5 formulas you must master for e-commerce operations

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?

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.

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