When it comes to measuring the performance of an ecommerce website, one metric has reigned supreme: Conversion rate. And not without good reason. Using conversion rate to measure performance has obvious advantages: it provides a simple means for cross website comparisons, it’s difficult to game, and it’s pretty much as straightforward as you can get. Orders divided by visits equals your conversion rate. Optimizing for better conversion rates has become the be-all-end-all when it comes to making decisions about a website.
Conversion rate, however, isn’t as monolithic as it might seem. Transactions counts are about as reliable as possible, but they need to be scaled against a metric that represents actual opportunities, and not every visit to your site represents an actual opportunity.
It’s been nearly 10 years since the first iPhone was introduced, initiating the smartphone revolution. And these days, it isn’t unreasonable to expect a single person to visit your site multiple times from different devices–a desktop, a tablet, and mobile–yet conversion rate is still calculated by a single visit, diluting a website’s actual success. Industry standards are stubborn.
Not Every Site Visit is Equal
As a business strategist who specializes in helping companies we partner with figure out how to best use the data they have to measure the success of their projects, my experience has taught me that not every site visit is equal. For one website it may be that one customer visits a site multiple times: once to figure out store hours, another to compare product features, and another to do a last-minute price comparison. Meanwhile, another website may have no physical stores and may only sell one product, so their customer will exhibit very different behavior, and may require less visits before they actually purchase. For these two websites, conversion rates are going to look very different. Visits that are part of a customer journey (ie. price comparisons or finding store locations) are not the same as a missed opportunity. Rather, they are a part of a customer journey. In context, even a bounced visit (a visit including only one page) can have an important place in a customer journey.
With all of the data we are able to gather about customers nowadays, and with everything we know about the bifurcated ways people shop, the time is ripe to not only design experiences that are customer centric, but to ensure the way we measure success in ecommerce is equally as customer centric.
The Customer Conversion Rate
I’m not the first to recommend this shift. Matt Lawson, Managing Director of Ads and Marketing at Google, recently wrote) about the need for companies to start focusing on customers for advertising, while Avinash Kaushik, author and digital marketer, has long recommended a move away from visit-based metrics to visitor-based metrics. Evaluating conversion rate as transactions per visitor (as opposed to visit) helps companies align performance with how a customer experiences their site. This is called the Customer Conversion Rate.
Cake & Arrow was born out of the philosophy of human-centered design. Human-centered design is about starting with the person–understanding their needs, their behaviors, and their desires–and designing solutions and products tailored to these needs. And if we are designing with the human experience in mind, why are we not also evaluating the success of our designs using this same standard?
When designing ecommerce experiences, we are always designing along the customer journey–the journey a customer takes to get from awareness through to an actual purchase. This journey is different for every company we work with, and will look different for different customers. One way to approach the issue of conversion rate is to also measure performance along these journeys. Below I have outlined 3 generic types of journeys–the long, the medium, and the short–to illustrate how the customer conversion rate might be applied to each.
Over the last year, Cake & Arrow has been conducting research with Millennials to help the industry better understand this elusive demographic, and in doing so to answer precisely this question. In our research, we found that when it comes to insurance, creating and delivering value for Millennials goes far beyond price and convenience–the two areas where insurance companies have been especially focused as they invest in their digital transformation efforts. 2016 research (also by Bain & Company) suggests that value exists in a hierarchy, and falls into four distinct categories: functional, emotional, life changing and social impact. Price and convenience both fall into the functional category, the lowest level of the hierarchy, meaning that while they are important (and according to the hierarchy, prerequisite for delivering higher level value), they fail to deliver the highest impact value–emotional, life-changing, and social impact.
The Long Journey
Companies with long customer journeys can reasonably expect a customer to take dozens of visits over many weeks to make an order.
For many B2B businesses, they are used to taking the long view. They understand that when businesses are making large financial investments in technology, infrastructure or services, these companies will do their research, and perhaps make many visits to a website over a span of several months before making a purchase. In B2C, however, it is often incorrectly assumed that customer journeys are short, and if a visitor doesn’t make purchase right away, this is considered a failure.
In working with many top retail brands we have found that this is not always the case, especially when the product being sold is high value, highly personal, or in the case of jewelry (an area where Cake & Arrow has expertise)–both.
Outside of B2B, companies with a long journey tend to be the best prepared for a long view that corresponds with Customer Conversion Rate.
