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Merchant Secrets for Driving Conversion

The concept of "conversion" is one that online merchants live and die by. An online store's conversion rate, which is the percentage of site visitors who make a purchase, is the figure that determines that store's bottom line.

But for all the focus on conversion rates, many merchants note that the concept is ill defined, and in truth, it's not always an accurate predictor of an e-tailer's success.

"It's a great number to know, it's interesting, but what you want to use it for is to fix things, not to totally focus on the number," says Lauren Freedman, president of the Chicago-based consultancy the e-tailing group. Freedman recently authored a research report titled "Merchant Secrets for Driving Conversion," based on interviews with some 30 merchants.

Among the many things her research revealed: merchants calculate conversion rates several different ways, so one site's 1.75 percent conversion rate can't be compared another site's 2.5 percent conversion rate. Was the number the result of an expensive marketing campaign, or a seasonal bump? Is it sustainable? What about average order amount — is that getting larger or smaller?

Most important: in what direction is the conversion number trending — up or down?

A merchant's category also greatly effects conversion. For example, very few visitors to flower delivery sites are merely browsing — people usually go there only to buy. But an e-tailer who sells used books will have a large population of idle browsers. So comparing these two sites' conversion rates is meaningless.

Still, despite all these caveats, conversion is king. E-tailers know that increasing conversion rate is absolutely critical. As Freedman found from her research, merchants are constantly benchmarking their conversion rates, and comparing their rate against internal statistics and those of competitors.

"Conversion has become one of the most important indicators among merchants, and we don't see any change in this analysis methodology or the enthusiasm surrounding the topic," Freedman says.

Her research indicates that a greater percentage of merchants are now focused on conversion rate. In a survey Freedman conducted with responses from more than 250 merchants, 20 percent of merchants in 2004 said they didn't know their rate; that number fell to 8 percent this year.

How Does Your Number Stack Up?
Based on Freedman's merchant survey, the most common conversion rate falls in the two to three percent range. But the rate varies enormously site by site, including those few fortunate merchants enjoying a higher than 10 percent rate.

Conversion rates are trending generally higher in 2005 than in 2004, with 41 percent of merchants this year reporting a "somewhat higher" rate, and 14 percent reporting a "significantly higher" rate. However, some 23 percent of merchants noted that their rate was "about the same" and 11 percent said it was "somewhat lower."

What Do Sites Do to Increase Conversion?
While many conversion-boosting techniques are highly situational — based on a specific category or season — some factors are universal, Freedman notes. Among the universal conversion strategies her research revealed:

1) On-site search: Not only must the search tool work quickly and accurately, it must be well merchandised. In response to a shopper's keyword search, the results must offer relevant product offers along with sales boosters like special offers, top-sellers, cross-sells and up-sells.

2) Having the right product/price: It was a retail rule long before the Internet and it continues to be key: "Having the right product will always win," Freedman notes. In every season and category there are a few winning products. And the right price is just as key. "Whether you're merely aware of competitive prices or spider them on the Web, ensuring that you maintain your edge and competitive position is vital," she says.

3) Streamlined shopping cart: Few things get as much attention — rightfully so — as trying to make the checkout process as quick and efficient as possible. It's practically a straight mathematical formula: the fewer steps involved, the fewer chances for shopping cart abandonment.

4) Displaying an attractive assortment: Showcasing a well-chosen array of what's hot and what's new in an engaging, attractive way will clearly produce results. It's a matter of "romancing it for the customer," Freedman says. She calls it "visual merchandising online."

5) Anything Free: Whether it's a "buy two and get one free," a deep discount, or a free service offered with a product purchase, the word free is a huge eye-catcher. "I think free shipping and those kinds of things are a big factor in terms of driving conversion."

6) Good Navigation: Sites spend untold fortunes attempting to tweak their navigation to increase traffic flow, knowing that a customer who gets around easily is a shopper who will buy more. "Ensuing that your navigation is easy to follow, logical, and intuitive for your category and your customer base," is critical, Freedman notes.

7) The Product Page: "Because so much of traffic comes from search, a lot of people land on the product page, so it almost becomes your homepage," Freedman says. "That page needs to be complete and full of information — if there's one question that's not answered, that's a potential step toward shopping cart abandonment."

In addition to these seven techniques, merchants in Freedman's survey listed several other principles for increasing conversion. Some of these were classics, like "know the needs and wants of your customers," and "shop other sites for inspiration, and tweak your site accordingly."

