Getting to grips with ecommerce: Part 2

Welcome back to part 2 of a series of ecommerce opinion pieces, written to help increase your revenue and lower your cost per acquisition.

So part 2….


Reviewing & Benchmarking Conversion Rates

We want to make sure that if we are spending your money driving traffic to the site, then that traffic isn’t being wasted. And the way we do that is by reviewing, benchmarking and then improving your conversion rates.

If you have a low conversion rate, this will affect your Gross Profit Margin and make things difficult to scale. But simply saying you must “improve conversion rate” doesn’t really help does it? So instead, I’ll try and break it down for you.

When we look at conversion rate, we need to consider it within the context of the marketing funnel. The advanced Ecommerce feature in Google Analytics, makes this very easy:

Here we can see the breakdown between All Sessions, Product Views, Add to Carts and Transactions. We can then start to see where the problem areas are and isolate them for improvement. For example, we could find that a problem exists between the Checkout and Purchase stage.

We worked with one client where we found out that the delivery costs were calculated at the checkout stage, and it was at this point we saw most of our potential customers drop off. We fixed this by making sure the delivery costs (and options) were included upfront at the product page. Yes, we did see a slight drop in our Add to Basket rate, however, the overall conversion rate improved.

Or a problem may exist at the landing/product page and there are a whole bunch of optimisation tactics that can help improve this (improving your copy, adding guarantees, improved creative, adding social proof/testimonials etc.). This is a whole blog post in itself (and one I might write later in the year).

The key thing here is to test and learn. If you want to try this yourself, you can start by using something like Google Optimize and Hotjar to help you make those improvements.

But if you want to take things to the next level, then I would suggest getting in touch with a Conversion Rate Optimisation specialist who will map out a custom solution for you.

Please get in touch with us if you want help with your Conversion Rate Optimisation. 

But what is a good conversion rate?

Am I reading your mind? Unfortunately, I am going to disappoint once again with the typical agency answer “it depends”. But to be fair, it really does. It depends on the following:

  1. The type of product(s) you’re selling
  2. The volume of traffic to site
  3. Traffic source, campaign & visitor type

Type of product you’re selling

A very easy example would be an ecommerce site selling bespoke furniture (a high-ticket purchase) and another ecommerce site selling wax melts (a low-ticket purchase). Now you wouldn’t expect these two sites to have the same conversion rates across the funnel, would you?

We would fully expect the furniture site to have a lower conversion rate than the wax melts, because it’s a purchase with a much longer consideration period. That’s not to say though that because it has a lower conversion rate that it’s not profitable. In fact, the higher AOV, coupled with a higher profit margin, could potentially blow the wax melt store out of the water.

My point is, it is difficult to compare the two. To make those kinds of comparisons you would need to be looking at similar products within similar industries.

Volume of traffic to site

As you start to scale your business and drive more traffic to your site, you’ll need to reach out to newer audiences. This may lower your overall conversion rate, but the increase in traffic could increase your overall revenue. For example:

  1. Let’s say you drive 10,000 people to your site and you have a conversion rate of 3%. In this example, you will generate 300 transactions. Let’s say your AOV is £50, then that amounts to £15,000 in revenue.
  2. Now let’s say you drive 5,000 people to your site and you have a conversion rate of 5%. In this example, you will end up with 250 transactions. And with the same AOV you have generated £12,500 in revenue.

Point being that even though in the second example, the conversion rate is better, because of the decrease in the volume of traffic, you actually generate less revenue.

Traffic source, campaign & visitor type

Not all traffic is created equal. It should be hardly surprising that a Google Ads (branded search) campaign has a much higher conversion rate than Programmatic (awareness) campaign.

Or that a first-time customer from a Facebook Ad has a lower conversion rate compared to a returning (loyal) customer converting from an Email campaign.

That’s why when you’re going through this process, it is important to segment your data across traffic sources, campaign types and visitor types.

Fact is, you could easily double your overall conversion rate, simply by stopping all top-of-funnel activity and just focusing exclusively on your loyal customers through bottom-of-funnel activity such as email.

But this will put limitations on your ability to scale your business as you won’t be reaching any new customers. As with all things, there is a balance to strike here.

So, my advice: build out the funnel. Identify where you’re seeing the largest drop off. Benchmark that number and simply try to improve it. Don’t worry about industry averages for now. Just focus on improving that number.  By doing this, your overall revenue will increase as a result.


The Offer, The Product & The Category

Before you run any paid activity it’s important to know what offer you are leading with. Or what product(s) and/or category you want to push – especially for those ecommerce stores that have large catalogues of products.

I am going to contradict myself a little here and say that it might not be clear at the start what offer or product is going to perform best (especially if you are just starting out), so I recommend a test and learn approach, using a small amount of budget first.

