Why RPV is the #1 Metric for eCommerce Growth [Updated 2020]
There are literally hundreds of eCommerce marketing metrics to choose from, and almost all of them measure something of value. However, at HiConversion, we believe the most important metric to achieve growth on your eCommerce website is Revenue Per Visitor (RPV) – and to better understand why, let’s first define what exactly it is.
But before we start, here are some key takeaways that we’ll also explore further in this article:
- Popular eCommerce website metrics and how they interact with each other
- Customer interaction can be either positive or negative
- Revenue Per Visitor is actually a composite index, influenced by Conversion Rate and Average Order Value
What is Revenue Per Visitor (RPV) in eCommerce?
Business leaders typically don’t pay attention to about 99% of marketing metrics. They focus more on the areas of primary concern such as revenue, margin, profit, cash flow, ROI, shareholder value – in other words, their companies’ ability to generate more profit and faster growth than their competitors.
So, why should RPV be part of that 1%?
According to Optimizely , “Revenue per Visitor (RPV) is a measurement of the amount of money generated each time a customer visits your website. It is calculated by dividing the total revenue by the total number of visitors to your site, and is a method of estimating the value of each additional visitor.”
RPV is one of the key financial performance metrics of your eCommerce site, and one of the primary objectives in any revenue performance optimization strategy. This composite metric combines Conversion Rate (CR) and Average Order Value (AOV) into an actionable data point. It measures the money your website makes every time a customer enters your eCommerce store.
eCommerce professionals often think that Conversion Rate or Average Order Value are the best metrics to use for revenue generation. However, RPV is poorly understood and rarely used as a metric. You may be surprised that using RPV can help increase revenue significantly on your eCommerce site.
Conversion Rate (CR) definition:
If your goal is to generate more revenue on your eCommerce site, it is logical to think that increasing the number of conversions (i.e. visitors who buy products on your site) will result in revenue growth.
In eCommerce marketing, the global Conversion Rate is the proportion of unique visitors that converted (i.e. made a purchase on the site). Micro-conversions are defined as proportions of unique visitors that performed a desirable action on the eCommerce site.
For example, a micro-conversion can be a proportion of unique visitors that selected any product on the site. They may not have made a purchase yet, but by selecting a product they moved one step further in the site’s sales funnel. Mathematically speaking, the Conversion Rate (CR) can be expressed as:
Conversion Rate = Conversions/Visits
Similarly to an increase in conversion rate, there are no guarantees that a lift in AOV will translate into a proportional increase in revenue:
This approach may stimulate sale of higher priced items, but the number of people who will make a purchase may go down, resulting in a decrease of your overall sales.
The Best Definition of Revenue Per Visitor (RPV):
Revenue Per Visitor (RPV) is a composite metric that combines Conversion Rate and Average Order Value into a single number.
It is calculated by dividing Revenue by Number of Visitors in a specific Period of Time, as follows:
Revenue Per Visitor = Revenue/Visitors
What would a better understanding of your site’s RPV mean to you?