We all want to achieve something for founders. It's the Growth target they need to achieve every year on year.

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Now to achieve these targets you need to measure your progress and that you can’t do without measuring it with a couple of important metrics which we will be covering in this blog.

These metrics are really important to keep an eye on if you want to grow your eCommerce brand in India and want to set back your competitors.

7 Key Metrics Every DTC Founder Should Monitor for Business Success

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1. Cost of customer acquisition

This is one of the most important metrics in any business.Every business needs money or revenue to keep growing and sustaining and the main source of constant cash flow for any business are their own customers.

But getting customers is not free at all, it takes an enormous amount of time,effort and heavy upfront cost.

Over the years the cost of acquiring has increased significantly by 60%, so in order to run a profitable and balanced company it’s quite essential to monitor the cost of customer acquisition for your brand.

How to calculate cost of customer acquisition or CAC

It’s quite easy simply to divide the revenue you as a brand got from every new customer by the total amount spent by marketing to acquire new users.

To make this accurate make sure you segment New user cost vs returning users cost. Often almost 80% - 85% of the time your marketing spends would go for acquiring new customers.

Separate the CAC for various acquisition channels to analyse the efficiency of the channel, this in return would help you to decide which channel is very effective, where to increase spends and efforts and where to decrease budgets.

While analysing, also keep in mind the scalability factor of the channel ex -Channels like word of mouth and Referrals are great ways of acquiring quality new customers but the scalability of these channels are often quite limited so focusing enough might not give you the best results.

2. Repeat Rate

This metric deficits how many customers from your already acquired customer base have repeatedly bought from you over “X”period of time.

Often measuring the repeat rate for an ecommerce brand would be little challenging as they are not frequent or in a decided time frame like a Software's a service ( SAAS ) business where your repeats are stable across years.

In order to reduce ambiguity and false data, bound it with a time frame ex -Repeat rate in 6 months, 120 days, within a year.This helps you to do laser focused targets and also helps you to monitor in a proper manner.

Pro tip:

Segment your customers into product wise and month of acquisition wise cohorts and measure their repeat rate behaviour.

3. Conversion rate

This metric is really essential as it shows out of all the traffic you received on your website what percentage of customers actually bought from you and the rest that bounced off.

This really affects your other metrics as revenue growth, cost of customer acquisition etc There are lot of tools that will help you to monitor it some of the famous ones are Google analytics, Mixopanel, VWO etc .

Try to segment customers and check which type of segment and what products have the highest conversion rate and try to replicate the best working things across your all products.

4. Average order value ( AOV )

Average order value is the equation of total order value by number of orders placed at that point of time. This metric helps you to take charge of the profitability of the business, by measuring.

Average order value once could take away an idea on an average how much a general customer is pending.So focusing on Average order value can increase the margins very effectively consider this case that.

Scenario 1

You acquired customer A at cost of Rs 100 and AOV of that Customer is 500 your margin on that Rs 500 purchase value is 50% i.e Rs 250 and overall profit equals to Rs 150 ( Rs 250 -Rs 100 ).

Scenario 2

You acquired customer A at cost of Rs 100 and AOV of that Customer is 800 your margin on that Rs 800 purchase value is 50% i.e Rs 400 and overall profit equals to Rs 300 ( Rs 400 -Rs 100 ).

5. Lifetime value (LTV)

Every business thrive son this one metric without this there won’t be a business in the first place.

By definition lifetime value or LTV is a metric that starts what’s the worth of a single customer in his or her entire purchase life cycle.

Let’s take an example to understand this

Let’s say you saw an Ad from brand called Typof Apparels and you bought a Shirt form them, after couple of months you bought again because you love the product, you keep transacting with them for next 2 years and post that you actually switched to a different brand and stopped using Typof apparels etc.

In this case the your LTV for the brand would be the Average order value of your purchase X Frequency of purchase. Ex - 1200 X 5 = 6000

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Now that you understand what the Lifetime value of a customer as a metric means now let’s see how a DTC brand can use it.

Basically Lifetime value helps a brand to calculate the worth of a customer inhis/her entire engagement cycle with the brand.

With LTC you can measure if you as a brand are capable of increasing CAC even beyond first purchase profitability and how long a customer is probably goingto stick with your brand.

This helps in projection of revenues and creating strategic decisions that would help the company scaleand growth with a data driven risk appetite involvement.

Often for DTC brands it’s difficult to measure accurate LTV or even for brands just starting out so in this case you should keep a strict check on the time frame of the frequency of purchase.With my experience working woth brand here’s what I suggest.

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For post PMF brand -Measure it for 1 year time frame frequency cap

For pre PMF brand -   Measure it for 180days time frame frequency cap

6. Burn rate

A very important metric for every early stage founder that is going against the top established companies in their space.Starting a business means dealing with expenses,cost and other stuff and Burn rate is one of them.

This metric tells us how quickly your company is burning the money and what percentage of your overall expense is exceeding your revenue It has a very simple formula  

{(Revenue - Operating expenses ) / Starting capital }* 100

7. Return to origin or RTO rates

Ask any DTC founder one thing you hate about eCommerce and they would definitely say the RTO.

RTO or Return to origin hurts a lot for every brand. This metric basically means that out of all your total orders shipped, what percentage of orders gets shipped back to you or returned to you because of unclaimed delivery.

This happens quite a lot with Cash on delivery in India because their customers tends to not take any ownership or interest post their purchase as no amount is paid upfront.This cost could be really fatal for a brand's financials and therefore it’s a very important metric to keep an eye on.

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Well if you are using an eCommerce platform like Typof you can reduce it by COD confirmation mechanism and RTO optimiser by Typof. So we have covered all the 7 important metrics to track for any eCommerce Brandon a day today basis to keep up with their growth.

Which ones are you tracking on day to day basis let us know in the comment section below and we will help you with a guide on how to solve this particular case for your brand.

FAQ

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