Why do I need an analytics app?

In ecommerce, we live in a world of data abundance. You now have the ability to review every single customer journey from their first interaction with your brand all the way through their 12th purchase — every Instagram ad they saw, every email they clicked, every item they added to cart but didn't purchase.
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And that's cool and all, but then the question becomes what am I supposed to do with all this data?
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Analytics apps will help you make sense of your sales and marketing data so you can identify the trends in your business and make better decisions. It's all about actionable analytics.

What are some common use cases for analytics apps?

There are quite literally hundreds of analytics apps designed to help store owners solve a variety of problems. Before we dive into our recommendations, you'll want to isolate exactly what problem you're hoping to solve.

Here are a few examples of common use cases for Analytics apps:

• To better understand  where your sales are coming from
  
• To improve your onsite conversion rate
• To spot issues (or bugs) in your customer's onsite experience
  
• To identify which products are most often purchased together (or common product purchase journeys)
  
• To understand the profitability of your advertising channels and campaigns
  
• To identify how frequently customers order again
  
• To get summaries of key performance metrics at a regular interval (e.g. daily ROAS updates)
  
• To identify your VIP customers and brand advocates
  
• To analyze subscription customer cohorts and churn rates
  

Prioritizing what analytics you need right now

Not all analytics apps are created equal, and the subscription prices can vary from free to very expensive. We're all about value here at Shopdog, so depending on your use case and the stage of your business we would recommend outlining your need-to-have requirements vs. your nice-to-haves before you start looking.
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If you don't have a clear understanding of exactly what you need before you start vetting different apps, it's easy to get sold a dream from a hand-wavy salesperson promising that all your problems will go away if you just have the right "insights".
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The reality is that ecommerce analytics are complicated, and there are a million things you could analyze, but probably only a few things you should focus on right now to make a tangible impact on your bottom line.

Let's start by taking a look at the different areas of your ecommerce business to see where you need to be diving into the numbers.

The 4 categories of ecommerce analytics

Broadly speaking, there are four areas where analytics apps can help your ecommerce business: acquisition, retention, operations, and conversion rate optimization — in that order (more on that later).

Acquisition & Attribution Analytics

Acquisition is how you acquire new customers, it is your business growth engine. Whether you acquire customers with SEO, Facebook Ads, TikTok, Google, Pinterest, press, affiliate marketing, Reddit, or some other really cool new channel that we haven't even heard of yet, you're going to need to get a handle on your acquisition metrics. The most common acquisition problems brands face (as it relates to analytics) are attribution and measuring performance.

The Attribution Problem

"Facebook says this campaign drove $15k in sales, but Google Analytics only attributed $7k"

Sound familiar?

Solving for over-attribution can drive even the most level-headed data whiz mad. There are a few reasons attribution gets tricky. For one, every marketing channel is incentivized to inflate their attribution numbers to keep you spending with them. Then, each channel's attribution model may be different (i.e. FB is using 7-day view attribution and Google Analytics is using last click). And finally,  attribution will always be partly a mystery — for example,  if someone originally got to your site by clicking an Instagram ad but then only purchased after clicking a marketing email, who should get the credit? 100% email? 50/50? 25/75?

Measuring Ad Performance

Part and parcel with attribution is having a clear view of which channels are performing well and which aren't, and a level playing field upon which to compare them. Going back to attribution, if Pinterest is reporting on 28-day attribution and Facebook is reporting on 7-day attribution, comparing their ROAS (return on ad spend) is not going to be apples to apples.
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Drilling down, you'll also want to compare metrics within a channel to see which campaigns and even which specific ad creatives are performing best and the under-performers you need to kill off.
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If you find yourself going into 7 different ad platforms every day and pulling the trailing 7-day performance into a spreadsheet to get a bird's eye view of your marketing performance, then you should definitely be using a Shopify analytics plug-in.

Retention

So now you've acquired your customer (and it probably wasn't cheap) so you'll want to make sure they stick around and continue to spend with you. There are two areas here you'll want to keep an eye on, your retention metrics and retention marketing performance.

Retention Metrics

This is where you'll put your retention data under the microscope and analyze metrics like subscription churn, repeat customer rates, reorder intervals, and lifetime customer value.

