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The Ultimate Guide to E-commerce Analytics

Women selling online, ecommerce store

In an increasingly technological world, customers are making informed decisions, they research products, compare prices between different sources, gather reliable product reviews from their peers before they make the buying decision.

The only way to stay ahead in the game is to understand and meet their high but also dynamic expectations and offer them the best possible online shopping experience. How do you do that? Well, they tell you how all the time! With digital stores, it is extremely easy to understand what people are looking for, how they get in the store, who they are, what they buy, and what puts them off. Data is gold for e-commerce!

Good data is the building block to understanding and predicting customer behavior. When you start using e-commerce data effectively, it empowers businesses to make profitable decisions.

Amazon's personalized product recommendation algorithm drives 35% of cumulative Amazon company revenue.

E-commerce analytics is the process of gathering, analyzing, and reporting the data related to the full customer journey from discovery of the product, acquisition, conversion, retention, and finally, advocacy, which aids in making data-backed decisions to drive more sales.

For organizations that want to take advantage and adapt to the increased online activity and online sales, there's a need to understand the value of data and to employ best practices of measuring and reporting business KPIs.

Data has the power to make or break an online business.

5 stages of the customer life-cycle

There are a plethora of metrics and analyses that can be associated with E-commerce analytics, but it is important to not get overwhelmed and to start with the essentials, and understand how it contributes to the big picture.

The whole process of acquiring a loyal customer can be split into making the customer aware of our product, getting them to visit our online store, encouraging them to make a purchase, retaining new customers, and finally, their post-engagement actions.

Optimizing each of these steps will lead to better business outcomes in terms of brand awareness, customer loyalty, and overall business outcomes (read revenue).

Strategize targeting based on user personas of existing successful customers

Start with making the audience aware of your product by deploying various marketing strategies that will lead them to your online store. This includes social media Ad campaigns, Google Ads, CPC campaigns, etc. for the specific user persona we are targeting.

The customer journey funnel starts with this step and the entire funnel's success depends on the width of the first step. Not only the quantity but the quality of the audience entering the funnel is of paramount importance.

Use of Analytics

Using descriptive analytics, you can get insights into who your most successful current customers are, use their demographic information, their interests to create user personas, and design marketing content specific to each of those personas.

Key Performance Indicators - Reach and Impressions.

Here's an illustration of the kind of insights this analysis can highlight: In the chart below, the 3rd campaign had more reach than the 4th even though it costs less than half of it.

Budget allocation based on channel performance to improve marketing ROI

After making the audience aware of your product, looking into how many of them have visited your site and from where will be the next step. It is important to measure the performance of different channels used for marketing and optimizing based on the performance during acquisition but also in terms of final purchases made.

Use of analytics

By gathering all the scattered marketing data from multiple channels and measuring their conversion rates at various stages, we can identify what is working and what isn’t.

Based on this information, decide to spend optimally to get maximum marketing return on investment.

Key Performance Indicators - Return on Ad Spends (ROAS), Click-through Rate (CTR), Cost per Acquisition (CPA), Acquisition Conversion rate, Customer Lifetime Value (LTV)

Here's an illustration of the kind of insights this analysis can highlight: In the chart below, we know we should be allocating more budget to social media ads than to search ads!

Improved customer journey on the store will lead to better conversions and revenue

Once the customers are in the store, helping them make purchases comes next. This can be achieved by providing them with the best online buying experience which will make them click that Buy Now button.

Use of Analytics

The understanding of customer journey will involve identifying the pages a customer visits, the products they see, the products they buy, and finally their exit point.

After identifying customer journeys and pinning down the problem they might be facing, there can be various solutions to improve the user experience. Remove roadblocks and confusions with improved flow and design of the store, optimize product portfolio, adjust pricing strategy, personalize the shopping experience, etc.

Epsilon research shows that 80% of consumers are more likely to make a purchase when brands offer a personalized experience.

Key Performance Indicators - Sales conversion rate, cart abandonment rate, repurchase rate, basket size, etc.

Pricing optimization is based on competitors' pricing, demand, and business goals. Dynamic pricing on e-commerce stores is not an option, but a necessity.

Increase customer retention by 5% to improve profits by more than 25%

By employing cross-selling and up-selling strategies based on the customers’ past behavior, we can keep bringing them back to the platform and this can in turn increase revenue with minimal monetary effort.

The success rate of selling to an existing customer is around 60% whereas it is 5%-20% for a new customer.

Acquiring new customers is way more expensive than retaining existing ones, and smart businesses know the value of loyal customers. Almost 65% of a company’s business comes from existing customers, so using data for re-targeting and re-engagement strategies will be a gold mine.

Customer Lifetime Value (LTV) is a metric that goes hand-in-hand with the retention rate and tells you how valuable a customer is over their lifetime on the platform. Focusing on retaining the high LTV customers directly relates to the success of the company. Retaining the customers for the long term is about focusing on the lower end of the funnel we saw above.

