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10 eCommerce terms for all business owners

While jargons are avoidable in every industry and google makes it easier for everyone to tune in with just a few clicks, it’s important to be aware of a few basic terms that help the foundation of a good business. These lingos might seem foreign initially and you’ll get more used to them with time for sure but the earlier to get accustomed to them, the better. We’ve compiled a list of 10 important ecommerce terms that everyone, be it a newbie or veteran should be aware of.

  1. AB Testing – When you can’t decide between 2 options and want to see which one works better, AB testing is your go-to option. It’s more of a trial and error to analyse what works better for your campaigns.

You may create two versions of the same ad, half of the viewers will see the first ad and others will the second. Based on the conversions and other key factors it’ll be easier to determine what template to go for in the future. It’s like an experiment with 2 dices at the same time to test efficiency and based on the results, have a higher chance of performing well.

2.Average Order Value (AOV) –AOV is one of the most important business metrics for ecom stores for major business decisions. It is an e-com metric that over a defined period of time, measures the average total of every order placed with a merchant. Its formula is the total revenue divided by the total number of orders.


Revenue / Number of orders = Average Order Value

3. Business-to-Business (B2B) and Business-to-Consumer (B2C)-

i. B2B are businesses that sell only to other businesses and not direct consumers. Mostly they’re manufacturers or wholesalers that sell parts to companies to build more upon.

ii.B2C are businesses that sell only to direct consumers and not to other brands. Examples would be retailers, private stores and subscription-based software services like Amazon Prime, Netflix, etc.

4. Key Performance Indicators (KPI) – Not everyone measures success the same way and it is completely true for businesses as well. KPIs are the factors you’ve chosen to evaluate your success. It might be the number of visitors, number of clicks, revenue, landing page conversions and so on. It’s not the same for any 2 businesses and needs to be tailored according to your business goals.

5. Big Data – It is the large set of data available that needs to be processed through computers to reveal trends and patterns. It helps in analysing and getting insights that may be missed like consumer behaviour.

6. Click-through Rate (CTR)- A click-through rate analyses the number of clicks a page receives versus the total number of visitors. We get CTR by dividing the number of clicks by the number of visitors over a definite period. CTRs are commonly used to analyse and evaluate pay-per-click ads and their effectiveness.

Number of Clicks/ Number of visitors = Click-through Rate.

7. Cross-Selling- Remember when you’re buying something on stores like Amazon for example and they recommend your products that are generally bought along with your current chosen product? This is called cross-selling and it makes sense to sell products used together. Examples would be shoes and socks, adapter and cord, spoons and fork and so on.

8. Churn Rate – Churn Rate or customer churn is the process of customers leaving your brand. There may be many reasons like poor service, faulty product, high on budget, not up to the mark, bad customer service and so on. Determining the exact cause of the problems will help companies improve a lot and increase the chances of customer retention plus gaining new customers.

9. Lifetime Customer Value (LCV)- LCV is a predicted monetary amount assigned to each customer’s lifecycle based on past consumer behaviours and trends. For example, if a new customer signs up for a Netflix membership, Netflix may predict that she will spend a total of xyz amount during her time there. It becomes easier for businesses to determine how much they should be spending to get new customers based on this estimated figure. Since it is easier to retain a customer than to gain a new one, this makes companies work toward customer retention goals by improving their services.

10. Return on Investment (ROI) – ROI is the ratio between investment and profit. If a company invested 500pounds on marketing to get new customers and their LCV is 1300pounds, the ROI would be 800pounds.

It’s important for every business to know ROI of every campaign so as to ensure they’re not wasting pennies and investing more than required.

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