The Total Customers KPI is a fundamental metric for any ecommerce business, reflecting the total number of unique customers who have made at least one purchase.
This KPI is not just a number; it represents the breadth and loyalty of your customer base, which is critical to maintaining and expanding your business’s reach. It is a quantifiable reflection of your market penetration and is critical for shaping marketing strategies, sales efforts, and understanding the overall health of customer relationships.
Key Takeaways
- Definition: Total Customers is a fundamental metric for any e-commerce business, reflecting the total number of unique customers who have made at least one purchase.
- Calculation: Total Customers is calculated by counting the number of unique customers who have made at least one purchase.
- Strategic Importance: The Total Customers KPI is critical for understanding customer retention, market reach, revenue forecasting, marketing effectiveness, and driving product development.
- Optimization Strategies: Increasing Total Customers involves improving acquisition and retention strategies such as improving marketing campaigns, optimizing the customer experience, leveraging social proof, implementing referral programs, and maintaining customer engagement.
- Limitations: The Total Customers metric does not measure customer retention or loyalty, does not predict future revenue, does not consider customer lifetime value (CLV), can encourage quantity over quality, can be misleading during market fluctuations, does not reflect market penetration, and is subject to duplication of effort.
- Complementary metrics: Total Customers should be evaluated alongside metrics such as Customer Retention Rate, Customer Acquisition Cost (CAC), and Average Order Value (AOV) for a comprehensive view of ecommerce performance.
Why does Total Customers matter for your business?
In the e-commerce landscape, the Total Customers KPI is important for several reasons:
- Customer Retention: A growing ‘Total Customers’ count is indicative of effective customer retention strategies. It means that the business is not only attracting but also maintaining a solid customer base.
- Market Reach: It allows you to measure the reach of your business in the marketplace. The more customers you have, the broader your market influence is.
- Revenue Predictions: Understanding your customer base helps predict future revenue, especially when combined with other metrics such as AOV and purchase frequency.
- Marketing Effectiveness: This KPI helps you gauge the effectiveness of your marketing campaigns in attracting new customers.
- Product Development: Insights into your customer base can drive product development, ensuring that new products cater to the needs and wants of a well-understood customer demographic.
How to calculate Total Customers ?
Explanation of the parts of the formula:
- Count of unique customers represents the individual customers who have been identified as distinct entities within a database or system. Each customer is counted only once, regardless of how many purchases they have made.
- The condition with ≥1 purchase specifies that in order to be included in the count, a customer must have completed at least one purchase. This means that only those customers who have actually gone through with a transaction are considered.
- Total Customers is the resulting metric that gives us the total number of unique customers who have made at least one purchase. It reflects the customer base size that the business has effectively reached and converted into buyers.
In essence, the Total Customers metric is a count of all the unique individuals who have engaged with the business by making a purchase, providing insight into the breadth of the customer base.
Example Scenario
Imagine that over the lifetime of a store:
- There were 5,000 individual transactions recorded.
- Out of these transactions, they were made by 3,000 unique customers – some made multiple purchases, and some made just one.
Insert the numbers from the example scenario into the above formula:
- Total Customers = Count of unique customers with ≥1 purchase
- Total Customers = 3,000
This means that the store has successfully attracted 3,000 unique customers to make purchases over its lifetime.
Tips and recommendations for increasing Total Customers
Increasing your ‘Total Customers’ KPI involves enhancing acquisition and retention strategies:
Improve customer acquisition strategies
Effective marketing campaigns are key to attracting new customers. By leveraging data analytics, you can gain a deeper understanding of your target demographics, preferences, and buying habits. With this knowledge, you can tailor your marketing messages to resonate with prospects on a personal level, increasing their engagement with your brand and the likelihood of conversion.
Improve the customer experience
The customer journey should be as seamless and enjoyable as possible to increase the likelihood of converting one-time purchases into repeat business. This includes a user-friendly site design that makes it easy for customers to find what they’re looking for and make purchases. In addition, exceptional customer service is paramount, as it can resolve any issues quickly and efficiently, leaving customers feeling valued and satisfied.
Leverage social proof
Social proof acts as a trust-building tool that can significantly influence a potential customer’s decision to purchase. Encourage your existing customers to leave reviews and ratings for your products or services. Positive reviews can attract new customers by showing them that others have had good experiences with your brand. They can also help build confidence in your products, increasing the likelihood of a purchase.
Referral programs
Referral programs are a powerful organic growth tool. They work by rewarding your existing customers for bringing in new ones, creating a win-win situation. Customers feel appreciated for their loyalty and advocacy, while you benefit from an increased customer base. By implementing a robust referral program, you can encourage word-of-mouth marketing, which is often more effective than traditional advertising methods.
Customer engagement
Maintaining regular communication with your customers is essential to keeping them engaged and interested in your brand. This could include updates on new product launches, personalized offers based on their purchase history, or simply newsletters with interesting content related to your industry. Such regular touchpoints can create a sense of community around your brand, fostering loyalty and encouraging repeat purchases.
Examples of use
Targeted Email Marketing Campaigns
- Scenario: An ecommerce company identifies that repeat customers make up a large percentage of their revenue.
- Use Case Application: The company can use targeted email marketing to re-engage past customers who haven’t made a purchase recently, potentially increasing the ‘Total Customers’ count.
