The Average SKU Rating is a key performance indicator (KPI) that measures overall customer satisfaction with specific products in an ecommerce catalog. It's calculated based on the aggregate ratings provided by customers after they've made a purchase.
By monitoring this KPI, companies can gauge product quality, understand customer preferences, and make informed decisions about inventory, marketing, and customer service.
Key Takeaways
- Definition: Average Item (SKU) Rating is a KPI that measures customer satisfaction with specific products in an ecommerce catalog, calculated based on aggregate post-purchase customer ratings.
- Calculation: It’s calculated by dividing the sum of the ratings for a particular product by the total number of ratings it has received.
- Strategic importance: Helps measure product quality, understand customer preferences, and make informed decisions about inventory, marketing, and customer service. A high average rating can increase consumer confidence and potential sales.
- Optimization Strategies: Encouraging customer reviews, addressing negative feedback promptly, improving product quality, providing clear product descriptions, implementing robust return/exchange policies, and maintaining open communication with customers are key ways to improve SKU ratings.
- Limitations: Average Item (SKU) Rating does not reflect overall product quality, can be influenced by subjectivity and biased reviews, does not differentiate between verified and non-verified buyers, lacks context without additional metrics, and does not indicate sales volume.
- Complementary metrics: This KPI should be evaluated along with product return rate, Net Promoter Score (NPS), customer feedback frequency, and product sales volume for a comprehensive understanding of product performance and customer preferences.
Why does Average Item (SKU) Rating matter for your business?
The significance of the Average Item (SKU) Rating for an ecommerce business is multifaceted:
- Consumer Trust: A high average rating can instill confidence in potential customers, making them more likely to purchase the product.
- Product Optimization: Tracking this KPI helps businesses identify underperforming products that may need improvement or discontinuation.
- Inventory Management: Products with higher ratings might require more stock due to increased demand, while those with lower ratings may need reassessment.
- Feedback Loop: It provides direct feedback from customers, allowing businesses to address concerns, improve product quality, and adapt to market demands.
- Marketing Insights: Understanding product ratings can guide marketing campaigns, with emphasis on high-rated products to drive sales.
- Enhanced Customer Service: Addressing issues related to products with low ratings can improve customer service and overall brand image.
How to calculate Average Item (SKU) Rating ?
Explanation of the parts of the formula:
- Sum of ratings represents the total combined score of all ratings given for a specific product. For instance, if a product received three ratings of 4, 5, and 3 stars respectively, the sum would be 12.
- Number of ratings is the total count of ratings that a specific product has received. It gives an indication of the product’s popularity and how many customers have provided feedback for it.
- The ratio gives the average rating for a product, indicating the overall customer satisfaction and product quality. This value can range between the minimum and maximum possible rating values, typically 1 to 5 or 1 to 10, depending on the rating system used.
In essence, the Average Item (SKU) Rating provides insights into the general opinion of customers about a product. A high average rating indicates that most customers are satisfied with the product, while a low rating suggests areas of potential improvement.
Example Scenario
Imagine that a particular product, say a pair of headphones, received the following ratings from customers:
- 5 customers rated it 5 stars.
- 3 customers rated it 4 stars.
- 2 customers rated it 3 stars.
To calculate the Average Item (SKU) Rating:
- First, find the sum of ratings: (5×5) + (3×4) + (2×3) = 25 + 12 + 6 = 43.
- Next, determine the total number of ratings: 5 + 3 + 2 = 10.
- Average Item (SKU) Rating = 43 / 10
- Average Item (SKU) Rating = 4.3 stars.
This means that on average, customers rated the headphones 4.3 stars out of a possible 5 stars.
Tips and recommendations for improving Average Item (SKU) Rating
Encourage customer reviews
Encouraging customers to leave reviews is an excellent way to improve your average item (SKU) rating. The first step is to make the process of leaving a review as easy as possible. This can be done by sending follow-up emails after a purchase, asking for feedback, and even offering incentives for reviews. By offering incentives, you’re showing your customers that their opinions matter and rewarding them for their time, which can lead to a higher number of reviews and a better overall rating.
