I thought he was speaking in a foreign language. At the time, I was a 19 year old first time entrepreneur looking to start a ecommerce store. I was on the phone with a large digital marketing firm, speaking to one of their sales reps.
He was walking me through their optimization and funnel process. Everything sounded cool, but I was rapidly trying to keep up with all the jargon he was dropping. CPC, CTR, CPA, CPM, what the heck did all that mean?
As an entrepreneur who now has over seven years of experience in ecommerce, I’ve come to realize how many keywords and acronyms we use in our industry. The digital marketing side of the business has terms that are rather standardized, yet as I now focus on the supply chain side, a whole new set of keywords sparks.
This article is going to be your go-to resource for understanding all the jargon that we use in our industry. Let’s cut the noise, what do these terms actually mean?
Digital Marketing Keywords
CPC: Cost Per Click
Your cost per click that your ad receives. Keep in mind that a click is not unique to the person taking action. If one person clicks on your ad three times, you will be charged for three clicks.
PPC: Pay Per Click
This is the same cost model as CPC campaigns, but another acronym used interchangeably.
PPV: Pay Per View
Pay-per-view is defined by your video or ad/image being visible on the page and 100 percent in view for a specific duration of time defined at the discretion of the publisher. For readers who scroll quickly, paying on a PPV model will ensure that your ad was loaded and viewed before you are charged.
VTC: View Through Click
This helps you measure the effectiveness of your ad campaign. A view through click would mean that a customer saw your ad, did not click, but in a later session visited your website and converted.
CTR: Click Through Rate
This is the number of clicks your ad receives divided by the number of times your ad has been shown. The CTR percentage allows you to measure the engagement with your ad. The higher the percentage the higher the engagement.
Formula: CTR percentage=((clicks/impressions) x 100)
CPA: Cost Per Acquisition
The cost per acquisition model applies to a specific “action” determined by the advertiser. Examples would include checkouts started on your ecommerce store, or a signup to your mailing list. A CPA model can be very competitive and can carry a higher cost. This needs to be optimized over time.
CPL: Cost Per Lead
CPL means that you are only paying for leads that are delivered to you through your ad campaign. Examples include when a customer submits their email, subscribes to your blog, or follows you on social media. The CPL cost model is very competitive and is not guaranteed to deliver in full.
CPM: Cost Per Thousand Impressions
This is probably the most common method for pricing online advertisements. You will be charged for every 1,000 times your ad loads to a page. Keep in mind that a CPM is not a unique view. If one person clicks on 10 pages and your ad loads 10 times, that is 10 impressions, not one. Consider your budget and desired reach before committing to a CPM.
Formula: total cost =((total impressions x CPM)/1,000.)
CTA: Call to Action
Your call to action is your “request” and the user’s next step after seeing your ad. Examples include: “Learn More” “Buy Now” or “Watch Video.”
DSP: Demand Side Platform
A DSP is a technology that allows advertisers to purchase display ad inventory across Real Time Bidding (RTB) networks like Google. The best way to think of this is it is your campaign, your bid, and your target audience. The DSP is just placing the ad buys on your behalf based on the criteria you’ve identified. Run multiple campaigns on multiple networks with ease.
RTB: Real Time Bidding
This is a method of purchasing unsold inventory by CPM through programmatic auction. Your CPM bid may be overruled by other advertisers and is not guaranteed. The highest bid takes inventory priority.
DMA: Designated Market Area
A geographic location representing a county, state, or country you choose to target.
ROS: Run of Site
Running your digital ads through a run of site channel means that you are delivering your online ads on a specific website. Consider the rotation “site wide” and not page specific.
SEM: Search Engine Marketing
An example of this are the advertisements that appear on Google Search, Bing Search, or Yahoo Search. Your ad would appear based on the search criteria, keywords, and your max budget.
SEO: Search Engine Optimization
SEO affects the visibility of your website organically through search engines’ unpaid (free) results. This showcases your site’s ability to rank for certain keywords on search engines like Google.
SMM: Social Media Marketing
When people use social media to market their business to customers, potential customers, journalists, bloggers, employees, potential employees, and anyone else in the social universe.
SOV: Share of Voice
The SOV is a calculation based on a percentage your ad is seen versus other advertisers. For example, if there are five advertisers rotating ads evenly on the homepage, each advertiser would have a 20 percent share of voice. If there is 1 sole advertiser advertising on the homepage, that advertiser would have 100 percent share of voice.
CRM: Customer Relationship Management
A set of software programs that lets companies keep track of everything they do with their existing and potential customers.
Website Analytic Keywords
BR: Bounce Rate
The bounce rate on your website is the percentage of people who land on a page on your website and then leave without clicking on anything else or navigating to any other pages on your site. A high bounce rate generally leads to poor conversion rates because no one is staying on your site long enough to read your content or convert on a landing page.
CMS: Content Management System
A web application designed to make it easy for non-technical users to create, edit, and manage a website. Helps users with content editing and more “behind-the-scenes” work like making content searchable and indexable, automatically generating navigation elements, keeping track of users and permissions, and more. The most popular CMS platform in the world is WordPress.
