Here is 1 formula to scale your online business, 1 quote, and 1 question to consider from me.
When I first ventured into the e-commerce world over 10+ years ago, I was overwhelmed by the sheer volume of strategies and metrics to consider. I learned, however, that success can often be distilled down to a simple equation (and the best thing, this works across all marketplaces):
Traffic (or clicks) x CVR x AOV = Total Revenue
And yes, there are different formulas, but this is one of my favorites. It was like finding the secret recipe to a dish I’d been trying to perfect for ages—once you know the ingredients, it’s all in the execution.
One Idea from Me
Decoding the E-commerce Formula: A Closer Look
In the competitive world of e-commerce, understanding the formula for success is crucial. The equation is simple yet powerful: Clicks x Conversion Rate x Average Order Value = Total Revenue. This formula serves as a roadmap for revenue growth. But what do each of these components mean, and why do they matter?
//Clicks: The Starting Point
Clicks represent the number of potential customers visiting your product listings or website. Think of it as the front door to your store. If no one walks through that door, you can’t make any sales.
The first thing we think of is advertising, but let me broaden your mind.
Clicks can come from email and newsletters, affiliates, influencers, advertising on multiple channels, blog posts, partners, and others.
You can point these traffic sources to multiple or a single channel.
//Conversion Rate (CVR): Turning Browsers into Buyers
The conversion rate is the percentage of visitors who make a purchase. A higher CVR means you’re effectively turning browsers into buyers. It’s like having a great salesperson who can close the deal.
What influences your conversion rate?
Product descriptions, titles, images, checkout process, page load speed, supporting A+ content, social proof, and more.
//Average Order Value (AOV): Maximizing Each Sale
Average Order Value (AOV) represents the average amount spent per transaction. Increasing this metric can significantly boost your revenue without necessarily increasing traffic. It’s like getting more from each customer who walks through your door.
How can I increase my AOV?
Think bundles, upselling and cross-selling.
The magic here is not knowing the formula.
The magic happens when…
… you develop a strategy to pull each lever
… measure and if successful
… amplify it across all your channels
Over the next few newsletters, I’ll discuss each of these levers in more detail, the strategies for each marketplace, and tactics behind it.
One Quote
“Opportunities don’t happen. You create them.” — Chris Grosser
One Question
If your business disappeared tomorrow, what would your customers miss the most?