In the words of Wharton Marketing Professor Peter Fader, Decisions about acquisition, retention, and development shouldn't be driven by cost considerations - they should be based on future value.

That doesn't mean that costs should be ignored altogether but the cost differences will be small relative to the value difference between retaining a so-so customer vs acquiring a, potentially much more valuable, new one.

Knowing how much your customer is worth can aid in making smarter and more accurate investments in your relationship with the customer, rather than spending an equal amount everywhere.

Use of Analytics

Moving customers from the low-value segment (single purchase) to the high-value segment (multiple purchases) will help improve retention rates. A/B testing different strategies to accomplish this will help identify the one that works the best.

Based on customers' past purchases and behaviors, we can easily strategize (read predict) what to cross-sell to different buyer personas, at what time, and through which marketing channel.

Key Performance Indicators - Retention rate, Customer lifetime value.

Making your loyal customers into your brand ambassadors will improve acquisition conversion rates

Optimizing all the above stages will directly affect the results of this stage. We can sort our customers into 3 buckets,

Promoters, the people who had a great experience and are sharing about the platform with their contact circle

Passives, the ones who had a good experience but are not willing to share it among their peers

Detractors, the people who had a bad experience and are thus discouraging other potential customers

Use of Analytics

By segmenting our existing customer base, we can optimize the strategies that can cater to each bucket. Apart from direct customer surveys, secondary actions data can also be used to segment these customers.

Strategies would include, rewarding the promoters, encouraging passives to become promoters through various incentives, and understanding the pain points experienced by detractors, and working on eliminating them.

Key Performance Indicators - Net Promoter Score, Revenue

Roadmap for becoming a Data-driven eCommerce business

By now, we know all the levels that data can unlock for an e-commerce business. Let us look at the analytics roadmap to follow to start tapping into the invaluable power of data.

Milestone 1 - Collecting the right data

The foundation for everything mentioned above is a strong data collection setup which includes following proper methodologies for naming, sorting, and tracking data from all the sources, These sources would be marketing data, sales data, customer data, website events data, product and store data, inventory data, customer support data, etc.

Know more about how to build trust in your data.

Milestone 2 - Processing the collected data

Now that we have decided on what data to collect, the next step is to move the data into the right platforms after having processed it to an analytics-consumable format. Because of the Big Data revolution, the majority of the companies are migrating to cloud data warehouses as they are scalable, readily available, and have less burden on the pockets.

Curious about what the Best Cloud Data Warehouses on the market are?

After getting all the data in a central database, the idea is to create a single source of truth that maps data from multiple sources and enables analysts to mine gold coins from it!

Milestone 3 - Business Intelligence with the stored data

It is imperative to decide and stick with the Key Performance Indicators one wants to measure their business’s success with.

Even though it is tempting to improve and optimize all the metrics, having a North-star metric for each quarter or a cycle and focusing on improving just that, while keeping track of the rest, is the best way to achieve success in the long term!

One easy way to go about it is by having multiple KPI dashboards each representing one aspect of the business and an overall dashboard with important metrics regarding the whole business' health. The most essential task here is to have clear and crisp definitions of your business and tying them back to respective stakeholders.

Using modern cloud BI tools, will enable all the business users in your organization to have ready access to the current standing of the business, which will in turn help to stay on top of things.

Having automated and interactive dashboards will save a lot of time and will enable you to make informed business decisions really quickly. See how easy it is to create such automated dashboards without much investment.

Milestone 4 - Diving deeper into data to find gold coins!

Using various analytical techniques on the data and deriving deeper insights will enable you to truly find monetary value from data. All the things we talked about in the above section on using analytics at each stage of the customer lifecycle, comes at this point.

From the dashboards, you will understand what is happening within your business but not why it is happening or what you can do to take advantage of it. This is where deeper analytical concepts will provide you with those answers along with actionable impactful insights.

Destination - Making customer-informed decisions that guarantee business growth

This is the most important part of the whole journey. After the analysts found the right opportunity for optimization or retention or revenue generation, now is the time to implement updates from those findings and measure the actual business impact from all that we did above.

It is more important to consume the insights derived from data and put them into action. Easily consumable insights with to-the-point action items will aid in successful business implementation. Data Storytelling is what we are pointing at. It is imperative to know the story and act at the end of it to make it beautiful.


The whole process of making your potential customers aware of the product effectively, until making them your loyal promoters is a long and daunting journey. This is where tools like data analytics come into the picture to make it a little easier. Breaking the journey down into multiple steps and optimizing each of them will transform an eCommerce business in many ways than one can imagine.

As they say, the journey of a thousand steps starts with one. Take that first step and wait for the magic to unravel itself.

We, at, have 10+ years of experience helping organizations win their battles with our weapon of choice, DATA!


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