The biggest advantage digital technology has afforded today’s web-based entrepreneur is the ability to track performance in real-time. This is possible with the availability of online and offline analytics. Analytics allows the entrepreneur the means to manage his business by proving valuable data that measures performance.

But the concept of analytics is not a new thing. By definition, analytics is the science of analyzing business. The term “science” implies there are bases to the process of analysis. Measurements are taken, metrics or benchmarks are established, and baselines are set as references.

This is Chapter 3.3 in The Beginner’s Guide to Starting a Successful Online Business.

Do you know why McDonald’s became a success?

It had nothing to do with the hamburgers, French fries, or milkshakes the franchise served. After one year of operation, Richard and Maurice McDonald decided to revamp their service setup into an assembly line system. The brothers did this to speed up service and increase the rate of turnover.

They realized that in a low-margin industry like food retail, the key to business success was volume.

McDonald’s analyzed their figures, the average time each customer was served and theorized that given the volume of people visiting their restaurant, they could double the sale if they could double the speed.

That was business analytics back in 1948.

The McDonald brothers saw a weakness in their business model; the speed of service and introduced a system that made it more efficient.

You probably have experienced business analytics in day-to-day events. I’ll share mine.

One of my favorite breakfast treats is taho (beancurd). Every morning, there would be a taho vendor plying his route around the neighborhood which included my street.

Every morning, I would look forward to hearing him call out, “Ta-ho! Ta-ho!” and I would run down the stairs and into the street with Twenty Pesos in hand.

Then one morning I didn’t hear him anymore. The days turned into weeks. Then after a month, while I was taking a walk around the neighborhood, I saw him serving taho to a neighbor who lived several streets away from mine.

I went up to him a bit annoyed and asked, “Why don’t you pass my street anymore and sell taho?”

He looked at me and said, “You guys are so cheap; always asking for a discount or credit. I don’t make money selling taho down your street.”

E-Commerce runs very much the same way. Like the taho vendor, you would want to know who your best customers are.

Where can you find customers who are willing to pay the price you want for your products and services? You need to know who they are and where you can find them so you can continue to service them in the best ways possible.

Why Your Online Business Needs Analytics Now More Than Ever

The year 2000 did not just usher in the new millennium. It was ushered in by events that transformed the world and perhaps the course of history:

  • 9/11
  • 2003 Collapse of the Equities Market
  • 2003 Invasion of Iraq; Fall of Saddam Hussein
  • Global Warming
  • Global Recession
  • 2009 Euro Zone Crisis
  • 2010 Greece Elections
  • 2014 2nd Re-Entry into Recession (Japan and UK)
  • 2014 Russia -Ukraine War
  • 2015 ASEAN Integration

These events had far-reaching repercussions and proved we had truly become a global economy. What happens in one region has consequences for other regions as well. The new millennium had ushered in the New Economy; one that is characterized as Volatile, Unpredictable, Chaotic, and Ambiguous or also known as VUCA.

The turbulent nature of the global economy has made business itself VUCA.

Markets have grown unpredictable and ambiguous. With the growth of the Internet and social media channels, consumers had more access to information. Consumers became more discerning and educated when it came to making decisions to patronize or purchase.

Social media and other online channels became key influencers in consumer behavior and consequently made increased demand elasticity.

A necessary adjustment to cope with VUCA was the evolution of digital technology. Man found ways to make technology serve man in the face of uncertainty and unpredictability.

Economic turbulence opened opportunities for online businesses where costs were streamlined. Then man used technology to devise tools that would help businesses track down demand-changing factors.

Without these tools; online and offline analytics, you would have a difficult time staying on top of your business. You would not know how to track the ills that are affecting your sales. You would have no clue as to the consumers who could take your business to the next level of profitability.

Without analytics, you would be blind inside the virtual world.

Understanding The Basics of Online Analytics for E-Commerce

To fully appreciate what online analytics can do for your e-commerce or online business, it is best to have a grasp of the basics of what it can do for you.

1. Analytics Makes Your Business Model More Efficient

If you’re starting your online business or have fewer than six months under your belt, chances are your business has not yet gained much traction. At this stage, it would be difficult to sustain operations from sales. Therefore, you need to manage your sources of funding well.

Analytics will point out to you the marketing strategies that are NOT working out for your business. It will identify which processes are NOT producing returns that are worth your time and money. It will show you which types of content are NOT bringing in leads.

The inverse is that analytics will point out which marketing strategies ARE working, which processes ARE producing returns worth your time and money and which types of content ARE generating leads.

Having these types of information will help you implement revisions to streamline operations and repurpose resources such as time and money for more productive use.

2. Strategy Follows Numbers

You may be surprised to know that despite the availability of analytics, many web-based entrepreneurs still do not track the performance of their businesses. They refer to financial reports prepared by their accountant to determine their courses of action.

Monetary numbers should be given importance in every business. After all the number one reason why small businesses fail is cash mismanagement. But if you want to know the details behind those financial numbers you have to refer to the numbers gathered by analytics.

If your business is not performing well, analytics will provide you with the numbers for a comparative analysis of all the marketing strategies currently implemented. You can view the performance from the perspective of ROI. Which strategy generated the highest returns and how much of your resources were allocated to it?

Analytics will also give pinpoint where most of your traffic is coming from and then review how much time and money was allocated to this segment.

From these baseline numbers, you can begin to formulate courses of action to reshape or revise your current market strategy into one that is more productive.

3. Increase Conversions

Knowing where your growth points are is like knowing what the winning numbers are in the next lottery draw. Well, not exactly but knowing where your market is coming from will help you direct more resources to the channels that will bring in more leads as well as shore up strategies to increase sales conversions.

And it’s not just about the type of content and which social media network brings into the business.

