Why Revenue Per Visitor is the best metric for ecommerce
In late 2017, Qubit released a groundbreaking piece of analysis that qualifies the most effective types of personalization that can be applied to a website. We found that if a business combines the most effective tactics (which include Social Proof, urgency and scarcity), they can expect an uplift of 6% in Revenue Per Visitor (RPV).
In this blog (part 1 of 2), explore why we use this metric, what it means, and why we consider it such a valuable measure for ecommerce marketing professionals. In part 2, we’ll look at some of the best tactics for increasing RPV.
Dealing with skews between SKUs
The market often talks about conversion rates as a measure of success. And it is very useful, particularly when you’re focused on customer acquisition.
But consider this: Tom and Jane are both merchandisers in the same business. Tom sells low price point items, such as T-shirts, while Jane sells big ticket items, such as Jackets.
Looking at conversion rate alone, Tom appears to be more valuable to the business. His conversions are 10%—twice that of Jane!
The twist is that Tom’s items generate less revenue for the business—T-shirt purchasers spend about $20 while Jacket shoppers spend around $100.
To level the playing field and truly understand where value is created, we need to take into account both factors: Conversion Rate and Revenue Per Converter. Multiply these two and you get RPV:
From here it’s a short leap to calculate company revenue—multiply RPV by the amount of visitors to your site.
Why else do we like RPV?
Quite simply, RPV recognises that there are multiple levers which can drive an increase in profitability.
Moreover, RPV is a true ecommerce metric dealing in traffic once it has been acquired. This rewards the efforts of your merchandising teams in promoting the kinds of products that lead to more business growth.
Finally, revenue per visitor can be calculated in two ways, which offers some flexibility with your reporting and a means of double checking your working:
If you’re looking at the impact of your personalization, RPV is a great tool as it combines the value of the items purchased, and accounts for a variance in SKU pricing.
Keep an eye out for the next part of this blog, where we’ll take a quick look the most effective types of personalization for boosting RPV, and to see how to reach 6% uplifts in RPV, check out the report.