E-commerce sites convert about 5% of their visitors to buyers. In comparison, many retailers achieve conversion rates in excess of 60% (depending on the format). There are plenty of reasons why offline shopping conversion rates would be higher (e.g. shoppers have already shown commitment by walking into the store) but you don’t have to spend too much time with the data to see there is a massive opportunity for websites to improve their e-commerce sales. Even a 200 or 300 basis point improvement in the current average online conversion rates would be a massive boost. And it’s a reasonable goal.
Recently I was honored to speak to dozens of e-commerce leaders on the McKinsey Chief Marketing & Sales Officer network with a colleague of mine, Stephan Zimmermann, about this topic. We shared a systematic approach to understand and close gaps in conversion performance. Here are a set of 4 no regret moves we shared that you can put in place today:
1. Fix comparison engine entries. Most companies devote attention to getting SEO and SEM right, but one of the most overlooked traffic sources for true "down-funnel" purchasers are comparison shopping engines. I'm amazed at how often the data linkages to comparison engines are either inaccurate or the price is so much higher than competitors that the results are well below the fold or worse on a second page. I encourage my clients to try a simple experiment. Take 15 products that you sell and look them up on one of the popular comparison shopping engines - if your company isn't listed in the top 5, forget about attracting or converting the customers most ready to buy. Fix the entries right away.
2. Understand and address exit points. In retail stores, we often conduct exit interviews in the store parking lot. We stop people with and without shopping bags to understand why their customer journey. For every 100 people that surf a site, on average, 95 leave without buying anything. If you ran a store where you had that type of throughput, you would be out of business.
In our experience, companies need to ask the "five whys" on the highest traffic exit pages.
Systematically attack the root cause of exit pages (e.g. product, price, availability, description) and put in actions to fix them. At one company, they leadership team established a "war room" to fix broken pages and within weeks results started to improve.
3. Boost average order value. Many companies use computer-driven algorithms to drive product recommendations and next-product-to-buy options to increase average order value. These can be very helpful, but as I've written in the past (see: One Big Mistake Retailers Are Making: Not Thinking Like Their Customers), a more nuanced and deeper understanding of customer preferences can be lost in the data shuffle. Many companies will put hours of energy to putting this great technology in place but very little time on maintaining and optimizing it. You need to constantly tune recommendation engines with human intervention from merchants and adjust the technology based on what you learn. If you don't have a periodic human rhythm in place to evaluate and refine the right recommendations for additional products to buy you are missing out on valuable sales.
4. Get smart about loyalty. Not all customers are created equal. A bad customer is worse than no customer at all, especially when you’re spending money trying to keep him or her loyal. It’s critical to do a “recency-frequency” analysis of your customers to spot the opportunities and line up communications to the customer life stage. Identify your new customers, and figure out how to expand their shopping with you so they remain loyal but frequent shopper. Encourage repeat purchases with follow-up emails and next-product-to-buy offers. Keep your frequent and active shoppers loyal; they’re gold to you. Find out who are your customers who were once loyal but no longer are. They might be easy wins to get them back. Most importantly, improve your algorithms to detect customers at risk and take early intervention to keep them.
We've seen this work. I’ve found time and again when you ask follow up questions and the "five why's", the opportunities abound. Follow these four steps and find the opportunities. Because, believe me, there are lots of them.
Posted by:
Josh Leibowitz
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