5 formulas you must master to operate e-commerce well

With the rapid development of e-commerce, more and more data are involved in e-commerce, and it becomes more and more important to lay a solid foundation for e-commerce.

Proficiently mastering the basic knowledge commonly used in e-commerce can not only help e-commerce people understand the underlying logic of e-commerce, but also have a deeper understanding of the importance of visitor costs.

You can also understand the analysis method of Taobao Mobile’s display weight in competition, so as to have a clearer grasp of the calculation method of investment-output ratio and profit in promotion.

If you don’t have a clear understanding of daily data and don’t keep the commonly used formulas in mind, no matter how long you have been in e-commerce, you will always be half a beat slower than others, or even become a headless fly.

Today I will sort out some common e-commerce knowledge that e-commerce people must know, as well as 5 formulas that must be remembered.

1. Sales formula

Sales = impressions * click-through rate * conversion rate * average order value

This is the most basic logical formula in e-commerce, and it is also the underlying formula that e-commerce must know. So how should we apply this formula?

1) From this picture, we can clearly see that paid promotion, title optimization, and participation in events can help increase display. At the same time, multi-product, multi-store, and multi-platform layouts can also help increase display. When other dimensions remain unchanged, increasing display will definitely increase our sales.

2) Click-through rate Everyone knows that click-through rate is very important, and most of the time people think that click-through rate is pictures; here you can see that picture optimization is definitely conducive to improving click-through rate, and it is also the fastest way to achieve results; secondly, the price range of our products, the competitive environment of the category, the location of the product display, the product itself, and whether the traffic attracted is accurate, these are all factors that affect the click-through rate.

3) Conversion rate: First of all, evaluation is very important. Good evaluation helps to improve conversion, while bad evaluation may directly cut the product in half. Secondly, it is the visual presentation. Before doing any promotion, you must have a good conversion rate system and visual presentation. The next step is the SKU setting. Whether the SKU can meet customer needs; whether marketing activities are designed for the product. Discount activities will also help to improve the conversion rate. Finally, it is still the accuracy of the traffic. The more accurate the traffic, the easier it is to improve conversion.

4) The increase in average order value is relatively easy to understand. The combination of related recommendations, marketing activities, customer service recommendations, and sku can encourage customers to purchase multiple items, thereby increasing the average order value. The most direct and simple way is to increase prices directly, which can not only increase the average order value, but also increase profits.

Understanding this formula and the corresponding influencing factors can help us improve. Similarly, when problems arise, we can also start from these aspects to conduct investigations and adjustments.

2. UV value (average visitor value)

UV value = sales / number of visitors

Expand the formula:

Sales = Number of visitors * Average order value * Conversion rate

After substituting the number of visitors into the formula, the final formula is:

UV value = average order value * conversion rate

This formula can help us determine whether our product prices can be increased.

As we all know, product price increases will definitely affect conversion rates. Although the average order value has increased, the conversion rate has decreased. So at this time, you can use this formula. If the UV value has increased, then there will be no problem with price increases.

On the other hand, for products with high customer orders, if the UV value is higher than that of competitors, it proves that we can beat competitors.

3. Taobao Mobile Display Weight Score

The Taobao Mobile display weight score affects the merchant’s display opportunities on Taobao Mobile. The higher the weight score, the more display opportunities there are, and vice versa.

The core formula for Taobao Mobile display is: Taobao Mobile display weight score = UV value * pit production. Similarly, we split these two to get: average order value * conversion rate * number of visitors * average order value * conversion rate; thus we get the final formula: Taobao Mobile display weight score = average order value squared * conversion rate squared * number of visitors; that is to say, if you want to increase the display volume, average order value, and conversion rate, it is very important.

As can be seen from the above pictures, customer service can improve conversion rate through inquiries and increase average order value through related recommendations - these two indicators directly affect our sales and Taobao mobile display weight, so customer service is particularly important in daily work.

These formulas can help us find the core factors that affect sales and help us improve them.

IV. Input-Output Ratio

Next, let’s look at the promotion formula:

Return on investment: ROI = sales / expenses

Let's do the same breakdown: sales have been explained before, and cost is click volume * PPC (price per click).

After processing, it can be concluded that: ROI=UV value/UV cost.

Through analysis, we can know that when promoting, we can give priority to promoting products with high visitor evaluation value in the store.

5. Break-even

When the profit is even, the cost = gross profit.

By processing the formula, we can get that the break-even line ROI=1/gross profit margin.

For example, if a product costs 50 yuan and sells for 100 yuan, then the gross profit margin is 50%; then the ROI of the break-even line is 2. So how should we choose this for our product?

Here you can see that the UV value can be calculated using PPC/gross profit margin. When the product gross profit is 50%, assuming the industry average click price is 1 yuan, then when the UV value is at least 2, the break-even point can be reached and there will be no loss.

Of course, in actual operation the investment-to-production ratio will be higher.

Author: Yiyanshuo E-commerce

Source: Yiyanluo E-commerce