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.
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