Summer of Metrics: Juggling Sharks

With all of your store metric connected, they will shift as things change in your store.

Not just with large changes either, even small changes like a handful of new orders can shift your metrics.

The problem is that improving one metric can harm another. Then when you go and try to repair that second metric, a third might start to drift.

It's the business form of juggling sharks.

Let's examine how change impacts each metric.

Average Order Value can be impacted by getting larger or smaller orders. Getting larger orders will often decrease the Repeat Purchase Rate and increase the Average Customer Purchase Latency as customers "stock up" and don't need to order as often or as quickly. The reverse is true too, smaller orders can increase the Repeat Purchase Rate and decrease the Average Customer Purchase Latency.

(I'm going to start using the shortened acronyms. It's getting wordy to write out all of these).

Improving your Repeat Purchase Rate can be done by getting customers to come back and buy again. Sometimes this will depress AOV, as they might place smaller but more frequent orders. Depending on your pack and ship costs, this can impact profitability. Improving your RPR can improve your Average Customer Purchase Latency though as you're having more people re-order but it could make it worse if you're getting one-time customers to split their order into only two orders.

Decreasing your Average Customer Purchase Latency so customers order sooner usually happens though smaller order sizes (thus lower AOV) or more reminders. Too many reminders could turn-off customers though which will harm your RPR and overall customer loyalty (through customer churn and defection).

Average Lifetime Value is difficult to influence directly due to its long-term view but changes to your AOV can add up to change ALTV, both positively and negatively. Longer or shorter purchase latencies won't directly impact your ALTV, but it will change how long you wait to realize the full lifetime value. Improving your RPR will almost directly improve your ALTV as more customers are placing repeat orders.

See what I mean about juggling sharks?

Remembering all of these can be near impossible, especially as some things are outside of your control and the economic environment is always shifting. Don't worry though, tomorrow I'll give you a simple way to ignore much of this which I've found to help the analysis paralysis.

Eric Davis