Referral Incentives
- Scenario: Customer acquisition costs are increasing, and the business wants a cost-effective strategy.
- Use Case Application: Implement a referral program that rewards existing customers for referring new customers, thereby growing the ‘Total Customers’ metric.
Social Media Outreach
- Scenario: The business has a strong social media presence but low conversion to sales.
- Use Case Application: Use social media platforms to engage with the audience and drive traffic to the ecommerce site with exclusive deals, enhancing the ‘Total Customers’ KPI.
Customer Feedback and Adaptation
- Scenario: Sales are steady, but new customer growth is stagnant.
- Use Case Application: Solicit and analyze customer feedback to identify what new potential customers might be looking for, using these insights to attract a broader customer base.
Marketplace Expansion
- Scenario: The business is performing well in its current market but wants to expand.
- Use Case Application: By entering new marketplaces or geographic regions online, the business can increase its ‘Total Customers’ count through broader exposure.
Total Customers SMART goal example
Specific – Increase the total number of unique customers who have made at least one purchase by 30% from the current base of 10,000 customers.
Measurable – Customer growth is tracked through the CRM system by comparing the monthly number of new customers who have made a purchase to the baseline.
Achievable – Yes, by implementing targeted marketing campaigns, improving customer service, optimizing the sales funnel, and expanding product offerings to attract new customers.
Relevant – Yes. Expanding the customer base is critical to revenue growth and aligns with the company’s strategic goal of increasing market share and building a loyal customer base in the coming fiscal year.
Timed – By the end of the next fiscal year, resulting in at least 3,000 additional customers making a purchase.
Limitations of using Total Customers
While the Total Customers metric is essential for understanding the size of a customer base in an e-commerce environment, it has limitations when used for business analysis:
- Does Not Measure Customer Engagement: Total Customers count gives no indication of how engaged customers are with the brand. A customer making a single purchase has a different value compared to one who is frequently returning and interacting with the brand.
- Lacks Insights on Customer Loyalty: The metric does not differentiate between one-time buyers and repeat customers. A growing number of total customers is positive, but without context, it doesn’t reflect customer loyalty or the effectiveness of retention strategies.
- Not a Predictor of Future Revenue: Total Customers is a historical metric; it counts all customers who have ever made a purchase but doesn’t indicate whether they will make future purchases.
- Doesn’t Account for Customer Lifetime Value (CLV): Without combining with CLV, Total Customers does not indicate the profitability or long-term value of the customer base. It only reflects quantity, not quality.
- May Encourage Quantity Over Quality: Focusing on increasing the Total Customers metric might lead businesses to pursue aggressive customer acquisition strategies that neglect the importance of acquiring the ‘right’ kind of customer.
- Can Be Misleading During Market Fluctuations: Seasonal spikes in purchases, such as during holidays, can temporarily increase the total customer count but not represent sustainable growth.
- Does Not Reflect Market Penetration: Knowing the number of unique customers alone isn’t enough to understand a business’s market share or penetration since it does not provide insight into the potential customer base.
- Subject to Duplication Errors: If the data isn’t clean or well-managed, Total Customers can be inflated due to duplication where one customer is counted multiple times.
In summary, while total customers is a metric that can provide a snapshot of a company’s reach, it should not be used in isolation. It must be paired with engagement, retention, and value metrics to provide a more strategic view of a company’s health and potential.
KPIs and metrics relevant to Total Customers
- Customer Retention Rate: This measures the percentage of customers who continue to buy over a given period. A high retention rate usually complements a high ‘Total Customers’ KPI.
- Customer Acquisition Cost (CAC): CAC is the cost associated with convincing a customer to buy a product/service. This KPI is essential for understanding the investment required to increase the ‘Total Customers’ count.
- Average Order Value (AOV): While ‘Total Customers’ focuses on the number of customers, AOV focuses on the average spend per customer. Higher AOV can signal a high-value customer base.
Final thoughts
The Total Customers KPI is an essential metric for ecommerce businesses. It serves as a measure of customer base size, market reach, and overall business health. By focusing on strategies that improve customer experience, acquisition, and retention, businesses can ensure a solid foundation for sustainable growth. Regular analysis of this metric, among others, provides a comprehensive understanding of customer dynamics and business performance.
Total Customers FAQ
What does ‘Total Customers’ refer to in ecommerce?
‘Total Customers’ measures the number of unique individuals who have made at least one purchase from an ecommerce store. This metric is essential for understanding the size and growth of your customer base.
Why is tracking ‘Total Customers’ important?
Monitoring ‘Total Customers’ helps ecommerce businesses to gauge market penetration, customer loyalty, and the effectiveness of marketing campaigns. It can also predict future revenue and inform growth strategies.
How can an ecommerce business increase its ‘Total Customers’?
Enhancing the customer experience, investing in targeted marketing, implementing referral programs, and expanding to new markets are effective strategies for increasing the ‘Total Customers’ metric.
What is the difference between ‘Total Customers’ and ‘Active Customers’?
‘Total Customers’ includes anyone who has made a purchase, while ‘Active Customers’ typically refers to customers who have made a purchase within a specific timeframe, such as the last 12 months.
Can ‘Total Customers’ be too high to manage effectively?
While a higher ‘Total Customers’ count is generally positive, it’s crucial to have the operational capacity and customer service infrastructure to maintain a high-quality customer experience as your customer base grows.