The UK SME Owner's Guide to Setting Up and Measuring E-Commerce Metrics That Actually Matter

Let's be honest - if you're running an e-commerce business and you're not tracking your key metrics, you're essentially flying blind. You might feel like you're doing well because orders are coming in, but without understanding your Average Order Value (AOV), Customer Lifetime Value (CLV), Customer Acquisition Cost (CAC), and Return on Ad Spend (ROAS), you could be hemorrhaging money without even realising it.

I've seen countless UK e-commerce owners who thought they were profitable, only to discover they were spending £40 to acquire customers who only ever bought once for £25. That's a recipe for disaster, and it's entirely preventable.

The good news? These metrics aren't as complicated as they sound, and you don't need expensive software to track them effectively. Here's everything you need to know to set up proper measurement protocols and start making data-driven decisions that actually grow your business.

Why These Four Metrics Are Your Business Lifeline

Before we dive into the how-to, let's quickly cover why these specific metrics matter so much for UK e-commerce businesses:

• AOV tells you how much each customer spends per order (crucial for pricing and promotion strategies)

• CLV reveals the total value a customer brings over their entire relationship with your brand

• CAC shows exactly how much you're spending to acquire each new customer

• ROAS measures how much revenue you generate for every pound spent on advertising

Setting Up and Measuring E-Commerce Metrics - A step by step guide to follow

Together, these four metrics give you a complete picture of your business health and profitability.

Setting Up Average Order Value (AOV) Tracking

What it is: The average amount customers spend per transaction.

How to calculate it: Total Revenue ÷ Number of Orders = AOV

Setting it up: If you're using Shopify, your AOV is automatically calculated in Analytics → Reports → Sales reports. For other platforms, you can easily create this in Google Analytics 4 under Reports → Monetization → Ecommerce purchases.

How to measure it effectively:

• Track AOV monthly rather than daily (daily fluctuations can be misleading)

• Segment by traffic source (organic vs. paid vs. email) to see which channels bring higher-value customers (Retention X software is great for this)

• Compare AOV across different product categories

• Monitor seasonal trends - UK retail typically sees AOV spikes in Q4 for instance
  

What good looks like: AOV varies massively by industry, more importantly, you want to see consistent month-on-month growth of 3-5%.

Quick wins to improve AOV:

• Bundle complementary products together

• Offer free shipping thresholds 15% above your current AOV

• Use "customers who bought this also bought" recommendations

• Implement exit-intent popups with discount codes for larger orders
  

Mastering Customer Lifetime Value (CLV)

What it is: The total revenue you can expect from a customer throughout their entire relationship with your business.

Basic calculation: (Average Order Value × Purchase Frequency × Gross Margin) × Average Customer Lifespan

Setting it up: This one's trickier to automate, but here's a practical approach:

1. In Google Analytics 4: Go to Reports → Monetization → Customer lifetime value

2. In Shopify: Use Retention X app, or export customer data to calculate manually

3. DIY approach: Export your customer data quarterly and calculate using the formula above
   

How to measure it effectively:

• Calculate CLV for different customer segments (first-time buyers vs. repeat customers)

• Track CLV by acquisition channel - some channels bring customers who spend more over time

• Monitor how CLV changes after implementing retention strategies

• Compare CLV across different product categories
  

What good looks like: Your CLV should be at least 3x your CAC. For UK e-commerce, a healthy CLV might be anywhere from £100-£500+ depending on your industry.

Strategies to improve CLV:

• Implement email marketing sequences for repeat purchases

• Create loyalty programmes that reward frequent buyers

• Offer subscription options where appropriate

• Focus on customer service excellence to reduce churn
  

Calculating Customer Acquisition Cost (CAC)

What it is: How much you spend to acquire each new customer across all marketing channels.

How to calculate it: Total Marketing Spend ÷ Number of New Customers Acquired = CAC

Setting it up:

1. Track all marketing costs: This includes ad spend, email marketing tools, content creation, staff time, agency fees - everything

2. Define "new customer": Make sure you're only counting first-time buyers, not repeat purchases

3. Use consistent timeframes: Monthly tracking usually works best for most industries
   

Platform-specific tracking:

• Google Ads: Cost ÷ Conversions (with conversion tracking properly set up)

• Facebook Ads: Total spend ÷ Purchase conversions from new customers

• Overall CAC: Use a simple spreadsheet to track total marketing spend vs. new customers monthly
  

What good looks like: Your CAC should be recovering within 3-6 months through repeat purchases. If it takes longer than 12 months to recover CAC, you've got a problem.

Ways to reduce CAC:

• Improve your website conversion rate (more customers from the same traffic)

• Focus on retention to increase referrals and word-of-mouth

• Optimise your best-performing campaigns and pause underperformers

• Invest in SEO for long-term, "free" traffic
  

Mastering Return on Ad Spend (ROAS)

What it is: How much revenue you generate for every pound spent on advertising.

How to calculate it: Revenue from Ads ÷ Ad Spend = ROAS

Setting it up:

• Google Ads: This is automatically calculated if you have conversion tracking set up properly

• Facebook Ads: Available in your Ads Manager under "Return on ad spend"

• Overall ROAS: Track total ad revenue vs. total ad spend across all platforms
  

The tricky bit - attribution: With iOS 14.5 and cookie changes, tracking isn't as straightforward as it used to be. Here's what to do:

1. Set up first-party tracking through Google Analytics 4

2. Use UTM parameters for all campaigns

3. Implement server-side tracking where possible

4. Consider using tools like Triple Whale for better attribution
   

What good looks like:

• Minimum viable ROAS: 3:1 (£3 revenue for every £1 spent)

• Good ROAS: 4-6:1 for most UK e-commerce businesses

• Excellent ROAS: 7:1+ (but don't chase this at the expense of scale)
  

Improving your ROAS:

• Test different ad creatives and audiences regularly

• Exclude audiences that don't convert well

• Use dynamic product ads for e-commerce

• Focus ad spend on your highest-margin products
  

Creating Your Monthly Metrics Dashboard

Here's a simple approach to track everything without getting overwhelmed:

Week 1 of each month:

• Export data from all platforms (Google Ads, Facebook, Shopify, etc.)

• Calculate your four key metrics

• Compare to previous month and same month last year
  

What to track in a simple spreadsheet:

• Month/Year

• Total Revenue

• Total Orders

• AOV

• Total Marketing Spend

• New Customers

• CAC

• Ad Spend

• Ad Revenue

• ROAS

• Estimated CLV
  

Red flags to watch for:

• CAC increasing faster than AOV

• ROAS dropping below 3:1 consistently

• CLV stagnating or declining

• AOV decreasing month-on-month
  

Making Decisions Based on Your Data

Once you're tracking these metrics consistently, here's how to use them:

If your CAC is too high: Focus on conversion rate optimisation, improve your targeting, or increase AOV through upsells

If your AOV is stagnating: Implement bundling, increase free shipping thresholds, or review your pricing strategy

If your CLV is low: Invest heavily in email marketing, customer service and retention programmes

If your ROAS is declining: Audit your ad accounts, refresh creative assets, or redistribute budget to better-performing campaigns

In a nutshell

These metrics aren't just numbers on a spreadsheet - they're the vital signs of your business. Start tracking them consistently, and you'll quickly spot problems before they become crises and opportunities before your competitors do.

Begin with simple calculations in a spreadsheet if you need to. The important thing is to start measuring consistently. You can always upgrade to fancier tools later, but you can't go back and retroactively track metrics you should have been monitoring from the beginning.

Need help Setting Up and Measuring E-Commerce Metrics? Book in for one of our strategy days here