Last Updated on March 12, 2023 by Hassan Abbas
B2B refers to business-to-business transactions whereby a business sells its products or services to other companies. In this type of commerce, tracking and analyzing key metrics is critical for measuring the success and growth of the business. Magento is the platform of choice for many B2B businesses who sell their products online. These types of businesses typically have a higher average order value and longer sales cycles compared to B2C commerce.
Additionally, B2B transactions often involve more complex product offerings, longer-term relationships, and more negotiations over pricing and terms. Therefore, making quick decisions and taking care of commerce metrics is essential. E-commerce platforms like Magento allow for setting discounts via customer groups. More importantly, B2B sales are increasingly reliant on your site performance. It’s vital to choose a Magento hosting provider that provides strong support and performance to help achieve the highest conversion rates. Today. In this article, we’ll look deep into important metrics of the business that each business should consider. So, without wasting any time. Let’s get straight into this.
Essential metrics for B2B Commerce.
- Revenue: Revenue is an essential metric, providing a clear picture of the total amount of money a business generates. Revenue can be broken down into various categories such as product revenue, service revenue, and recurring revenue. Magento (also known as Adobe Commerce) allows for tracking your revenue straight from your admin dashboard. Tracking these numbers allow firms to measure growth and identify any issues or trends that may be affecting sales. .
- Gross Margin: Gross margin (GM) is defined as the difference between revenue and the cost of goods sold. This metric is important because it indicates how much profit the business makes on each sale. If the GM is low, it may indicate that the business needs to be pricing its products or services correctly or that the cost of goods sold is too high. Using this data can help you make informed pricing and cost management decisions.
- Average Order Value: Average order value (AOV) measures the amount of money spent on each order. Magento again provides this data right on the admin dashboard when you login.This metric provides insight into customer spending habits and helps businesses identify opportunities to increase sales. For example, if the AOV declines, the business may consider offering promotions or discounts to encourage customers to spend more.
- Customer Lifetime Value: Customer lifetime value (CLV) mainly predicts the net profit attributed to the entire future relationship with a customer. CLV helps businesses understand the long-term value of each customer. This helps make decisions about marketing and customer retention efforts. Using this data in combination with other tools can help you make better decisions. For example, if the CLV is too high, the business may want to invest more in customer loyalty programs and personalized customer experiences.
- Conversion Rate: The conversion rate helps measure the ratio of visitors to a website who make a purchase. This metric is critical for understanding the effectiveness of the sales process and identifying areas for improvement. Google Tag Manager and Google analytics both offer tools for Magento that can help track your conversion rates. For example, if the conversion rate is low, the business may need to improve the user experience (UX) on its website, provide more precise product information, or offer better customer support.
- Customer Acquisition Cost: Customer acquisition cost (CAC) measures the cost of acquiring a new customer, including all marketing and sales expenses. This metric is crucial because it helps businesses understand the cost of acquiring new customers and make informed decisions about marketing spend. Spending too much on CPC ads for example may be a poor use of a marketing budget. In a scenario where the CAC is too high, the company may need to reconsider its marketing strategy or invest in other marketing channels.
- Repeat Purchase Rate: The repeat purchase rate measures the percentage of customers who make more than one purchase from the business. This metric helps you have insight into customer loyalty and the effectiveness of customer retention efforts. Magento offers an easy way to track your repeat customers through your dashboard. By logging in and clicking Reports → Customers, you can easily view the repeat customers of your site. If the repeat purchase rate is low, the business may need to improve customer satisfaction and engagement.
- Inventory Turnover: Inventory turnover measures how quickly the business sells its inventory. Using a Magento inventory management system can help in tracking turnover. This metric helps companies to understand the demand for their products and make informed decisions about inventory management. For example, if the inventory turnover is low, the company may need to reconsider its product offerings or improve its marketing efforts to increase demand.
What is the 80/20 rule in E-Commerce?
The 80/20 rule (the Pareto Principle) is a widely accepted principle in economics that states that 80% of the results come from 20% of the sources. With e-commerce, the 80/20 rule suggests that 80% of a company’s revenue is generated by 20% of its customers or products.
This principle can be applied in various ways in Magento by analyzing customer behavior, product performance, and marketing. For example, a business may find that 80% of its revenue is generated by 20% of its customer base and that these customers are more likely to make repeat purchases and refer others.
Similarly, the business may discover that 80% of its revenue is generated by 20% of its store products and that these products are the most popular and most profitable. By applying the 80/20 rule, Magneto owners can focus on the most valuable customers and products and allocate resources more efficiently. This can ultimately lead to higher revenue and profitability as well as provide an understanding of the business and target market.
How does a website’s poor performance lead to conversion loss?
A website’s poor performance can lead to a loss of conversions in several ways.
- Slow Load Times: If a website takes less time to load, visitors will likely lose patience and leave the site, which can result in a loss of potential conversions. Choosing a high-performance hosting provider with the best technical support will be important for your Magento store.
- Poor Navigation: If a website is easy to navigate, visitors may become frustrated and need help finding the information they are looking for, leading to decreased conversions. Devising a navigation plan with your development team can help you prevent such issues.
- Broken Links: Broken links can prevent visitors from reaching the pages they need to purchase, resulting in a loss of conversions. It’s important to have continuous monitoring of broken links to ensure you stay on top of them.
- Unclear Calls to Action: If a website’s calls to action need to be more transparent and prominent, visitors may not know what they should do next, leading to decreased conversions. Too many pop-ups can also be a deterrent to a conversion.
- Poor Mobile Experience: With the ubiquitous use of mobile devices and the internet, websites must have a responsive design that offers a responsive user experience on all devices. A poor mobile experience can lead to a loss of conversions from mobile visitors. Using Google PageSpeed Insights can help you address these issues.
- Technical Errors: Technical errors such as 404 or server crashes can also prevent visitors from accessing a website, leading to a loss of conversions. Security Concerns: A website needs proper security measures to ensure visitors are confident to make a purchase, which can result in a loss of conversions. Following Magento security guidelines is incredibly important to safeguarding your customer’s data.
It’s important to use metrics to analyze your data, address performance issues and provide a fast, user-friendly, and secure website for your users. This will help ensure that your visitors have a positive experience with an increased ability to convert.
Tracking and analyzing key B2B commerce metrics is critical for measuring the success and growth of the business. By regularly auditing and monitoring these metrics, e-commerce businesses can make informed decisions, identify trends, and take proactive steps to improve their performance. By following the recommended best practices as well as fully vetting the agencies and providers, you can ensure that your site is performing as it should, and that your data is fully compliant and safeguarded. This will ultimately help your customers gain your trust, bring them back as repeat customers, and help improve your conversion rates.
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