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Story by
JJMFinance
Published on July 11, 2008 in How-To |
Photo by IntangibleArt |
JJMFinance is back to give sellers helpful hints on crunching the numbers behind your shop. If you have trouble remembering the last time you cracked a math book (or how to calculate ratios and the like), this advice should prove quite useful. Enjoy!
Dear Sellers,
Everyone loves a good story. We are used to stories being communicated to us through written or spoken words, but numbers can tell us stories as well. In fact, there are numbers in our Etsy shops that can tell us stories about our shop's popularity, inventory, sales, and feedback.
One number alone can tell us a limited story, but when you put two numbers together, a more interesting story occurs. These two-numbered stories are called ratios. A ratio is the relationship between two numbers.
This is the first in a four part series where we will learn about four different ratios that occur in our Etsy shops. The first ratio we will explore is a very useful popularity ratio.
Heart-to-Sale Ratio
The heart-to-sale ratio tells us a story about our shop's popularity. I know the word "popularity" conjures memories of high school, cheerleaders, and rock bands — but it's really not that bad! This ratio will show us how our shop's "popularity" leads to sales.
How to Calculate
Heart-to-Sale Ratio = (Total hearts you have received) divided by (Total sales you have made)
You can find your total hearts that you have received by clicking on "See who hearts this shop" on the right sidebar of your shop's homepage under page tools. You can find your total sales on the right sidebar of your shop's homepage under other items. Find a calculator and type the first number divided by the second number. The number that is calculated is your heart-to-sale ratio.
What Story Does This Number Tell?
This number tells us how many hearts on average you have to receive before you make a sale. If your heart to sales ratio was 3.14, this means that you will probably not make another sale until 3 more people "heart" your shop.
Fill your number into these sentences to get your interpretation:
I need ______ people to heart my shop before I probably make my next sale.
On average, I will get a sale when _______ more people heart my shop.
Historically, for every ______ persons that hearts my shop, I will then get one sale.
How to Use This Information
You can use this ratio to help you manage your business and make decisions. We all would rather have sales more than hearts, but you can indirectly manage your sales by managing your hearts. It is sometimes easier to know what type of marketing will lead to hearts... and thus, future sales. You can also use this ratio to help set goals for your shop.
Is your heart-to-sale ratio consistent? If it is constant, you know that it usually takes a certain amount of "popularity" before you make a sale. Do you know the direction your ratio is moving? If it is getting smaller and smaller, you know that you are converting your popularity into sales at a better rate. If it is getting bigger and bigger, you are converting your shop's popularity into fewer sales.
Naysayers...
If you ever visit the forums, you might hear some people say that hearts really don't mean anything, or there is no relationship between hearts and sales. They might be right, but I think they are wrong — the heart-to-sale ratio really is useful.
I have found that throughout the life of my shop, my heart-to-sale ratio has consistently been around 3 — that is no random fluke!
I also think that the heart-to-sale ratio is a special number that is unique to your shop and your shop only. Some shops might find that their ratio is 7, another person's is 3, while another's is 1. There is no better or worse ratio — try not to make comparisons of your ratio to other shop's ratios. Although, it is probably better to try to make your heart-to-sale ratio lower if possible (meaning you have more "completed" sales that came from hearts).
Other Thoughts
People heart other people's shops for all types of reason — friendship, bookmarking a shop, keeping an eye on competition, weird marketing, etc. If you pay people $1 just to heart your shop, you will probably get lots of hearts, but will not necessarily see an increase in sales. Don't try to manipulate your heart-to-sale ratio, but instead think of it as a vital sign for your shop. You go to the doctor to get a checkup — let the heart-to-sale ratio be your shop's monthly checkup. Until next time — keep crunching numbers!
For more financial philosophy from JJMFinance, check out his previous articles. For more information on numbers in your shop, check out the Art of Pricing series.
| Tags | business, finance, hearting, HOW-TO, JJMFinance, popularity, ratios, selling, The Numbers Game |
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40 comments Login to add your own!
dogties
FearlessFibers
I’m a metrics fiend myself, but I have to say that I don’t really think the ratio is necessarily meaningful in the way that it’s stated here. I’ve looked at this up and down and sideways since I’ve been here (I’m a huge geek for metrics!) and my conclusion is this: Over time and assuming no major changes in how you operate, you will see a certain run rate on your hearts. Same holds true for sales. As your shop gains or loses momentum, so will these two indicators. They will appear to yield a “ratio” (in which we all seem to want to find meaning). In reality, I just think they are two separate numbers that have somewhat static run rates and therefore have a somewhat static ratio (each “indicators” of sorts, but not necessarily correlated to one another).