GA: Google Analytics
A service by Google that generates detailed statistics about a website’s traffic, traffic sources,conversions, and even sales. Marketers use it to get to know their audience, trace their customers’ paths, and make a visual assessment of how visitors interact with their pages.
PV: Page View
A request to load a single web page on the internet. Marketers use them to analyze their website and gauge how large their audience is.
RSS: Rich Site Summary
An RSS Feed is a web feed that publishes frequently updated information like blog posts, news stories, and podcasts. They let publishers syndicate data automatically, which is why they’re sometimes known as “Really Simple Syndication.” When you subscribe to a website’s RSS, you no longer need to check their website for new content. Instead, your browser will automatically monitor the site and give you timely updates.
UV: Unique Visitor
A person who visits a website more than once within a defined period of time. Marketers use this term in contrast with overall site visits to track the amount of traffic on their website. If only one person visits a webpage 30 times, then that web page has one UV and 30 total site visits.
UI: User Interface
A type of interface that allows users to control a software application or hardware device. A good user interface provides a user-friendly experience by allowing the user to interact with the software or hardware in an intuitive way.
Supply Chain and Logistic Keywords
3PL: Third Party Logistics:
A company’s use of third-party businesses to outsource elements of the company’s distribution and fulfillment services. These third party logistic service companies can integrate directly into a company’s website to create a seamless shipping process for customers.
ATO: Assembled to Order
A business production strategy where products ordered by customers are produced quickly and are customizable to a certain extent. The assemble-to-order (ATO) strategy requires that the basic parts for the product are already manufactured but not yet assembled.
BOL: Bill of Lading
The bill of lading is a legally binding document providing the driver and the carrier all the details needed to process the freight shipment and invoice it correctly.
BOM: Bill of Materials
A bill of materials or product structure (sometimes bill of material, BOM or associated list) is a list of the raw materials, sub-assemblies, intermediate assemblies, sub-components, parts and the quantities of each needed to manufacture an end product.
COGS: Cost of Goods Sold
The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good.
CPG: Consumer Packaged Goods.
This refers to the manufacturers and supplies in the Packaged Goods industry, a very specific reference to companies that manufacture or distribute Consumer Packaged Goods to the retail environment.
DFRL: Design for Reverse Logistics
This term applies to your company’s ability to accept returned items from your customers.
DP: Demand Planning
Demand planning is a multi-step operational process used to create reliable forecasts. Effective demand planning can guide users to improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, and enhance profitability for a given channel or product.
EFTA: European Free Trade Agreement
A regional trade organization and free trade area consisting of four European states. It was established on May, 3 1960. The organization operates in parallel with the European Union (EU), and all four member states participate in the European single market.
NFTA: North American Free Trade Agreement
A agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994.
ETA: Estimated Time of Arrival
The estimated time of arrival or ETA (rarely, ETOA) is the time when a ship, vehicle, aircraft, cargo or emergency service is expected to arrive at a certain place.
FOB: Free on Board
This term indicates that the supplier pays the shipping costs that usually also include the insurance costs from the point of production to a specified destination, at which point the buyer takes responsibility.
ISO: International Standards Organization
The International Organization for Standardization (ISO) is an international standard-setting body composed of representatives from various national standards organizations. Founded on 23 February 1947, the organization promotes worldwide proprietary, industrial and commercial standards.
Worldwide Responsible Accredited Production (WRAP) is a non-profit dedicated to promoting safe, lawful, humane and ethical manufacturing around the world through certification and education. The WRAP certification program mainly focuses on the apparel, footwear and sewn products sectors.
JIT: Just in Time
Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. This method requires producers to forecast demand accurately.
MAPE: Mean Absolute Percent Error
A cross-sectional measure to calculate the demand forecast error across products, customers, divisions etc.
MRP: Materials Requirements Planning / Manufacturing Resource Planning
Material requirements planning. Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes.
MTO: Made to Order
Made to order (MTO) is a business production strategy that typically allows consumers to purchase products that are customized to their specifications. The made to order (MTO) strategy only manufactures the end product once the customer places the order, creating additional wait time for the consumer to receive the product but allowing for more flexible customization compared to purchasing directly from retailers’ shelves.
OEM: Original Equipment Manufacturer
An Original Equipment Manufacturer is a company that produces parts and equipment that may be marketed by another manufacturer. In ecommerce, it relates to the act of a company engineering and creating their own product to their own specifications.
ODM: Original Design Manufacturer
An original design manufacturer is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce (either as a supplement or solely) without having to engage in the organization or running of a factory.
PO: Purchase Order
A purchase order is a commercial document and first official offer issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.
POD: Proof of Delivery
Proof of delivery is a method to establish the fact that the recipient received the contents sent by the sender.
POE: Port of Entry
The place where a product may lawfully enter a country.
QA: Quality Assurance
The maintenance of a desired level of quality in a service or product, especially by means of attention to every stage of the process of delivery or production.
QC: Quality Control
A system of maintaining standards in manufactured products by testing a sample of the output against the specification.
