Average Order Value (AOV) TERMS
Average order value (AOV) is the average amount customers spend at your store, determined by dividing revenue by the number of orders.
AOV = Revenue / # of Orders
Bundling/Product Bundling TERMS
You are bundling your products when you group relevant products as a single package, usually for a lower price than the products would cost separately.
Business to Business (B2B) TERMS
Business-to-business (B2B) sales occur when one business sells items or services to another.
Business to Consumer (B2C) TERMS
Business-to-consumer (B2C) sales involve selling items to individuals, not businesses.
Call to Action (CTA) TERMS
More often called a CTA, a call to action is when you ask or tell a customer or member of your audience to do something. Examples include “buy now,” “contact us,” or “learn more,” often with a button to click.
Conversion TERMS
Conversion is the process of getting a visitor to become a buyer. They go through the conversion or sales funnel, in which they go through the four stages of awareness, interest, desire, and action (i.e., becoming aware of your brand through making a purchase).
Conversion rate = Purchases / Site Visitors
Customer Acquisition Cost (CAC) TERMS
Getting customers to show up in your store costs money, and the amount it costs is called customer acquisition cost (CAC). You divide the amount you spent on marketing by the number of people who purchased to determine your CAC.
CAC = (sales + marketing expenses) / (total customers acquired)
Customer Lifetime Value (CLV) TERMS
CLV, or customer lifetime value, is the amount you can reasonably anticipate an individual will spend at your store over every purchase they ever make from you.
CLV = ([customer’s profit contribution per year] x [total years as a customer]) – CAC
Content Management System (CMS) TERMS
A CMS, short for a content management system, allows you to create, monitor, and alter content on your website. You don’t need to be a web designer or coding expert to use a CMS.
Customer Relationship Management (CRM) TERMS
A type of software, customer relationship management (CRM) helps you build and maintain relationships with users from their first visit through all their subsequent purchases.
Payment Card Industry (PCI) Compliance TERMS
Accepting credit cards means you automatically collect data about the purchaser; PCI compliance means following the laws and regulations about storing and protecting that data.
Payment Service Provider (PSP) TERMS
A payment service provider (PSP) allows you to accept electronic payments, including credit and debit cards and digital wallets (e.g., Google Pay).
Point of Sales (POS) TERMS
If you’ve previously only worked in physical stores, you may think of point of sale (POS) systems as registers. While that is hardware related to a point of sale, POS in the online world more often refers to a software system that performs transactions, manages inventories, sends digital receipts, and more.
Return on Investment (ROI) TERMS
Your ROI (return on investment) is the amount of money you make compared to how much you spend. In other words, it states how profitable your company is at a given moment.
Search Engine Optimization (SEO) TERMS
Search engine optimization, or SEO, is the process of setting your site up for success on search engines like Google, Bing Search, and DuckDuckGo. This involves ensuring you use the right keywords while providing valuable content.
Search Engine Results Page (SERP) TERMS
Search engine results pages (SERPs) are the pages of results you see when you use a search engine. Your goal is to use eCommerce SEO effectively enough to end up on the first page (or close to it), either with your homepage or individual pages on your site.
Customer Acquisition Cost TERMS
Your CAC is the amount you spend to get a single customer. This figure will help you calculate other metrics and ensure you aren’t spending more on advertising than you’re making back in sales.
CAC = (sales + marketing expenses) / (total customers acquired)
Average Order Value TERMS
The AOV shows you the average amount of money your customers pay per transaction. If your business is making a profit, a customer should spend more on their order than you spent acquiring them — AOV needs to be greater than CAC.
AOV = (total revenue) / (total orders)
Cost of Goods Sold (COGS) TERMS
The COGS is the total amount you spend to produce and sell your product, including labor and
manufacturing costs. Be sure your COGS doesn’t exceed the price of your products.
COGS = (inventory costs at the beginning of the year) + (additional inventory costs during the year) – (end of year inventory)
Customer Lifetime Value TERMS
CLV indicates the value a customer adds to your company over the time they patronize your business. Ideally, you want customers who return to your business and spend their money in your store again and again. If the CLV is low, you may need to evaluate your customer satisfaction rate.
