Product Variants: The difficulty measuring performance in Shopify
Shopify analytics tend to offer incomplete and somewhat inaccurate insights, especially on key metrics such as Average Order Value and Customer Lifetime Value. The lack of depth in reports means that while you’ll understand how much you sell, you won’t have the insights you need on how you could sell more, and more consistently.
Why It Might Be Happening
Demographics Are Too Basic: Most of the data you might have on customers will take the form of demographics. Demographic data tells you your customer’s age, gender, income, family situation, annual income, education, ethnicity…but not much else. While this can be useful for targeting ads, it’s dangerous to assume that two people of the same age or sex would have the same needs.
You Can’t Set Your Own Geography: Until quite recently if you wanted to use Shopify to sell your goods to different countries you needed a different shop for each nation. While this was probably a very profitable idea for Shopify, it meant extra work for you and a fractured picture of your customer base.
While today that problem has somewhat been solved, business owners still only get broad country-level data on their customers. If you want to cater to regional tastes or buying preferences of different counties/states then this is near impossible in Shopify.
Some cities are more important to your business than others but Shopify doesn’t have any way you can tier different locations so they can be labelled and analysed.
Setting your own geography would also be useful from a delivery point of view. If a customer 10 miles away will affect your profit margin by an extra 5% per order, would you still advertise to that region?
What Could You Do Today?
173tech would consider Customer lifetime Value to be a north star metric that every eCommerce business should pay close attention to.
You could calculate LTV if you know:
- How much a customer spends in an average purchase.
- How often the customer makes those purchases.
- The average length of time they will remain a customer.
LTV= avg spend x avg purchases per year x avg lifetime
LTV measures how well you are monetising customers with how well you are retaining them, and can be used as a benchmark to define success across your customer acquisition. Comparing LTV across channels, sales reps, marketing efforts, etc. will give you insight into which aspects you need to eliminate in your process and which you need to accelerate.
Even where this type of comparison might not be available in Shopify, we would still recommend that the math is not that difficult and with a simple excel sheet on customer acquisitIon, you can easily apply LTV.
What If We’ve Only Been Running A Few Years?
The more historical data you have, the more accurate your LTV but this isn’t to say that start-ups should ignore this metric altogether. Start to record the necessary metrics today, apply LTV, but also add a pinch of salt!
If all your early leads are coming from word-of-mouth for example, you can’t assume that this channel will scale indefinitely. Compare LTV with your Customer Acquisition Cost and at least you’ll ensure that your growth is not undermining your profit.
How 173tech Can Help.
Shopify is an amazing tool, but it needs to cater for the needs of millions of eCommerce brands. This means it doesn’t always serve you the right information that is bespoke to your business. If you want to take control of your data and get a more detailed view of your customers, we can help by setting up your own data pipeline, automatic reporting and more.