Understand and Improve Your Ecommerce ROI - 2022

If a penny saved is a penny earned, the money you can save from routinely analyzing your ROI could be a literal fortune for many brands.

Tracking your marketing ROI for an Ecommerce business is one of the most important ways for you to assess the value and performance of your current marketing efforts and learn what’s working, and what isn’t.

However, tracking Ecommerce ROI can be a little more complex than anticipated if you don’t have a plan in place. The good news is, we’re here to break it all down for you and make measuring this ROI a breeze.

Want to know how to measure Ecommerce ROI to improve your online marketing strategies?

What is Ecommerce ROI? 

Before diving into the specifics of calculating, and improving, your Ecommerce ROI, it’s essential to understand what Ecommerce ROI is to begin with. 

Ecommerce ROI measures the profit from a marketing campaign and compares the amount you spent on that campaign to the amount you’ve earned from that campaign. It is typically expressed as a percentage.

If you have a positive ROI, it means you not only made back all of the money you spent on marketing, but you earned a profit as well. A negative ROI means you made less than you spent on marketing in the first place. 

Why Is Ecommerce ROI So Important? 

First and foremost, knowing your Ecommerce ROI is important, because it means that you’re staying on top of your budget. However, other benefits can come from knowing how to calculate your Ecommerce ROI. 

Identifying The Best Performing Marketing Campaigns 

Your Ecommerce ROI won’t just tell you if you’re in the red or the black, it will help you pinpoint which of your marketing campaigns are performing the best. While you may have assumptions about which campaign is your top performer, the only way to really tell is by calculating your ROI.

This is the easiest way to figure out which campaigns deserve the most time and attention.

Opportunity to Test New Marketing Channels and Initiatives 

Testing out new marketing initiatives is always a risk. It’s hard to determine which efforts will work the best and which won’t. It’s easy to want to stay with a single marketing channel that you already know works, but this may mean that you are missing out on potentially lucrative marketing opportunities. 

You can use a benchmark ROI to test how new marketing efforts are doing compared to your existing ones so you can see how your new plan is working. This is the best way to determine if a new channel works or not and if you should be investing more in some of these marketing efforts.

Being Able to Grow Your Ecommerce Business 

Growth is always the number one goal with it comes to running your business and adapting an Ecommerce ROI strategy is an easy way to track your growth and to make certain your company is scaling and reaching certain milestones.

Marketing and getting new clients are essential for growth, and your ROI will tell you whether or not those efforts are lucrative. 

How Do You Calculate Ecommerce ROI? 

If you want to determine what your Ecommerce ROI is, you’ll be happy to know the math is relatively straightforward. 

Here are two of the most common ways to calculate this number in the Ecommerce world.

Basic ROI Calculation 

The first and simplest way to calculate ROI involves first figuring out how much your average new customer spends when they visit your online store. This number known as the Average Order Value (AOV) should be pretty easy to find.

Let’s use an example to illustrate how it works. Say you spent $500 on Instagram ads and those ads gave you seven new customers who have an AOV of $50 per transaction so 

So, in this example, your ROI is -30% meaning it was a loss. So, this is a marketing approach you may want to revisit.

On the other hand, say you spend $2000 on blogs for the month and have 75 customers come in from search traffic at $50 per transaction. 

In this case, you have a positive ROI of 88%, meaning the campaign was successful and had a great return on investment. 

Pretty simple, right? Well, there’s also a slightly more complex ROI calculation that can give you even more insight into how your marketing efforts are performing. 

So, if the average customer at your online shop spends $200 over their lifetime, then the initial calculation from Instagram ads will look different it would be: 

So, all of a sudden, that original ROI looks a little better, even if the advertisement isn’t making up its initial cost right away, over time it will pay for itself. It’s all in how you look at it and 

Long-Term ROI Calculations 

With the basic Roi formula, you are looking at the customer’s first purchase only to determine ROI. However, any online business should know about customer retention and how much their average customer spends over their lifetime.

This number is known as the CLV or customer lifetime value. That number is used to determine a different type of ROI, but using the same formula of: 

How Do You Improve Ecommerce ROI?

So, you’ve done the math and figured out what your marketing ROI is, but how do you work on improving that number?

Improving Ecommerce ROI is a challenge even for the best marketers. In fact, according to Smart Insights, Ecommerce businesses have a fairly low average conversion rate of only 2-3%. However, star performers—the top 10%—can achieve conversion rates as high as 6.25%.

To get closer to that 6.25%, you’ll need to do more than the bare minimum.

So, unless you’re comfortable with only two or three out of every 100 website visitors making a purchase, it’s up to you to come up with a few out-of-the-box marketing ideas to create a remarkable shopping experience for your customers.

From improving your marketing techniques to increasing revenue from existing orders, here are our favorite tips for improving Ecommerce ROI and winning some of those missed opportunities back.

Convince Your Customers to Come Back With Email Nurturing

People who abandon their carts or don’t finish transactions on your website might fall into one of several categories. Perhaps they don’t trust you enough, don’t need the product right away, or simply haven’t arrived at that point in the buyer’s journey yet.

You need to help bring them from where they are now to the point of conversion, and email marketing is the perfect tool to make it happen.

Through email nurturing, you can show your prospects the right product details to help them make educated buying decisions about the items left in their cart. Having easy access to key product information makes it simple for them to go back and buy the products they were considering without a second thought.

Re-marketing with the right content boosts Ecommerce ROI because it allows you to re-engage potential customers that were already close to converting. Bringing back existing leads is far more cost-effective than bringing in new ones.

Use Social Proof to Build Trust

When you have positive reviews on your website, you become more reliable in the eyes of new visitors. Online reviews influence as much as 67 percent of consumers, and most internet users trust the information they find online just as much as a personal recommendation. 

By showing that there is a community that trusts you enough to buy from you and speak well about your products, you can increase ROI, conversions, and ultimately revenue.

The best Ecommerce websites focus on getting social proof from their users to gain more trust. Think of Amazon and how it encourages customers to submit post-purchase reviews. Their online store has a system that allows buyers to rate products, submit product questions and answers, and even illustrate their reviews with relevant photos and videos. You’d be smart to put a similar system in place.

Advertise Products With Video

You can increase the return on your marketing efforts by using video content to promote your products. Video is one of the most effective methods for capturing the attention of your website visitors and guiding them through a fulfilling shopping experience. With less than a minute of video, you can change the buying intentions of your visitors by helping them choose the right products to meet their needs.

For video to work in your favor, you need to make the content more about your potential users and less about your products. Use storytelling to show people how they can benefit from buying from you.  

If you want to connect with your audience, you need to engage them by authentically providing valuable information. Video is the perfect way to offer solutions to common problems without totally turning your content into a sales pitch.

Put your customers first to improve Ecommerce  ROI

The best Ecommerce marketing techniques are innovative and focus on the buyer rather than the products. When you sell package insert ad space, for example, it does more for you than just offset your shipping costs. 

It gives your customers a value-added surprise they didn’t know they would be getting, makes unboxing more fun, and positions your brand as the hero—one who shares exciting brands, products, and deals at no extra cost to them.

Finding, tweaking, and building your Ecommerce ROI can be a thorough process but it is one that will ultimately help you with your goal of building your brand and getting the new customers your company needs to scale.

You've made it this far and you've learned so much. Congratulations!

If you're looking to learn more about marketing or Ecommerce in general, feel free to reach out to us at: solutions@undigital.com