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Secrets of Online Conversion |
Posted by
Josh at 2/9/2008 10:48:11 AM
Josh Troy has been stirring things up in online retail for over 10 years. He was part of the original team that launched babystyle.com and grew it into one of Internet Retailers Top 500 sites. As the head of online for Stila Cosmetics, Josh has doubled conversion and quadrupled online revenue. His current goal is to help demystify some of the urban legends of e-commerce. He's currently working on his never-to-be-published How-To novel, "You're Doing it All Wrong!"
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748 views |
| Trying to find reliable info on e-commerce conversion rates is a notoriously frustrating quest. Most companies are highly protective of this information - and they should be. Apart from your balance sheet, there's probably no greater indicator of your business health than this metric. Thus, very few online retailers will open their kimonos wide enough to reveal the goods. Thankfully, there are a few exhibitionists out there, and I've seen enough on my own that I'm able to help shine some light into this dark mystery.
First thing to remember about conversion rates is that everybody lies. Okay, maybe they don’t lie, but they’re definitely going to put their best spin on it. Whenever someone tells me their conversion rate, I silently divide it by two. It’s not that there’s a conspiracy to spread misinformation, it’s just that most of the people with access to conversion rates are the ones whose jobs hinge on them. Thus, it’s safe to assume the conversion rates you hear are inflated.
So how do people inflate their conversion rates? It’s all in the methodology. I believe the most honest way to report conversion would be VISITORS to BUYERS. And depending on what vertical your business is in - these can vary dramatically. For example, a fashion retail website should expect average conversion in the 2 to 3% range. Someone selling high-ticket electronics probably sees much lower conversion in the 1 to 2% range.
But remember, everybody slants their numbers. Some e-commerce companies with content-rich websites like to segment out traffic that loiters on their non-product pages and they don’t factor those into their overall conversion formulas. Some companies go even further, and only factor conversion based on those shoppers who actually add something to their cart (thus they are officially "shoppers") against those who ultimately make a purchase. Conversion based on the SHOPPER to BUYER method is a good gauge of how your site funnels people through the checkout process, but it doesn’t tell you much about the unrealized potential of your overall visitors.
Obviously certain segments of your customer base will convert at higher and lower rates. If we just carve out the repeat shoppers (people who've made more than one purchase) then conversion should probably be around 2 or 3 times higher than the overall percentage. This shows that the shopper is happy with their previous purchase and the barrier to convincing them to go through with an order has been lowered because you delivered on his or her expectations. A very scary thing to see is when your repeat conversion is flat to, or lower than overall conversion. This indicates dissatisfaction with the product they received (maybe a quality control problem), or perhaps a serious usability issue on the site.
What are the Top 3 culprits behind crappy conversion? Inventory, inventory and inventory. To prove this, keep track of your in-stock ratio and plot that against your conversion rate. You will find that even a slight drop in the availability of your best-selling items will always correspond with a lowering of overall conversion. It’s the old Pareto Principle (A.K.A 80/20 rule), where 80% of your sales come from 20% of your products. Remove one of those items from the equation and you’re hurtin’ for certain.
Timing is another factor that can produce a fluctuation in conversion rates. You’ll see this clearly demonstrated in email campaigns. What time of day is the email landing in the recipient's inbox? One rule of thumb is to avoid the Monday morning clutter zone. This is that time starting at 9AM on the east coast when everyone returns from the weekend and they begin a fast and furious frenzy of deleting all their accumulated spam. You don't want your email to be a casualty in this kill zone, so you're better off landing your campaign later in the morning. This tip alone can boost your open rates dramatically.
Without a doubt, the best way to move the needle on improving conversion is to take a very close look at your checkout chain. Starting at the cart and moving all the way to your “Thank You” page, find ways to streamline this process down to the bare minimum of clicks. Promotional offers are easy triggers, but there are obvious brand implications to that practice (another topic for another day).
Now that I’ve muddied the water with all my disclaimers about how everybody cooks their books on conversion, I’ll give you what you’re probably looking for…benchmarks! The nice people at Fireclick have provided one of the only public places I’ve found that actually attempts to track conversion across different online verticals. But be warned, you should condition the data you find here with all the information that I’ve shared above:
fireclick.com
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