Analytics will also give you data to determine if your website needs to be revised. You will know if navigation is too cumbersome for users, if the download time took too long or if users clicked out after viewing the Home Page. Then you would be able to take the next steps which are to improve User Experience and test web copy.

The Process of Analytics: The Funnel Analogy

The best way to understand the process of analytics is to think of it as a funnel.

Example No. 1:
You are an online retailer of health supplements. Recently, you blogged about the “10 Best Ways to Use Protein Powder to Build Muscle Mass” and this was shared on your company pages on Facebook, Twitter, and Instagram.

  • The reader clicks on the blog that was posted on your Facebook company page.
  • It takes the reader to your website’s blog page.
  • The reader is convinced of your blog and decides to order protein powder through your website.
  • The reader clicks on a button that directs him to the ordering page.
  • The reader selects protein powder and clicks “Add to Cart”.
  • Reader; no customer, gives personal information to finalize the purchase of the protein powder.

At any time during this process, a reader or lead may leave the funnel for some reason. If he left after reading the article, he might not have been convinced by your content. If he left after viewing your products page, it could be that he did not find the brand he was looking for or that he found your products expensive.

Knowing the percentages for each stage will give you a baseline to determine where in the process you could be having problems.

Example No. 2:
You decide to implement e-mail marketing as a strategy to promote your health supplements. You decide to send an e-mail advising of your new supplement line to e-mail subscribers totaling 1,000.

Of the 1,000 emails sent, 800 are successfully received in the Inbox. 400 recipients decide to open your e-mail. 50 were enticed by your offer and clicked on the links indicated. Out of the 50, 30 clicked “Add to Cart”. Finally, five decided to push through with the purchase.

Based on the flow of transactions, your e-mail campaign resulted in a 0.01% conversion rate. You can see that 83% of those who clicked “Add to Cart” did not push through with the transaction. You can focus on this area and assess why the abandonment rate was quite high.

These examples are a very simplified rendition of how the process of analytics works. The point is to show that analytics can help e-commerce businesses find the answer to one of the most feared questions in sales:

“What went wrong?”

Going back to McDonald’s, there is no question that it is one of the most successful brands in the world. You’ll be hard-pressed to find McDonald’s restaurants that are barren. Most often, you see people come in, look at the menu, look around then turn and leave.

For a giant like McDonald’s sales abandonment is like water on a duck’s back; McDonald’s will shake it off as if it were nothing. But for small businesses, every lead is important. It is an opportunity not just to increase income but to build the brand. You will need to identify the areas in your process where further exploration is discontinued or where the sale is abandoned.

Analytics will do this for you.

Tracking is Everything

Internet traffic is categorized into four avenues:

  • Search – comes directly from search engines like Google, Bing, and Yahoo.
  • Referral – comes from a link from another website.
  • Campaign – comes from traffic that is created by a marketer such as an affiliate.
  • Direct – does not come from any known source.

It is advisable to tag your campaigns so these can easily be organized within the tool you used for analytics.

For example, you decide to post two articles or blogs on Facebook. The first one is more of an introductory post; it writes about the supplement industry and the reasons why you chose this business as your entrepreneurial launching pad. The second post is an informative post on how vitamin C can prevent cancer. The first one is linked to your blog page.

If you do not tag the posts, traffic generated would be recorded by “Referral” and will compromise the data collected by analytics.

You can tag posts by using a UTM or the Urchin Traffic Monitor. The UTM is how a business can track sales from their point of origin down the funnel to their conversion page.

Every online business owner must add UTM to any link that delivers traffic to their website. Categorizing your traffic will give you a better vantage point to identify the high-yielding channels or avenues.

Get Started with Google Analytics

For first-time online proprietors of an e-commerce business, a good analytics program to start is Google Analytics. Many website-based entrepreneurs find the program easy to use, provides important information, and best of all; it’s free!

Google Analytics is perfect for e-commerce sites because Google enables you to send all of your key sales data directly to your Google Analytics account. You will need to set this up however before data can be linked to your sales in real-time and you would be able to track records from specific marketing campaigns.

If you are not proficient in technology, ask a programmer or a web designer to help you set up your Google Analytics account as there will be changes done to your website’s code.

Important Web Analytics Metrics

Now that you have a better grasp of analytics and the importance of constantly analyzing and monitoring your e-commerce website, it is time to look at the web analytic metrics that people continue to use today for their safety and ease of use.

E-mail Marketing Funnels

Follows the same basic funnel:

  • Total number of e-mails sent
  • Total number of e-mails delivered and received
  • Percentage of recipients who opened an e-mail
  • Percentage of recipients who clicked the link in your e-mail
  • Percentage of recipients who ended up on your landing page
  • Percentage of recipients compelled to follow through with the call-to-action

Social Media Analytics

Social networks such as Facebook have built-in analytics that you can refer to. Facebook has its “Insights” page which gives you data on the number of “likes”, the number of people your posts have reached, and percentage changes in activity.

LinkedIn is another social media network that provides valuable data on your activity. Among these are the number of people who have read your posts, the search activity on your profile, and the industries where most of the visits are coming from.

Paid Marketing Analytics

As mentioned in the previous chapter, Pay-Pay-Click Advertising and other types of Paid Marketing strategies applied by affiliate marketers and some business owners are very effective ways of generating leads and sales for your business.

But this activity could be time-consuming. If you have many arrangements with different affiliate websites, you have to keep track of their performances or contributions to your e-commerce website. The figures you procure from Paid Marketing Analytics will help you fine-tune or organize your program better.

Online Analytics is an indispensable tool for every online business especially those who are managing e-commerce websites. This is a program that fulfills every entrepreneur’s dream; to present data in real time. If you are not well-versed in analytics, ask your web designer or web analyst to help you analyze data.

Next read: How to Expand and Grow Your Online Business