CLV = ([customer’s profit contribution per year] x [total years as a customer]) – CAC
Customer Retention Rate TERMS
Customer retention rate refers to the percentage of clients who remain loyal to your business over a period of time. If your customers are not returning to buy more, you may have a problem with product quality or customer service.
Customer Retention Rate (over a given period) = ([total new customers] / [total number of customers]) x 100
Customer Satisfaction Score TERMS
You can measure customer satisfaction by sending surveys to your customers. Ratings can be on a scale of 1-5 or 1-10 and should cover a variety of factors that are relevant to your business. Surveys can be created through plugins like WPForms or linked through a website like SurveyMonkey.
Customer Satisfaction Score = (sum total of all survey scores) / (total number of surveys)
AVERAGE QUARTER-HOUR PERSONS (AQH) TERMS
Average Quarter-Hour Persons refers to the average number of people listening to a radio station for at least five minutes over a 15-minute period. Marketers look at this number to determine the size of an audience for a particular radio station and how it relates to the cost of advertising there.
CLICK-THROUGH RATE (CTR) TERMS
The Click-Through Rate measures the percent of an online advertisement’s viewers who ultimately click on the ad. For example, if 1,000 people see an ad on a website and 150 of them click on it, this advertisement has a CTR of 15 percent. Marketers look at the CTR of their advertisements to ensure they are effective at converting viewers.
COST PER ACQUISITION (CPA) TERMS
The Cost per Acquisition refers to how much an advertiser spends, from start to finish, to convert one visitor into a customer. The CPA may include costs such as creating the advertisements, paying for advertising space, optimizing a website for search engines, and employing sales agents. Measuring the CPA helps marketers ensure they are getting a good return for their investment.
COST PER CLICK (CPC) TERMS
Cost Per Click is an online advertising measurement. It refers to how much a company pays the host of the advertisement each time someone clicks on their ad. CPC rates vary based on the popularity of the hosting site.
COST PER ENGAGEMENT (CPE) TERMS
Cost Per Engagement is a relatively new performance measure in online advertising. Cost per engagement accounts for other types of engagement beyond clicking on an advertisement. For example, a user may view your story on Instagram or share your tweet on Twitter. Marketers primarily use CPE when it comes to video advertising and social media campaigns.
COST PER THOUSAND (CPM) TERMS
Cost Per Thousand (or Mille) is another online advertising measurement, similar to CPC. The difference is that in a CPM structure, the marketer pays for the number of people who view the ad rather than click on it. CPM measures in thousands of viewers, meaning you pay a specified rate for every 1,000 people who see the advertisement, regardless of how many people actually click on the ad.
FREQUENCY TERMS
Frequency refers to how often an individual or household views a specific advertisement. Marketers look at the frequency of an ad to ensure that their audience isn’t seeing their advertisement too often or not often enough. For example, a marketer may look at the frequency at which a household sees an ad over the course of one month to determine if they need to run the ad more or less often.
FREQUENCY CAPPING TERMS
Frequency Capping is a method for ensuring an individual doesn’t see the same advertisement too many times. The marketer places a cap on the frequency, stopping the ad for that person once they reach a certain frequency level.
IMPRESSIONS TERMS
Impressions are the total number of times an individual sees an advertisement or a group of ads. When talking about digital marketing, impressions are the total number of times an ad appears online. For example, if you run an ad on Facebook, each time someone sees your ad, that is one impression.
POST CLICK TRACKING (PCT) TERMS
Post Click Tracking is a way of tracking user behavior after they interact with a digital advertisement. For example, you could track if a user fills out a registration form after clicking on your banner ad. PCT helps inform marketers about the effectiveness of their advertisements.
RETURN ON INVESTMENT (ROI) TERMS
In marketing, Return on Investment measures whether you are earning enough benefits relative to your resource investment. For example, if you are spending on average $1 for each visitor you bring to your website but only earning $0.50 in profit per visitor, then this results in a negative return on investment. However, if you generate on average $2 per visitor in profits, this is a positive return on investment. Marketers measure return on investment to gauge the effectiveness of their campaigns and ensure they are spending resources wisely.