A few years ago, a jewelry company came to us with robust user tracking integrated within their site analytics allowing them to connect visits from the same visitor in a way that goes well beyond what site analytics can provide. Using this information we were able to help them pull together marketing campaigns that were aligned with each benchmark along this journey. They were then able to track against these campaigns to help them better understand how customers were engaging with their site and their content along their journey toward purchasing, taking the emphasis off of site visits, and instead placing it on site visitors.
For businesses with long customer journeys, it is critical that they look beyond simple conversion rates to better understand whether they are successful (or unsuccessful) at reaching their customers. So if the lead time is months, rather than minutes or hours or even days, companies must start to ask themselves how they can begin to measure success along the customer journey.
Identify Unique Landmarks
For many businesses, there is a multi-touchpoint aspect to interactions with potential customers. Ordering is more than a two-step action. For example, a jewelery customer might first come to learn about terms and distinctions, followed by determining price ranges, and finally comparing products. All of these actions may be spread out between various visits along with non-visit interactions like asking friends and family for their opinion. In total it could be weeks or months before an order is placed.
With one another we worked with, after taking a closer look at their analytics, we realized that in some cases as much as several weeks spanned between single site visits. Although these visits weren’t directly leading to a purchase, they were a part of the customer’s consideration process. Given the average order size of more than $6,000, some customers needed to prepare financially for their purchases or compare prices with other jewelry brands, and even when they did return to the site, there were still more touch points before making the actual purchase, as customers would often want to customize their jewelry, playing around with different jewels or deciding upon an inscription before finally making their purchase.
We recommend reviewing your customer’s purchase journey for insights on landmarks in the journey. Viewing product and adding to cart are often key markers. What other unique landmarks does your business have?
The Medium Journey
For the bulk of our ecommerce clients, the core customer journey tends to average a couple of days and a couple of visits. We consider this a medium journey. While some visitors may complete an order in a single visit, the majority of visitors will make multiple visits over the span of a few days before purchasing.
Fashion and apparel companies often fall into this category. Product purchases are based on a combination of value and fit with personal aesthetics. The need to balance various options, including online vs. in-store, need it vs. want it, etc. often requires the customer to make several visits before completing a purchase.
A review of our retail customers show that the average customer takes multiple visits over a few days to make a purchase. Visit-based conversion rates inadvertently privilege more impulsive buyers, while overlooking the specifics of how the average visitor engages on the site.
Inadvertently privileging certain customers in this way goes against against our human-centric approach to design, and can potentially lead businesses to neglect their core customers. Using the Customer Conversion Rate succeeds by aligning a company’s performance metrics more closely with how visitors interact with the site.
Reinforce the Right Behaviors
For example, a marketing manager at a company may realize that emails have a high conversion rate and push for sending more. Next they notice that when they send emails about sales, conversion rates are even higher. Soon enough, the company is always sending sale emails, and while conversion rates may be higher, average order size goes down, and they have trained their customers to “wait for sales” to make a purchase. While companies with long customer journeys tend to understand the need to not to rush the order, companies with medium length customer journeys often fall into this trap out of impatience.
Think of a site that has four kinds of visitors:
- Visitors who make all decision in one visit and place an order right away.
- Visitors that take some time browsing, averaging 10 visits to complete an order.
- Visitors needing extended browsing, averaging 25 visits to order.
- Visitors who didn’t complete an order, on average taking 15 visits.
Over the last year, Cake & Arrow has been conducting research with Millennials to help the industry better understand this elusive demographic, and in doing so to answer precisely this question. In our research, we found that when it comes to insurance, creating and delivering value for Millennials goes far beyond price and convenience–the two areas where insurance companies have been especially focused as they invest in their digital transformation efforts. 2016 research (also by Bain & Company) suggests that value exists in a hierarchy, and falls into four distinct categories: functional, emotional, life changing and social impact. Price and convenience both fall into the functional category, the lowest level of the hierarchy, meaning that while they are important (and according to the hierarchy, prerequisite for delivering higher level value), they fail to deliver the highest impact value–emotional, life-changing, and social impact.
For the base case, 2% order on their first visit, 35% orders after 10 visits, 18% after 25 visits and 45% don’t purchase. From my experience, most companies experience a similar customer mix.
Now let’s create two discounts to the same number of visitors and see how they react.
