E-commerce GMV Metrics: Strategies for Managing First-Time Buyers

When analyzing revenue, e-commerce brands commonly use GMV (Gross Merchandise Value) to gauge performance. By examining the components of this formula, brands can identify areas for further optimization. GMV essentially represents the total order value, including returns and cancellations, simplifying the process of identifying specific metrics and growth opportunities. This article focuses on how e-commerce brands can enhance GMV from first-time buyers. In the next article, we will explore strategies for managing and maximizing GMV from existing customers.

After a period of operation, and initially optimizing the key metrics mentioned above, e-commerce brands often encounter the following issues:

1. Despite efforts to further improve these metrics, the effectiveness of these optimizations tends to diminish, making it difficult to achieve significant additional gains
2. Although GMV shows gradual growth, this increase does not necessarily translate into a corresponding rise in final revenue

Introduction to Primary and Secondary Metrics for E-commerce Brands

The root of the problem lies in the fact that while the GMV metric provides a simple benchmark, it overlooks two critical issues:

1. There is a significant behavioral difference between customers making their first purchase and those making repeat purchases
2. The influence of various factors on traffic and conversion rates requires a more detailed breakdown. Without this, brands may get lost in a myriad of potential solutions

To address these issues, beBit TECH recommends that e-commerce brands adopt a more detailed analytical framework when evaluating their performance metrics. 

Differences Between First-Time Buyers and Returning Customers

First-time buyers and returning customers exhibit significantly different behavioral traits across various industries. The more distinct the characteristics of similar products among different brands, the more diverse the strategies needed to convert first-time purchases and repeat purchases. Take shampoo as an example. For customers who have never purchased the product, e-commerce brands must leverage website imagery, descriptive text, and endorsements to help customers imagine the fragrance and the voluminous feel of their hair after use. This presents a substantial challenge. Conversely, returning customers, who have already experienced the product, can more easily envision how a new product might benefit their hair based on past descriptions.

Therefore, it is essential to segment the GMV for these two customer groups. This segmentation helps identify whether a decline in brand performance is due to a decrease in first-time buyers or a reluctance of experienced customers to make repeat purchases. By doing so, brands can determine which metrics require more attention and tailor their strategies accordingly.

Distinguishing Metrics for Traffic and Conversion Rates

The traffic and conversion rate metrics within the original GMV formula need to be analyzed separately for first-time buyers and returning customers, as they present similar yet distinct breakdowns.

• New Traffic: Users who have never visited the website before but do so within the current month
• Registration Rate: Number of new registrations in the current month / Number of new visitors in the current month
• Add-to-Cart Rate: Number of new registrants who added items to their cart in the current month / Number of new registrations in the current month
• Cart Conversion Rate: Number of new registrants who made a purchase in the current month / Number of new registrants who added items to their cart in the current month
• Average Order Value (AOV): Average amount spent by new registrants who made a purchase in the current month

For first-time buyers, it's crucial to ensure a steady inflow of new traffic from both advertisements and organic sources. Once these visitors land on the website, the key metrics to monitor are their registration rate, their progression to adding items to their cart, and finally, their conversion rate into making purchases. These metrics are essential for optimizing the conversion rate. Additionally, the amount of money first-time buyers spend on their initial purchase is a vital indicator of marketing effectiveness.

• Number of Return Customers: Number of customers who have previously made a purchase and revisit the site in the current month
• Add-to-Cart Rate: Number of returning customers who add items to their cart in the current month / Number of returning customers in the current month
• Cart Conversion Rate: Number of returning customers who make a purchase in the current month / Number of returning customers who add items to their cart in the current month
• Average Order Value (AOV): Average amount spent by returning customers who make a purchase in the current month

For returning customers, it's essential to monitor whether they consistently revisit the site in line with marketing campaigns during each time period. The proportion of returning customers willing to make repeat purchases during each campaign period reflects the deepening relationship between the brand and its loyal customer base over time. Lastly, while the AOV might vary with each campaign, the average annual contribution of returning customers should gradually increase as their membership period with the brand lengthens.