As a comparison, imagine that I find that I consistently average receipt of 10 new feedbacks each week. I also find that I average receipt of 20 inquiries each week. This ratio remains fairly static over a long period of time, even as my shop eventually begins to yield 15, then 20 feedbacks, and 30, then 40 inquiries. Should I conclude that for every 2 people who ask me a question, I will receive 1 new feedback and therefore that if I can draw in more questions, my feedback rate will go up? Clearly not. The two numbers are unrelated, but both happen to progress at a fairly static pace and thus yield a fairly static ratio. It does not give meaning to the ratio.
Of course, the example above is more clear cut, with two largely unrelated stats. Hearts and sales can sometimes have some level of correlation and so the ratio can’t be dismissed quite so readily. I do, however, believe that it’s not particularly meaningful nonetheless, although that’s very dependent on the particular shop. I can only speak for my shop and I can say that a pretty static ratio does exist. I also, however, can say that a very large percentage of my hearts are people who heart my shop *after* becoming customers. Another very large percentage never buy from me at all. And yet another big chunk of people never heart my shop at all, but buy again and again.
The ratio seems most likely to have meaning for people in your shoes, JJM. That is, people whose target buyer market is very specifically *within* the Etsy community (particularly the seller community, but also the buyer community that is very hooked-in to Etsy, through forums or general Etsy addiction). This is the community that is most likely to use the heart feature.
Regardless, I find any discussion of business indicators interesting and so appreciate your writing this! It’s always worth analyzing the stats and I look forward to the rest of the series.
charmerz
Unless you can truly track the days you get a sale with the days you get hearts (which I suppose you can if you have few enough hearts and sales), it's a logical fallacy to presume the two are directly correlated.
A heart doesn't occur in relation to a purchase, it occurs in relation to exposure of the store or an item in the store. Plenty of items (and stores) get a skewed increase in views and hearts when they're featured on popular treasuries, the gift guides, and the front page without those items necessarily receiving a sale as a result.
Therefore, perhaps it would be more accurate to say that the accumulation of hearts is "proof" that your store is generating awareness.
I think that a heart-to-listing ratio would be much a more accurate way of tracking. Or, frankly, the much more concrete and proven listing-to-selling ratio.
panyizsuzsi
memopause
crisgarcia
I think low pricing is key to good sales, and that's a worry for me, as I have to exchange from euro (expensive) to dollar (very cheap at the moment...)
roska
very interesting article, and interesting points brought up in the comments. i will be looking forward to future articles and more discussion.
sandcookies
I think this is a really cool point of view - one possible way to use easily accessible info and data to help understand where your shop is at.
stunningannak
yaelfran
fearlessfreak
Interesting article...I have just recently noticed that my sales equal about 10% of the number of hearts I have...I don't have time to do a lot of extra marketing right now-but wouldn't it be fun to get that percentage higher?! Yeah! I think I can!
loosewirestudio
Good info!
Also remember, there's a long forums thread that captures this info and a related chart. If you have not yet added your data to the thread, please do! :)
http://www.etsy.com/forums_thread.php...
And the chart:
http://www.flickr.com/photos/loosewir...
Brought to you by, well, you - the community. :) Thanks!
strawberryluna
Great article, thank you so much for de-mystifying so much business math!
psarokokalo
JJMFinance
Thanks strawberryluna! It really makes me happy knowing that I can help people understand numbers and finances a little bit more!
phydeaux
An Etsian after my own heart, err, ratio (I'm a financial director in my day job).
However, I have to add that there are always variables associated with these kinds of ratios. For instance, for someone like me who sells handknit scarves, my hearts will likely lead to increased sales after we get through the Summer, but certainly not right now, in July heatwaves (my scarf knitter colleagues will likely agree with this).
I was able to trend this more accurately when I first started, during cold weather. And colder countries, where the bulk of my sales are currently coming, have a much smaller # of buyers than US buyers (at least currently). I can estimate that the bulk of my hearts are from the US; therefore, the bulk of my hears will earn a higher yield of sales in the Fall.
I should have picked jewelry making ...
Great articles, JJMFinance!!!
JJMFinance
I love the discussion going around this. Quite a few Etsy shop owners have made some great points on this forum post as well!
time2cre8
I've never really analyzed the hearts-to-sales ratio in my shop for the exact reason cited by FearlessFibers, above.
