E-commerce Glossary

The average amount spent per order. Calculated as total revenue divided by number of orders. Higher AOV often means better profitability and more room for acquisition spend.

The minimum ROAS required to cover all costs and not lose money on an ad campaign. Determined by your profit margins—the lower your margins, the higher your break-even ROAS needs to be.

The total cost to acquire a new customer, including all marketing and sales expenses. A critical metric for understanding unit economics and sustainable growth.

Revenue minus variable costs (like COGS and shipping). Shows how much each sale contributes to covering fixed costs and generating profit. Essential for understanding true ad profitability.

The cost to acquire a conversion (usually a purchase). Different from CAC in that it can measure any conversion, not just new customers.

How much you pay for each click on your ad. A key efficiency metric for paid traffic. Lower CPC with maintained quality often indicates better ad relevance or targeting.

The cost to show your ad 1,000 times. Varies widely by platform, audience, and competition. Generally ranges from $5-$50+ depending on targeting.

The percentage of people who click your ad after seeing it. Higher CTR typically indicates more relevant or compelling creative. Industry averages vary by platform (1-2% for Meta, higher for Google Search).

The percentage of visitors who complete a desired action (usually a purchase). E-commerce CVR typically ranges from 1-4%, with top performers reaching 5%+.

The total revenue a customer generates over their entire relationship with your brand. Critical for understanding how much you can spend to acquire customers profitably.

Compares customer value to acquisition cost. A ratio of 3:1 or higher is generally healthy—meaning each customer is worth 3x what you paid to acquire them.

Total revenue divided by total marketing spend across all channels. Unlike platform-specific ROAS, MER gives a holistic view of marketing efficiency. Also called 'blended ROAS.'

Gross margin is revenue minus COGS. Net margin is revenue minus all costs (COGS, shipping, overhead, etc.). Critical for calculating break-even ROAS and understanding true profitability.

Revenue generated per dollar spent on advertising. A 3x ROAS means $3 revenue for every $1 ad spend. The most common metric for measuring ad performance, though it doesn't account for product costs.