Other tips made use of site statistics to boost conversion. In particular, "Look at where visitors leave" — what needs to be changed about that page? This might be the place to offer the special discount.

On a related note, look at user behavior by source of origin: what page did that shopper enter from? By comparing the conversion rates of shoppers who enter at various pages — which requires use of a good Web analytics package — you may decide that certain landing pages need changing or enhancing.


The Value of Service
Freedman's research indicates that all shoppers can be broadly classified into three distinct categories:

A directed shopper knows what they want, is ready to purchase and needs little extra information; a browser surfs idly, and hence needs to be actively tempted and courted by a merchant; and an information seeker, who often shops a site on multiple occasions, may finish their shopping offline, and is usually found in data-heavy sites like home electronics, computers, appliances, and automotive. Conversion rates among information seekers can be boosted by offering an "education center," or a microsite, dedicated to offering help, research indicates.

Yet, for all of these types of shoppers, one factor remains key in influencing conversion rate: customer service.

Freedman cites research that indicates that in brick and mortar stores, poor service is the leading factor prompting shoppers to leave a store, expecting to never return. In fact, this low satisfaction drives many shoppers toward online shopping.

As an example of strong customer service, Freedman's research cited Road Runner Sports, which lists a toll-free number on every page. When shoppers call they talk with a true specialist, not an untrained sales rep; this improved service at the call center results in ten to fifteen times higher conversion than Web-only shopping.

Another top customer service example is that of West Marine, which focuses on responding to customer e-mails as a top conversion strategy. The site uses a metric it calls "e-mails/total transactions," which tracks on how quickly and effectively this process is handled. Because so many customer e-mails concern product and policy issues, responding to them efficiently definitely boosts sales.

At the very least, sites should offer clear contact information on multiple pages, especially the home page, to create a sense of shopper comfort.

A big part of customer service is being a trusted merchant. "Trust is an intangible that impacts whether or not a customer will visit and buy," Freedman notes.

When it comes to trust, the big question a site must ask itself is: does the site make it clear to shoppers that it offers "100 percent satisfaction guaranteed?" Ideally, a site will display this guarantee across many pages — in particular, on the product pages, shopping cart levels and customer service pages — making it impossible to miss.

Freedman's research indicates that only 65 percent of merchants currently offer this optimal guarantee, "so there's certainly room for improvement," she observes.

Of the top reasons shoppers give for shopping online, the number one factor is "saving time," (78 percent) followed closely by "get easier shipping" (40 percent), according to Nielsen research from 2004. So it should come as no surprise that making shopping convenient will boost conversion rates.

Benefiting the most from the convenience factor are those online merchants with a brick and mortar component - especially those multi-channel retailers who can closely coordinate their online and offline operations.

Forrester Research states that shoppers in 2004 spent a healthy $180 billion in brick and mortar stores that was influenced by online research — a 31 percent increase over the prior year. Given that only 7.7 percent of all retail sales take place online, this means that online research is playing an ever-larger role in brick and mortar shopping. In short, now is a good time to be a multi-channel retailer.

Specifically, the in-store pick-up of an online order is a huge conversion booster. Freedman's survey noted the good results that REI enjoyed with this technique. Offering in-store pickup of Internet purchases drives "conversion through the roof," and shopping cart abandonment is "significantly lower," reported the outdoor gear retailer.

An in-store return policy for online shoppers is also a top sales driver. Research by Harris Interactive reveals that not only do 88 percent of online shoppers say that a convenient in-store return policy has a bearing on their purchase decision, but that one in five shoppers will make an in-store purchase when returning their item bought online. It's a double-win for merchants.

For those online merchants who can't offer in-store returns, Freedman points out that a having a clearly displayed online return form can make a big difference. An even more effective technique for retaining customers, she says, is sending a pre-paid return label along with purchase. "This changes the dynamics of shopping, working especially well in apparel and accessories where size challenges are a constant and retention is essential for long-term viability."

Another effective conversion booster for multi-channel sellers is putting their catalog online. Shoe retailer Aerosoles reported that since it put its catalog online, its site's conversion jumped 15-20 percent, and its average order amount increased 10-15 percent.

An Unfinished Job
No matter what tactics a merchant uses to increase conversion, Freedman notes that there's no complete solution. As her report [www.marketlive.comgo2report] clearly proves, an online seller must constantly work to tweak and improve conversion rates, always looking for ways to gain that partial percentage point improvement. "At the end of the day it's an evolving process, so there's no substitute for looking at the details - it's a continual issue."



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