Address negative feedback
Addressing negative feedback is an essential strategy for improving SKU ratings. By regularly monitoring product reviews, you can respond quickly to any concerns or negative feedback. By taking action to resolve these issues, you not only improve the product, but also show customers that their feedback is valued. This can lead to increased customer satisfaction and a more positive perception of your brand, which in turn improves ratings.
Improve product quality
Improving product quality is another important way to improve SKU ratings. Regularly evaluating and refining product quality can help identify areas for improvement. If a product consistently receives low ratings, it’s worth rethinking its design or sourcing. By continually striving to improve the quality of your products, you can ensure that they meet or exceed customer expectations, resulting in higher ratings.
Provide clear product descriptions
Providing clear and accurate product descriptions is essential to setting appropriate customer expectations and consequently improving SKU ratings. Detailed descriptions allow customers to fully understand what they’re buying, reducing the likelihood of disappointment when they receive the product. When customers receive exactly what they expected, they are more likely to leave a positive review, increasing overall ratings.
Implement a robust return and exchange policy
Implementing a robust return and exchange policy can also have a significant impact on SKU ratings. When customers feel confident that they can easily return products that do not meet their expectations, they are less likely to leave a negative review. A flexible return policy shows customers that their satisfaction is paramount, which can lead to more positive reviews and improved ratings.
Engage in open communication
Maintaining open communication with customers who leave reviews is another effective strategy for improving SKU ratings. Responding to both positive and negative reviews shows customers that their feedback is valued. This engagement can provide deeper insights into what customers like or dislike about a product, allowing you to make necessary improvements. It also fosters brand loyalty, as customers appreciate brands that listen and respond to their feedback.
Examples of use
Inventory Management
- Scenario: An ecommerce platform selling electronics notices that a particular brand of headphones has a lower SKU rating than competitors.
- Use Case Application: Based on the low rating, the platform can decide to stock fewer units of these headphones or even consider replacing them with a better-rated product. This proactive approach can prevent overstocking underperforming items and optimize inventory costs.
Marketing Focus
- Scenario: A DTC fashion brand observes that certain dresses in their collection have exceptionally high SKU ratings.
- Use Case Application: The brand can amplify marketing campaigns around these high-rated dresses, using customer reviews and ratings in promotional material to drive more sales.
Product Development
- Scenario: A DTC skincare brand identifies a moisturizer with mixed SKU ratings, with some customers mentioning a strong fragrance as a negative.
- Use Case Application: The brand can reformulate the moisturizer to have a milder fragrance, addressing customer feedback and potentially improving future ratings and sales.
Customer Service Enhancement
- Scenario: An online book store finds that certain books have low SKU ratings due to shipping damages.
- Use Case Application: The store can improve its packaging methods for those specific books, ensuring they reach customers in pristine condition, and thereby potentially elevating the SKU rating.
Pricing Strategy
- Scenario: An ecommerce platform selling shoes observes that high-priced sneakers have a lower SKU rating due to perceived value-to-cost mismatch.
- Use Case Application: The platform can consider offering occasional discounts or bundling the sneakers with other complementary products to enhance perceived value and improve SKU ratings.
Average Item (SKU) Rating SMART goal example
Specific – Increase the average SKU rating from 3.5 to 4.5 stars (out of 5) for our top 50 products.
Measurable – Average Item (SKU) ratings will be continuously monitored and compared month-over-month to track improvements.
Achievable – Yes, by soliciting more customer feedback, improving product quality based on feedback, providing better product descriptions, and improving customer service.
Relevant – Yes. This objective aligns with the company’s goal of increasing customer satisfaction, which in turn increases sales and brand loyalty.
Timed – Within the next 12 months.
