E-Commerce - Formula Sheet
E-Commerce Key Metrics and Formulas
Modern digital enterprises rely on essential business metrics to measure operational success, consumer behavior, and transactional efficiency. Below are the key formulas used to calculate these performance indicators.
1. Conversion Rate (CR)
The conversion rate calculates the percentage of website visitors who complete a desired action, such as making a purchase.
\[CR = \\frac{C}{V} \\times 100\]
Where:
- CR: Conversion Rate (%)
- C: Total number of completed conversions (purchases)
- V: Total number of unique website visitors
2. Customer Acquisition Cost (CAC)
This formula measures the average total expenditure required to acquire a single new customer.
\[CAC = \\frac{MCC}{CA}\]
Where:
- CAC: Customer Acquisition Cost
- MCC: Total marketing and sales campaign costs spent
- CA: Total number of new customers acquired
3. Average Order Value (AOV)
AOV tracks the average dollar amount spent each time a customer places an order on a website or application.
\[AOV = \\frac{TR}{O}\]
Where:
- AOV: Average Order Value
- TR: Total revenue generated within a specific timeframe
- O: Total number of distinct orders placed in that same timeframe
4. Shopping Cart Abandonment Rate (CAR)
This metric represents the percentage of users who add items to their digital shopping cart but exit the site without completing the transaction.
\[CAR = \\left(1 - \\frac{CP}{CA}\\right) \\times 100\]
Where:
- CAR: Shopping Cart Abandonment Rate (%)
- CP: Number of completed purchases
- CA: Number of shopping carts created by users
5. Customer Lifetime Value (CLV)
CLV predicts the total net profit attributed to the entire future relationship with a customer.
\[CLV = AOV \\times APF \\times ALT\]
Where:
- CLV: Customer Lifetime Value
- AOV: Average Order Value
- APF: Average Purchase Frequency Rate
- ALT: Average Customer Lifetime (duration of the active relationship in years)