The figure above includes the calculations for the base case (initial) and two examples (discount #1 and #2). Both discounts tested succeed in getting customers to act faster, leading to increases in visit conversion rate. Visit conversion rate has a clear winner in discount #2, which generates an entire percentage point increase.
Despite the improved visit conversion rate, however, you can see that discount #2 doesn’t generate any additional transactions, and actual Customer Conversion Rate remains the same. Some customers that were taking 10 or 25 visits to order, now order in 1 visit, reducing the overall visit count. Faster ordering has some potential benefits, but they should be weighed against the costs of discounting.
The limited impact of the discount is clear, however, when using the Customer Conversion Rate, which doesn’t change in Discount #2. Discount #1, increasing both transactions and the Customer Conversion Rate, is the actual winner.
It’s important to note that neither of these scenarios address whether the sales are actually increasing revenue. A deeper analysis of the data may indicate that while sales are increasing transactions, revenue may actually be decreasing or remaining flat. It’s important that all of these factors are considered when making business and marketing decisions.
Using the Customer Conversion Rate helps businesses with medium length customer journeys more accurately measure the success of their marketing campaigns, so they can make better strategic decisions that actual cater to the needs, desires, and behaviors of their core customers.
The Short Journey
Short customer journeys are the digital equivalent of going to a convenience store and buying a pack of gum. The customer comes to a website prepared to buy, with all the information they need to make a quick transaction.
Digital services and stores with a limited assortment, for example Harry’s, which sells razors, or websites that sell services with few variations, like Lemonade, which sells rental insurance are most likely to see short customer journeys. These represent the rare cases where you will see little difference between visit-based conversion rate and Customer Conversion Rate. And while Customer Conversion Rate may not apply to short journeys, removing friction should be a goal for all journeys, and there are many ways ecommerce stores can optimize the purchasing process to make even these short journeys less painful.
Here are a few things you can do to reduce friction:
- Include the right amount of information in your product listings. Displaying too little information in a product listing can make a shopping experience frustrating and tedious, while too much information can make the shopping experience overwhelming. If you are struggling to find the right balance, consider including more information using a hover.
- Make filtering useful. Useful filtering will help users find the products they are looking for faster. If filters are too generic, users will abandon them, and may spend time browsing, eventually abandoning their shopping if they don’t find what they are looking for quickly. There is much evidence that meaningful filtering options bear a direct relationship to conversion, so be mindful about how you use filtering on your site.
- Give users multiple ways of removing items from their cart. Removing items from the cart should be easy. If users experience frustration when trying to remove items from their cart, they are more likely to abandon their cart. According to the Nielsen Norman Group, ecommerce sites should use the word “remove” on their button, rather than “delete,” should avoid using trash can icons, and should give users the ability to set the quantity to zero.
- Don’t include too many form fields in a checkout step. When it comes to conversion, the number of form fields included in a checkout step is more important than the number of checkout steps total. Err on the side of including less form fields in each step, rather than trying to reduce the total number of steps.
- Ensure your checkout process does not exceed eight steps. According to research conducted by the Baynard Institute, the number of checkout steps does not affect conversion until it exceeds eight. Focus more on limiting the number of form fields, and keep the number of checkout steps under eight.
To read more about our recommendations for optimizing conversion on your ecommerce site, download our white paper comparing the the customer experience of Shopify Plus and Magento 2.
If you are wondering what journey your company falls into, it only takes a quick look at site metrics to see whether you fit the short journey profile. If more than 70% of orders come from first time visitors, this is you. In our experience many companies mistakenly believe that their customers are on short customer journeys, and thus only optimize for visit-based conversion rate. The reality is that far more companies fall into the category of medium and long journeys, and can benefit immensely from using the Customer Conversion Rate.
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The journey framework reinforces the idea that customers should always be at the center of every decision a business makes. Not only is this philosophy what is best for customers, but for businesses too.
And while we must always look customer behaviors to help us make decisions, it is important to remember that there is no one right way to do things and there is no magic formula. First and foremost, all companies need put more energy into getting to know their customers and understanding the journeys they are on so they can make decisions that are right for them.
Regardless of where your customers fall on the spectrum of long to short, there is something to be learned from all three types of journeys. Perhaps the first order from a customer fits a medium journey, yet return purchases follow the short journey profile. Data is best used to challenge assumptions and add complexity. Use your metrics to get in the mindset of the customer.
For more information on how customer-centric analytics can help you make stay focused on your customer, download our guide to using customer-centric data to make business decisions in ecommerce.
