July 07, 2015

Ecommerce Chart: How a low conversion rate can be a good thing


More transactions in a short amount of time are always better, right?

However, the most efficient practice isn’t always the best practice.

In this week’s Chart, we look at conversion and add-to-cart rate data from Monetate based on 8,473,310,803 shopping sessions. We also sat down with David Brussin, Executive Chairman and Founder, Monetate, to hear his views on ecommerce conversion rates.

by Daniel Burstein, Director of Editorial Content, and Dr. Liva LaMontagne, Editorial Research Manager

For the past five quarters, Monetate has collected conversion and add-to-cart rates in ecommerce stores across many industries, ranging from 7,000,000,000 to 8,473,310,803 shopping sessions per quarter.

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We sat down with David Brussin, Executive Chairman and Founder, Monetate, at the MarketingSherpa Media Center at IRCE 2015 to provide you with an in-depth understanding of current trends in ecommerce conversion rates, how marketers should interpret conversion rates and other common performance metrics all with the goal of strategically building a mutually beneficial, long-term relationship with customers.

Watch the video below to learn more about add-to-cart and conversion rate data from David Brussin.


Trends in add-to-cart and conversion rates

There is no one ideal rate that applies to all ecommerce companies since the rates vary considerably between industries and business models. If you’re getting a worse conversion rate than what is listed on the chart, it does not mean your ecommerce store is necessarily failing.

Rather, we share this data with you to give you an understanding of the overall trends in customers’ ecommerce behaviors.

On average, we can see a trend that, except for a short spike around Holiday season 2014, add-to-cart and conversion rates are declining. At the same time, online shoppers are visiting more product pages per session (up from 2.09 product views/session in Q1 2014 to 2.28 product views/session in Q1 2015), according to Monetate's quarterly research.

How can we explain these changes in customer behavior?


Customer experience is becoming increasingly more important

Customer engagement is key. Amazon is brutally efficient. Walmart, with its logistics prowess, is going to master this ecommerce game before too long. With these companies competing in the ecommerce space, selling on price, while staying profitable, is becoming more and more difficult. "Selection is going away as a place where brands compete with one another," Brussin said. "Price transparency to the consumer online means that pretty quickly everybody normalizes around the same price ... Customer experience has become incredibly important."

Brussin’s focus on customer experience was echoed by many of the ecommerce marketers and leaders we interviewed at IRCE. "Differentiate yourself on something no one can compete with. Not price. Someone will always be willing to make less money than you," Marc Lobliner, CMO, Tigerfitness.com, said.

"Customers are pickier about which brands they engage with — they want more from that interaction," Brussin said. "[Customers] are spending more time in the research process and the purchase process, which translates to lower conversion rates and lower add-to-cart rates."

When optimizing that customer experience, look beyond conversion rates. Create experiences that serve customers throughout the journey they take to make a purchase decision. In other words, if you want to get them to the end of the funnel, make sure to engage them at the beginning of the funnel. Engage customers with interesting and helpful content, a community that feels passionate about your niche, an engaging shopping experience across devices and the like.


A counterintuitive view of conversion rate

This engagement-focused customer buying process explains why low(ish) conversation rates can be your friend.

Brussin has observed that some of the best brands can have shockingly low conversion rates and extremely high revenues at the same time. What is driving this kind of success? Strong and lively relationships with their customers.

"Low conversion rates [for some businesses] are actually a sign of something that's working really well," Brussin said. "Low conversion rates in retail can be a sign of content consumption behavior. And it's absolutely the best thing that I ever see in our customers ... when their customers come in every day to read the latest, see the latest, see what products have been added and see what's new. They're not converting everyday but they're coming every day. That relationship with the brand is so strong that they're coming everyday to interact with the content and the product for that brand. And they're converting on an absolute basis a lot more often. So conversion rate may be shockingly low for a brand with content consumption behavior but revenue is off the charts high."


How to get customers to stick

What can brands do to create websites that engage their customers and keep them coming back? The answer is simple — it’s all about focusing on the customer.

Start by learning what your customers really want. This is not just in terms of products, but what goals they are trying to achieve and what pains they are trying to overcome.

You can learn this through surveys, social media listening, customer service conversations and exploring relevant forums.

Then, test. Not just A/B testing of your final product conversion, but earlier in the funnel. What email newsletter content is more engaging and gets more clicks? What types of videos get more views? Is copy more engaging for your audience?

Companies who start testing their websites might discover that there is no one right answer.

"That first key learning is — there's no one right answer," Brussin said. "And sometimes you can miss that. You can look at a test and say, 'I didn’t learn anything because my experiment didn't do any better than my control.'"


Creating targeted experiences for customer segments

By taking a closer look at customer segments, a company can discover that a test page works great for customers from suburban areas, but works poorly for customers in city centers.

"When you start to look at the people and a little bit about what makes them different and how the problems they need to solve might be a little different, you find out ... that, 'I need both those experiences. I just need a way to target one to this group and another to this group.'"

According to Brussin, most company websites still utilize a one-size-fits-all approach. No matter who you are, you see the same page. Companies like Apple, Uber and Google have taught customers to expect much more in terms of relevance and customization.

For example, Famous Footwear is using real-time weather data so that they can present the right product to their customers in the right context. People might have different needs depending on whether they are in snow or heading to the beach.


How to use metrics for success

If high conversion rates aren’t the ultimate benchmark of success, what is? How can we use all this data to get closer to the customer and create more engaging experiences?

Brussin shared the following tips.

  1. Get a nuanced understanding of your customer. "Who are the important groups of customers? ... the groups that make up the audience and how you're doing for each of those," he said.

  2. Look at the right performance indicators. Instead of focusing on conversion rate, or average-order value separately, combine them into one indicator — revenue per session. "If your conversion rate goes up while your order value goes down, you might be moving backwards or standing still," Brussin said. "Revenue per session tells the whole story. It’s conversion rate and order value together."

  3. Focus on the relationship with your customer. "Think past the session, and think about the person, think about the customer, and understand on a monthly or quarterly or annual basis or maybe even a lifetime basis. How are we doing for this customer?" he said.


Related resources

Subscribe to MarketingSherpa Chart of the Week — Access the data and discoveries you need to better serve customers and improve results

Ecommerce Research Reports (from Monetate)

All 43 interviews from the MarketingSherpa Media Center at IRCE 2015

B2C Best of 2014: Top takeaways in Web optimization, mobile marketing and email (from MarketingSherpa)

Fundamentals of Online Testing — Online training course (from MarketingSherpa's parent research organization, MECLABS Institute)


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