SKU: Stock Keeping Unit
A stock keeping unit is a product and service identification code for a store or product, often portrayed as a bar code that helps track the item for inventory.
WTO: World Trade Organization
The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. The WTO officially commenced on 1 January 1995.
ERP: Enterprise Resource Planning
Enterprise resource planning is the integrated management of core business processes, often in real-time and mediated by software and technology.
A omni channel sales approach that provides the customer with an integrated shopping experience. The customer can be shopping online from a desktop or mobile device, or by telephone, or in a bricks and mortar store and the experience would be seamless.
APEC: Asia Pacific Economic Cooperation
A forum for 21 Pacific Rim member economies that promotes free trade throughout the Asia-Pacific region.
CBP: U.S. Customs and Border Protection
The largest federal law enforcement agency of the United States Department of Homeland Security. It is charged with regulating and facilitating international trade, collecting import duties, and enforcing U.S. regulations, including trade, customs, and immigration. CBP is one of the largest law enforcement agencies in the United States.
FDA: U.S. Food & Drug Administration
The Food and Drug Administration is a federal agency of the United States Department of Health and Human Services, one of the United States federal executive departments. The FDA is responsible for protecting and promoting public health through the control and supervision of food safety, tobacco products, dietary supplements, prescription and over-the-counter pharmaceutical drugs (medications), vaccines, biopharmaceuticals, blood transfusions, medical devices, electromagnetic radiation emitting devices (ERED), cosmetics, animal foods & feed and veterinary products.
HTS: Harmonized Tariff Schedule
The Harmonized Tariff Schedule of the United States is the primary resource for determining tariff (customs duties) classifications for goods imported into the United States. The Harmonized Tariff Schedule classifies a good based on its name, use, and/or the material used in its construction and assigns it a ten-digit classification code number, and there are over 17,000 unique classification code numbers.
An individual or firm to whom freight is shipped. A freight receiver.
An agency that receives freight from a shipper and then arranges for transportation with one or more carriers for transport to the consignee. Often used for international shipping.
This basically means the cost of the product and nothing else! No shipping costs or export fees in China are included in this price, never mind local port and custom fees or delivery to your door.
CIF Cost, Insurance and Freight:
Shipping price also includes sea freight charges and insurance to deliver the goods to your nearest port. From that point onwards, you take the shipment into your hands.
DDP: Delivered duty paid (DDP)
A transaction where the seller pays for the total costs associated with transporting goods and is fully responsible for the goods until they are received and transferred to the buyer.
Common Business Terms
API: Application Programming Interface
A computer programming term meaning a series of rules. APIs allow an application to extract information from a service and use that information in their own application, or sometimes for data analysis. It’s kind of like a phone for applications to have conversations — an API literally “calls” one application and gets information to bring to you to use in your software. APIs facilitate the data needed to provide solutions to customer problems.
Companies that sell to other businesses. Examples: Slack, Salesforce.
Companies that sell directly to consumers. Examples: Amazon, Apple, Nike.
CAC: Customer Acquisition Cost
This is your total sales and marketing cost. To calculate, follow these steps for a given time period (month, quarter, or year):
- Add up program or advertising spend + salaries + commissions + bonuses + overhead.
- Divide by the number of new customers in that time period.
For example, if you spend $500,000 on Sales and Marketing in a given month and added 50 customers that same month, then your CAC was $10,000 that month.
CLV or CLTV: Customer Lifetime Value
The lifetime value of a customer is the amount of money a customer is expected to spend with your company.
DNS: Domain Name Server
A server that translates a web address into one or more IP addresses.
MRR: Monthly Recurring Revenue
The amount of revenue a subscription-based business receives per month. Includes MRR gained by new accounts, MRR gained from upsells, MRR lost from downsells, and MRR lost from cancellations.
Changes in levels expressed with respect to the previous month. These changes are more volatile than quarter-over-quarter or year-over-year and tend to reflect one-off events like holidays, website troubles, natural disasters, and stock market crashes. Compare the average of whatever you’re measuring in Month X with Month Y to calculate the MoM change.
To calculate percentage growth: Subtract Month Y number from Month X number, divide the result by Month X number, then multiply the final result by 100.
ROI: Return On Investment
A performance measure used to evaluate the efficiency and profitability of an investment. The formula for ROI is: Gain from Investment minus Cost of Investment, divided by Cost of Investment. The result is expressed as a percentage or ratio. If ROI is negative, then that initiative is losing money. The calculation can vary depending on what you input for gains and costs.
URL: Uniform Resource Locator
Also known as a web address, a URL is a specific character string that refers to a resource.
Don’t let all the jargon confuse you. As a ecommerce entrepreneur, you’ll realize there seems to be a dozen ways to say the same thing. At the end of the day, you want to let your numbers do the talking.
If your CPC costs are too high, your CPA will often be too expensive. Everything in ecommerce is intertwined by the numbers. From your unit costs to your CPM, if one expense is too high, your company might not be able to turn a profit.
By understanding these terms, you’ll be on the right track towards ecommerce success!