How eCommerce Makes Good Use of Data Analytics

The ecommerce industry is both lucrative and highly competitive. A single misstep quickly puts your business behind competitors. How do you maintain your lead or ensure a profitable market share?

This article discusses how a San Diego analytics agency leverages data to help you achieve online business goals, especially in the following areas:

• Understanding customer needs
• Optimizing marketing campaigns and processes
• Increasing revenues
• Predicting growth and trends
• Improving customer loyalty

Data analysis is a vital process that lets you scale your ecommerce business cost-effectively. Read below and discover how to maximize this process.

1. Understand Customer Needs

Make your customers happy, and money follows—but who are they? How do they find your website? What products do they like to buy? How much are they willing to spend? What do they think about your brand? How does their brand perception affect your bottom line?

Data analytics help answer these questions without the inaccuracies that arise when guessing or assuming what buyers want. Using customer information lets you know buyers more deeply and better understand their needs, so you can offer a more satisfying online experience. Most importantly, when using the information gained through data analytics you run marketing campaigns that match user intent.

The most successful San Diego ecommerce businesses tap into data to do the following:

• Segment customers.
• Map their buying journeys.
• Listen to their feedback. 

Customer segmentation is the process of categorizing prospects and existing buyers into different groups. These range from demographics, such as age and location, to psychographics, focusing on their behavior. 

This process recognizes that customer needs and challenges vary. For example, Encinitas yoga enthusiasts want flexibility and inner peace. Carlsbad triathletes focus on endurance and speed. If you are an online athletics retailer, understanding these widely divergent motivations guides your messaging and content. 

Data analytics is also useful in tracking the customer journey, often revealing critical conversion barriers. It might uncover that your long sales form leads to cart abandonment. Fixing it might increase sales by 10% more. 

Lastly, customer information is valuable when performing sentiment analysis. You might have a messaging problem if your value proposition is sustainability, but customers do not see it.

2. Optimize Ecommerce Operations

San Diego has a vibrant online business economy. However, running a company here is often expensive and complicated. Besides the high cost of living that increases overhead and labor costs, California imposes strict internet regulations. 

These factors are beyond your control. But you can collect business data to manage backend operations and costs. When you optimize the supply chain and marketing, you improve your bottom line, especially on returns and cash flow. 

For instance, a San Diego analytics agency analyzes data to enhance the marketing mix, or the 4 P’s:

• Price
• Product
• Promotion
• Place 

Consider an ecommerce shop offering craft brewery supplies in the city. Social media promotions double the sale of its new hops by 20%. However, email vouchers to existing customers drive still more revenue. 

Additionally, the analytics reveal that breweries buying their own equipment and ingredients have a higher lifetime value. This suggests the business can increase sales if it expands its product line. Tracking referral traffic also informs the shop that partnering with brewing blogs is more cost-effective than affiliate marketing. 

Meanwhile, a local South Mission Beach surf shop wants to boost its ecommerce conversion rates. The analytics team compares metrics with an A/B test on the website’s checkout process. The result says that guest checkouts convert 15% more orders. 

3. Increase Sales 

Any ecommerce business drives more revenue by getting customers to buy more. One strategy to encourage more spending is the use of  recommendation engines.

Recommendation engines are software tools that analyze customer data and behavior to personalize product recommendations. They then display these suggested items across multiple marketing channels to influence buying decisions. These include onsite search results, push notifications, and emails.

In the process, these platforms increase the customer’s lifetime value by:

• Facilitating repeated purchases of consumables that customers buy over and over.
• Increasing order frequency.
• Adding more items to every order through upsells and cross-sells.
• Giving them what they need as well as what they think they want.

San Diego online businesses also use data analytics for dynamic pricing. This involves managing prices in real time based on the following factors:

• Supply and demand
• Competitor pricing
• Time of day or season

For example, Old Town hotels raise room prices during major conventions and decrease them on weekdays and off-season. They also run special promotions or offer discounts when new local accommodations open.

4. Predictive Analytics

More internet retailers also use big data for predictive analytics. This segment's market size is projected to reach over $65 billion by 2030. 

It is popular and valuable for the following reasons:

• Analyzing seasonal sales levels, marketing campaigns, and changing trends leads to more precise sales forecasts and inventory management.
• Predictive analytics identifies the most effective marketing strategies for targeting high-value customers. 
• It allows e-retailers to engage proactively with leads and buyers likely to abandon the business.
• Predictive algorithms enable real-time pricing adjustments based on demand signals to maximize revenue. 
• It quickly identifies potentially fraudulent transactions to reduce losses.

The ecommerce giant Amazon relies heavily on predictive analytics for same-day delivery. 

Sophisticated forecasting models can anticipate regional customer demand. For instance, analysis of past order data and customer attributes can be used to appropriately determine staffing and scheduling at local fulfillment centers in order to meet projected order volumes. This also enables targeted marketing for those most likely to pay a premium.

On the logistics side, predictive analytics consider traffic patterns, demand density, weather, and labor availability. It then optimizes delivery routes, driver assignments, and shift schedules to minimize fulfillment costs. 

5. Customer Retention

Lastly, retention modeling uses data to identify loyal customers. Data can also be used to predict those who are at risk of not returning. 

How? Through metrics such as the net promoter score (NPS).

NPS is a metric for customer satisfaction that Fred Reichheld developed in 2023. It is based on the idea that happy clients stay with the business. They also contribute to higher revenues by becoming brand advocates. 

NPS asks customers on a 0–10 scale, “How likely are you to recommend our company/product/service to a friend or colleague?” A San Diego analytics agency then categorizes participants as:

• Promoters (9-10). These loyal enthusiasts will likely keep buying and referring the products to others.
• Passives (7-8). These people are satisfied but unenthusiastic. E-retailers might convert them into promoters with competitive offerings.
• Detractors (0-6). These are the unhappy customers who might damage the brand through negative word-of-mouth.

The NPS then subtracts the percentage of detractors from promoters. This produces a score from -100 to +100.  The higher the score the better the business is doing with customer retention. 

Tracking NPS identifies problems and opportunities for growth. It also guides investments and benchmarks your brand against competitors. 

Summing Up

Ecommerce moves fast, and only those that keep up survive. Data analytics helps you thrive despite intense competition by providing actionable insights into customer behavior and business optimization. 

These factors alone already improve conversion rates and more effectively target marketing efforts. They also deliver a tailored experience that promotes customer retention. 

Are you ready to grow your online business with accurate, relevant information? Digital Authority Partners (DAP) is an award-winning San Diego data analytics agency. We help over 250 companies increase their lead conversion by 92%. Contact us today to learn how we can do the same for you.