At RJMetrics, we are nerd-evangelists for data. We want everyone to learn how to use it and love it. So we crunched the data from hundreds of our clients to see what we could learn about the state of e-commerce in 2014. Here’s what we discovered about average order size, customer lifetime value and other e-commerce benchmarks you always wanted to know but never knew who to ask.
1. Top customers spend 5x more per order
On average, 90% of e-commerce customers spend $54 per order. The top 10% are spending $163 per order, 3x more per order than 90% of customers. When we zoomed in even further we found that the top 1% of customers have an Average Order Value (AOV) of $267, 5x more than the AOV of most of your customer base.
Use reviews to increase your AOV
Ebay and Amazon were pioneers in user generated content, among the first e-commerce retailers to implement comments and user reviews. Today customer reviews create a 74% increase in product conversion. If you’re not already using customer reviews, don’t worry, you’re not alone. A surprising 27% of the IR 500 doesn’t use customer reviews. But now is the time to change that. Customer reviews convert and decrease return rates — so get them!
2. Top customers make 4x more purchases
The typical online store gets 43% of its revenue from repeat customers. Companies that have mastered repeat purchases are getting up to 75% of their revenue from repeat customers. If you tend to focus on customer acquisition, now is the time to pay attention to how you can grow revenue by looking at your existing customer base.
Don’t be afraid to break the discount cycle
There’s a tendency in e-commerce to solve problems with discounts rather than data. When it comes to driving repeat purchases, your data can help you figure out things like how soon after a purchase you should reach out to a customer or how often you should be emailing your various customer segments. Leverage those insights. Now is the time to get better at repeat business that doesn’t rely on deep discounts.
3. Top customers spend 30x more than the average customer
Customer Lifetime Value is the single most important metric for your e-commerce store. If you’re not already familiar with this metric, get up to speed on how to calculate CLV now. Here’s why it’s so important — the top 1% of e-commerce customers spends 30x more than the average customer. The lifetime value of these customers isn’t just a little better, it’s dramatically better.
If you’re still tracking marketing ROI using metrics like cost of customer acquisition or first purchase this data should make it overwhelmingly obvious that it’s time to stop. Your customers are not all the same, and you shouldn’t be treating them as if they are. Spending $15 on a customer whose lifetime value is $35 probably isn’t a great move, spending $15 on a customer whose lifetime value is $1,050 is a no-brainer.
Treat your best customers like VIPs
Every month, pull a list of your top 1% of customers and do something special for them. Write a note, send a gift, invite them to a special event. If you can do this more often or at scale, even better. Try showing some love to your big spenders and just see what happens.
This is the year to really dig in. Find the most loyal customers, get the most reviews, the most repeat purchases and the best possible returns. Nerd out with your data and sell more!