Limitations of using Average Item (SKU) Rating
While the Average Item (SKU) Rating is a significant metric for understanding customer satisfaction with specific products in an ecommerce environment, it has its limitations when utilized for comprehensive business analysis:
- Doesn’t Reflect Overall Product Quality: The rating only captures customer feedback based on their individual experiences. It doesn’t necessarily provide a holistic view of the product’s quality, functionality, or other attributes.
- Can Be Influenced by Subjectivity: Ratings can be highly subjective. Different customers might have varying expectations, and a low rating from one customer might not necessarily mean the product is of poor quality.
- Doesn’t Differentiate Between Verified and Non-verified Purchasers: Not all platforms distinguish between ratings given by verified buyers and those who haven’t made a purchase, which can skew the actual perception of the product.
- No Insight into Rating Criteria: Some customers might give a product a low rating due to shipping issues or packaging, which doesn’t actually reflect the product’s quality or functionality.
- Subject to Biased Reviews: Ratings can be influenced by incentivized reviews, where customers are offered discounts or freebies in exchange for positive ratings.
- Not Indicative of Sales Volume: A product with a high average rating might not necessarily be a bestseller, and conversely, a product with a lower rating might still have high sales due to other factors like pricing or brand loyalty.
- Overemphasis Can Neglect Other Feedback Channels: While trying to improve the Average Item (SKU) Rating, businesses might overlook other valuable feedback channels like written reviews, customer service interactions, or social media feedback.
- Lacks Context Without Additional Metrics: An Average Item (SKU) Rating in isolation doesn’t provide a comprehensive view. For instance, a product with few reviews but a high average rating might not be as reliable as a product with hundreds of reviews and a similar average rating.
In summary, while the Average Item (SKU) Rating is a useful metric for measuring customer satisfaction with specific products, it should be analyzed in conjunction with other metrics and feedback channels to gain a thorough understanding of product performance and customer preferences. It shouldn’t drive inventory or marketing decisions alone.
KPIs and metrics relevant to Average Item (SKU) Rating
- Product Return Rate: A high product return rate in conjunction with a low SKU rating can signal significant product issues that need immediate attention.
- Net Promoter Score (NPS): Measures customer loyalty and satisfaction. A product with a high SKU rating but a low NPS could indicate external issues like shipping delays or packaging problems.
- Customer Feedback Frequency: The number of feedback or reviews a product receives can provide context to its SKU rating. A product with fewer reviews but a high rating might not be as reliable as one with hundreds of reviews and a similarly high rating.
- Product Sales Volume: This metric tracks the number of units sold. A product with a high SKU rating but low sales might indicate issues with visibility or marketing.
By closely monitoring the Average Item (SKU) Rating in conjunction with these metrics, your company can ensure product quality, customer satisfaction, and ultimately improved profitability.
Final thoughts
The Average Item (SKU) Rating is not just a number; it’s a reflection of customer satisfaction and product quality. By closely monitoring and responding to this metric, businesses can refine their products, improve the customer experience, and increase sales. Remember, in the world of e-commerce, customer feedback is invaluable, and SKU ratings provide a direct channel to that feedback.
Average Item (SKU) Rating FAQ
What is Average Item (SKU) Rating?
It represents the mean rating given by customers for a specific product or SKU on an ecommerce platform.
How is it beneficial for my ecommerce business?
It provides insights into product performance, customer satisfaction, and areas of improvement, ultimately guiding inventory, marketing, and product development decisions.
How can I improve a product’s SKU rating?
Engage with customers, address negative feedback, enhance product quality, provide accurate product descriptions, and ensure a seamless shopping experience.
Are there other KPIs related to SKU Rating?
Yes, Product Return Rate, Net Promoter Score (NPS), Customer Feedback Frequency, and Product Sales Volume are some KPIs that complement SKU Rating.
If a product’s SKU rating is high, does it guarantee higher sales?
While a high SKU rating can boost consumer trust and potentially drive sales, other factors like marketing, visibility, and pricing also play a crucial role in sales volume.