Let's break these down:

Lifetime Customer Value (LTV): This is how much you can expect a customer to spend over a given period of time and this requires cohort analysis. For example, let's say a customer spent $100 on their first purchase in January, and then by July they've made two more orders for $50 each, you would say their 6-month LTV is $200.
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Repeat Customer Rate: The percentage of customers in a given time period who are returning customers. This might seem redundant with LTV because if customers come back and spend more you'd think your repeat customer rate might be higher, but repeat customer rate takes into account your store's sales overall where LTV is a per-customer metric. For example, if you scale your acquisition very quickly, your repeat customer rate might go down because as a percentage more of your sales are coming from new customers. Not a bad thing, just an important distinction to understand.

Subscription Analytics: Generally you're looking at two things here, subscription growth and subscription churn. Growth is pretty straightforward (how many new subscribers you have in a given period) while churn is the percentage of subscribers who have canceled. Obviously, you need to have subscription products for this to even be a consideration, but reporting on subscription revenue is important for a couple of reasons. One is that subscribers generate guaranteed recurring revenue, which is forecasted differently in your accounting because it isn't as seasonal as other sales. And two, subscription revenue can affect your company's valuation because it is viewed differently by investors or potential acquirers — a million dollar annual recurring revenue business is more valuable than a million dollars of regular sales (all other things being equal).

Retention Marketing

Now that you’ve outlined the metrics that you can use to measure your customer retention, you’ll want to see how your retention marketing efforts are performing and how they can improve your retention numbers.When it comes to Retention Marketing, there are three primary channels: Email, SMS, and Loyalty & Referral Programs. 

Email
Email is one of the most powerful and highest ROI retention channels because once you've paid to acquire a customer, the marginal cost to send them an email is virtually zero. While you'll need to spend time and resources to develop a successful email program, there's no middleman you need to pay to reach your customers — it is an owned marketing channel. The most popular ecommerce email marketing tool is Klaviyo.

SMS
SMS is a relatively new channel to reach existing customers (compared to email) and the SMS marketing landscape is evolving rapidly. Where email strategy needs optimization to avoid the ever-changing SPAM filters to ensure deliverability, SMS is a more direct way to get in front of customers with a virtually 100% open rate. The most popular SMS marketing platforms are Attentive and Postscript (see our comparison here).

Loyalty & Referral Programs
Last but certainly not least here is your Loyalty & Referral programs. We’ve grouped these together since most Loyalty & Referral apps provide features to support both programs but they are different. 

Loyalty programs generally offer tiered discount incentives (e.g. spend $200, get $20 off your next purchase) or points-based cash back (e.g. earn 1 point for each dollar spent, cash out 200 points for $20 off). 

Referral programs offer a two-way incentive for customers to share with their friends/network (e.g. refer one friend and you both get $10 off your next purchase, refer two and get $20 off, etc).

Every retention marketing tool will offer its own analytics within the app, but you’ll want to use a Shopify analytics app to see all your retention marketing channel performance in one dashboard.

Operations & Logistics Analytics

To run a successful ecommerce business, you need to understand your core financial metrics (e.g profit margin) and have a clear picture of your costs (e.g. COGS, marketing spend). This will allow you to find problem areas where you can trim expenses and growth opportunities where you can allocate more capital. 

Here are some of the most common operations questions that analytics apps can help you answer:

• What is my real profit after taking into account COGS, returns/refunds, taxes, shipping and fulfillment, and marketing spend?
  
• What are my most profitable marketing channels?
• What is my return rate/costs? What is getting returned most often? And how can I reduce my returns?
  
• What products are the most expensive to ship? 
  
• What are my most profitable products and collections?
  

• What is my real profit after taking into account COGS, returns/refunds, taxes, shipping and fulfillment, and marketing spend?
  
• What are my most profitable marketing channels?
• What is my return rate/costs? What is getting returned most often? And how can I reduce my returns?
  
• What products are the most expensive to ship? 
  
• What are my most profitable products and collections?
  

If you're looking to drill down into your operations and find your profit centers, you'll need an analytics app that can take a wholistic view of your business and integrate with your marketing channels and fulfillment platforms while also taking into account your fixed costs.

Conversion Rate Optimization