I do occasionally notice that I've received a heart from someone and a subsequent purchase, but it hasn't been so obvious as to be a pattern.
Rebelyun
A very interesting concept, but it does not take into consideration individual "hearts" on single items, these people may not heart the shop.
Do they eventually buy?
I am trying a free shipping sale this weekend as an experiment for just that purpose, to see if that will encourage sales.
mizusugi
Interesting, but need to consider more factors before coming down a conclusion. Nonetheless, a good starting point to analyze the shopping pattern of the buyers for Etsy!
windtwirler
Gosh! What a cool idea- If I counted on this though, I think I would get almost one sale for every heart! Wish it really did work that way. I got 6 hearts today but no sales! ...but maybe they will buy in the future. There was a time when I had more sales than hearts- now I find I getting more hearts than sales.
I did enjoy your article!
eclipse
I don't check my hearts that often but I have noticed that most of my sales come from people who have never hearted my shop, or any of my items. Of course any 2 random numbers can be expressed as a ratio, but I don't think this particular ratio represents "conversion" from heart to sale. Hearters and buyers seem to be two unique groups, in my limited experience. (although in looking at my own favorites, things I heart, most items I have bought were hearted by me first)
I do wish there was a simple built-in tool for generating these kinds of stats on Etsy. To keep track of this ratio you have to look in 2 different places, copy and paste numbers to a spreadsheet, use a calculator, etc. etc. etc. It's very time-intensive to keep all these stats manually, with not really much payoff.
zillows
This article is very well-written and extremely useful. Thank you for taking the time to share this information about the heart/sales ratio. :)
littlebrownsparrow
An interesting little article, but I'm afraid it just doesn't hold much water for me. If I make a sale when my hearts get to the calculated amount further needed, I'll believe you. But what if I get a sale before I reach 368 hearts...will the universe implode? :P
Damselle
most of my sales come from first time buyers that I bring in through advertising, so my ratio of 2 still doesn't tell me how many non-etsy users I have to expose my shop to before they *don't* heart my shop but *do* buy my product. I'm sure that this is helpful for sellers who get most of their sales from other Etsians though.
thewhimsytrove
Mathematically interesting. Logically flawed. But entertaining reading nonetheless.
earthexpressions
ThriftyGoodness
Well, if that's the case... then I'm LONG over due for another sale. Ahem.
Thanks for the info, though. :D
yosemitevintage
littlesparrowsnest
It is enjoyable to check this ratio for myself, I usually go back to the shop who hearts me and check out their own shop so I see it has another positive reinforcement.
Sometimes I find something I just have buy and its prompted mainly by this reciprocation!
Thank You for your insight, I hearted you too!
KreatedbyKelly
SpiritedWoodland
I really liked the thoughts and ideas you've presented in this article... Thanks! :)
PennyFabricArt
An interesting article, but I have to agree with FearlessFibers that the correlation between the two doesn't seem to show statistical relevance.
In my shop, out of 397 hearts only 3 are buyers, and of those 3 only 1 hearted me prior to the sale. 5 were sellers I bought from. Many are members of Street Teams that I'm on.
It seems to me that there are too many non-buying related reasons for hearting which dilute the applicability of this ratio.
By the way, it was a major pain navigating the tiny dots on the "Hearts Me" circle to evaluate my own stats. Putting them in a less pretty List form would allow for better, faster research.
nunofakind
Always good advice from you!! Thank you for including "Sister Calculata"...I appreciate your support. Interesting points about hearts/sales. Hope that this theory holds true.....time for another sale! :)
GreenRoom
Every thing on the planet can be explained using numbers... And this certainly includes Etsy shop sales. I love this article! It gives me a tangible, controllable goal to reach each day. The more people who see and like my shop, the more sales I make. And now I know approximately how many people = 1 sale. Thanks a Million! This is a great article. :)
EnfinLaVoila
hopestreetdesigns
garyhellerphotograph
Interesting article. I do feel though that Hearts seems to be more of a way that others sellers use to create links to their own shops, as well as just giving a thumbs up gesture. Most of my sales were from customers that were not sellers and had not given me any hearts or listed any of my works as favorites. I'm only here for a few months now and maybe more of a relation between hearts and sales may build, but for now it seems to be non related.
ladaworks
Great article. I'm glad the hearts matter. I love to look at peoples favorites.
Previous Page
Good article; thanks for including my bracelet!