Three Key Metrics for Managing First-Time Buyers in E-commerce

In managing first-time buyers, beBit TECH believes that it is essential to focus on three key areas: 'Efficiency in Membership Base Expansion', 'Conversion Rate of New Members to Purchasers', and 'Average Order Value (AOV) of First-Time Buyers'. For the 'Efficiency in Membership Base Expansion', it is crucial to analyze the volume of new traffic and the registration rate to ensure a steady influx of new visitors who are effectively converted into registered members. Regarding the 'Conversion Rate of New Members to Purchasers', attention should be given to the differences in conversion rates from registration to purchase, as this helps optimize the process of turning new members into paying customers. Lastly, the 'Average Order Value (AOV) of First-Time Buyers' can vary significantly across industries, but the strategy should involve considering customer acquisition with a long-term perspective, including offering initial incentives to attract new buyers. 

Expansion in Membership Base Expansion (New Traffic x Registration Rate)

In brand management, especially in the early stages, acquiring customers heavily depends on advertising. The size of incoming traffic and the proportion of visitors willing to register are critical indicators for evaluating the effectiveness of these advertisements. However, the registration rate is often influenced by current promotions on the website and external platforms. Therefore, it is advisable to prioritize observing trends. Significant fluctuations in these metrics are usually related to factors such as 'personalization of the customer experience' (expanding the range of Lookalike audiences to increase traffic or targeting different interest groups) or 'conflicts of campaign period between the brand's official website and other third-party online shopping platforms' (such as Shopee or MOMO), which can divert traffic away from the brand's official website. 

Apart from analyzing the causes, it is also possible to enhance the registration rate through the use of pop-up windows. When detecting user visits, employing pop-ups to communicate the same offers and products as advertised can help retain visitors and increase the registration rate.

For example, beBit TECH provides an advanced pop-up window feature that allows clients to segment traffic based on detailed UTM tags. This segmentation can differentiate traffic from various KOLs, products, and campaigns, enabling targeted communication through advanced pop-ups. This approach has proven to be effective in significantly increasing the registration rate of new visitors.

Conversion Rate of New Members to Purchasers (Add-to-Cart Rate × Cart Conversion Rate)

The registration conversion rate will never be 100%, as e-commerce consumers often compare prices across multiple sites to find the best deals. According to internal statistics from beBit TECH, despite variations between industries, over 80% of registered users across all brands make a purchase within two days of registering. Taking the health and wellness industry as example, more than 90% of customers make a purchase within two days of registering.

Therefore, the key to customer retention lies in engaging customers with effective contents in a timely manner after their registration.

In terms of timeliness, it is recommended that brands communicate marketing messages every 2-3 days, or on a weekly basis to customers who registered during the previous period but have yet to make a purchase. For those who have already implemented a Customer Data Platform (CDP), the system typically automates push notifications around the clock to customers who registered 1-3 days prior but have not bought anything.

In terms of content effectiveness, brands could seize the opportunity at the moment of membership registration to communicate captivating contents such as first-purchase offers, brand stories, product advantages, and even trials to bridge the gap with customers and increase the purchase intention for first-time buyers. To learn how to create effective contents, you may refer to the following article, which explains in detail the optimization of EDM materials.

• Continue Reading: 5 EDM Optimization Secrets to Accurately Capture Your Audience's Attention

Average Order Value (AOV) of First-Time Buyers

E-commerce brands often offer first-time purchase discounts or free gifts to new customers, which can result in a lower average order value (AOV) for these initial transactions. However, brands must remember that the goal of encouraging first-time purchases is not solely for the immediate profit, but to increase the number of customer experience of the product or service. Therefore, offering substantial discounts should be a better approach, and can be a strategic investment in building a loyal customer base.

Conclusion

While GMV is a familiar and simplified metric for e-commerce marketers, the increasingly complex competitive environment poses certain limitations to its usage. As brands advance into the maturity phase, it is crucial to consider GMV with greater detail. Capturing first-time buyers requires focusing on the immediacy and personalization of marketing efforts to convert traffic within the given short consideration period.

In the next article, we will delve deeper into strategies for managing and encouraging repeat purchases from returning customers!