number of customers you're able to acquire.
Customer feedback might be the most important metric of all, however hard it can be to quantify.
A few examples of easy ways for you to track customer feedback and customer satisfaction are short surveys, rating and reviews requests, and tools that allow you to measure customer happiness over time.
At the beginning stages of your business, try to personally reach out to customers or new leads. This can help you understand if your product is really solving all the pain points that might have, and if there's anything that it could be doing better for them.
This constant feedback can help you to continue improving your product, enhancing your sales pages and marketing efforts, and therefore increasing your sales.
So if you're just starting out, and your business is either recently launched or about to launch, then focus on getting the attention of your audience - the right audience - and focus on getting initial sales and feedback, which will lead to more sales later on.
Once you manage to secure a steady stream of traffic, then you want to focus on the other more complex metrics like the customer acquisition cost, the conversion rate, and your customers' lifetime value.Create Your Online Course Today