The 3 Levers of Growth for More Revenue in eCommerce
By: Franz Sauerstein
Tags: Ecommerce, Marketing, Accounting, Growth, Business

Initial Situation

First things first: the calculation and evaluation are individual for each shop. This is exactly why it’s so important to understand which of the three levers you need to pull in order to get the biggest increase in revenue for your shop.

In our example, we assume that the shop:

Currently has 1,000 customers, with an

Average order value (AOV) of 50 €/order.

From these 1,000 customers, zero are regular customers of the shop, meaning all customers order only once.

That amounts to a total revenue of 50,000 €.

Marketing costs are 7,143 € (customer acquisition costs over complete customer running time presumed at 1:7).

In addition there are product/handling/shipping costs of 21,500 € (empirical values).

These assumptions run on a margin before overheads (30%) of 21,357 €, as well as

a profit of about 6,357 €.

Assumption 1: 30% more customers

If we now pull the first lever “Number of customers” and increase it by 30% to 1,300, the following changes result in:

Revenue increases by 15,000 € to 65,000 €.

Marketing costs increase by 2,143 €.

Margin before overheads rises by 6,407 €.

Profit rises by 1,907 €.

Almost 2,000 € additionally, for 30% more customers — not so bad at all, is it? But what does it look like if you pull the other levers? Maybe even more will happen.

Assumption 2: Average order value (AOV) raised by € 15

If we now pull the second lever instead of the number of customers, i.e. set the AOV to 65 €/order (instead of 50 €), the following changes will occur:

Revenue increase by 15,000 € to 65,000 €.

The marketing costs remain the same because we have put nothing into it to attract more customers or regular customers.

The product/handling/shipping costs increase by 4,500 €.

The margin before overheads increases by 10,500 €.

The profit increases by 6,000 €.

Amazing! 6,000 € more profit for only 15 € higher AOV — that sounds feasible, doesn’t it? But maybe the third lever can tickle even more out of this shop…

Assumption 3: More regular customers — out of ten first-time customers, three place another order

If you manage to convert 0.3 customers into regular customers, this will have the following effect on the shop:

The turnover rises to 65,000 € here as well

The marketing costs sink around 1,648 €, since it is more favorable regular customers to reactivate than new customers to activate.

The margin increases by 12,148 €.

The profit rises around 7,648 €.

With the third lever, we increase the margin and profit most for this shop scenario. But as I said, every shop is different, depending on

How your own shop is set up,

How many customers you have,

The AOV, and

How many regular customers you have.

Use the calculator in the spreadsheet and calculate where you can realize the largest additional margins and profits for your shop. Afterward, we’ll be happy to discuss with you what measures and what effort is involved.

But what happens if we pull all levers at the same time?

Assumption 4: 30% increase with all levers

If we pull all three levers at the same time by 30%, thus increasing the number of customers to 1,300, the AOV to 65€, and the number of regular customers to three out of ten first customers, the following changes result for the shop:

The turnover increases from 50,000 € to 109,850 €, more than doubling.

The marketing costs remain the same.

The product/handling/shipping costs rise by 19,905 €, since more orders are received and must be completed.

The margin almost triples, from 21,357 € to just over 61,302 €.

The profit more than triples, from 6.357 € to 28.347 €.

And now it’s your turn. The easiest way to figure this out for your own shop is with our calculator spreadsheet, which you can copy here for free.

Expert tip for all those who prefer to calculate everything themselves: If you know your revenue, AOV, and the number of your customers, you can calculate the repurchase rate if you don’t have it at hand. The formula for this is: turnover / customers / AOV = repurchase rate.