But for those stores that have been running for a while, you can get a whole bunch of useful data from Google Analytics to help identify and then “double down” on your best performing products/categories.

We want to make sure we are leading with the right offer (whether that be a discount, a bundle, or perceived added value) and the right product (or category) that will appeal most to our customer base.

For example, we worked with an eco-cleaning brand that sold products both individually and through a variety of different bundles. In addition, they also sold through a subscription model. We took a test & learn approach, to work out what combination of offer and product generated the lowest CPA. We then led with that combination for our new customer paid acquisition activity.

Another example would be for a fashion brand we are currently working with. They have hundreds of different products on their site (and several different categories), so when we first started working with them, we applied the Pareto Principle to analyse which brands, products and categories were generating the highest revenue for them.

We soon discovered that 80% of their revenue was coming from a small percentage of brands within their marketplace and a couple of different categories. So instead of casting the net wide and potentially wasting their finite budget, we doubled down and focused on those brands and products that generated the largest revenue for them.

So, before you start running paid activity, make sure you’ve figured out what offer and product to lead with.


Creative & Copy 

This stems from a deep understanding of your customer. Only then can you start to write compelling copy and build creative assets that sell. Only when you have this deep understanding, should you start running paid ads.

I can’t stress how important it is to take the time to build out your customer profile(s) and conduct a thorough competitor analysis. And I’m constantly surprised by how little time is dedicated to this.

One of the first things I do when onboarding a new client is to ask whether they have built a profile of their “ideal” customer (or customers). I then take them through a workshop to uncover the various different motivators and barriers to their product.

This concept was first introduced to me by one of our Facebook (or Meta as it is now known) reps. We were taken through a presentation called “Create for Growth”, and through a simple example of a new organic fizzy drink, we discovered that there could be many different reasons why a customer might want to purchase this particular fizzy drink:

  • The selection of different flavours available
  • The free shipping
  • The fact that it’s all organic

It is about taking the time to discover all the possible reasons that would either encourage or prevent a consumer from entering your category or buying your product.

We applied this concept to our eco-cleaning brand client, where we mapped out the various different reasons why someone might want to purchase from them. We workshopped several angles:

  • Sustainability
  • Efficacy (focusing on how well the product cleans)
  • Value (focusing on how much more cost effective it is compared to competitors)
  • Convenience (focusing on the subscription and how easy it is to purchase)

We then built several ad variations based on these different motivators and split-tested them to find out which reason to buy resonated best with our audience.

So please do take the time to really understand your customer before spending money on paid ads.


Tracking & Measurement 

I covered this off in some detail in a previous blog. But to reiterate:

Set your KPIs and understand the metrics you want to measure. Have your benchmarks in place, so you can keep track on what is or isn’t working.

If you have a CPA or ROAS target, start there and then work backwards. What are your conversion rates? How much traffic do you need to drive to your website to achieve your goal? What are the CPMs of those channels?

You need to understand these things before you start, otherwise, you’ll have no idea whether performance is good or bad.

Secondly, check your URL parameters. I have audited many Google Analytics accounts in the past, and the inconsistences in URL tracking astound me. Bottom line, if you’re not tagging your URLs in Google Analytics correctly, then you are losing out on valuable information to look back on and make future decisions. So, your very first step will be to define your URL parameters. Now everyone does this slightly differently, but the key thing to remember here is tobe consistent.

In addition, make sure that your Google Analytics is set up and tracking correctly. We’ve all heard the expression, “garbage in, garbage out”.

You don’t want to make key decisions around your paid media budget using unreliable data, as this could have dire consequences further down the line.

If you would like us to audit your Google Analytics account to make sure you’re all ship-shape and tracking the right things, please get in touch. 


Retention & Referral Strategies

I strongly recommend that you have your [backend] retention and referral processes firmly in place before you start spending money on your paid ads.

And what I mean by this is to make sure you’re in a position to capitalise on all those new customers once you turn that traffic tap on.

First things first, have all your email flows set up. I personally recommend starting with these three:

  1. Post Purchase Flow – this is a series of emails sent after a customer has purchased your product. It’s designed to reduce refund rates, increase brand affinity and also increase customer lifetime value by encouraging a second purchase. The flow contains emails that promote your brand’s values and great content along with emails that build excitement for their new product arriving.
  2. Welcome/Newsletter Flow – this is used to welcome newsletter subscribers and nurture them to make their first purchase. Often, the newsletter subscriber flow will offer the user a discount or free gift to encourage them to purchase. Newsletter subscribers can subscribe from a sign up form on the website, via a pop up or can even be gathered through special events such as a competition. There are many different approaches you can take with this. We have seen success with both a content-focused welcome series and sales-focused welcome series where it really pushes the discount.
  3. Cart Abandonment Email – Cart abandonment emails are likely the most common email automation for an ecommerce store and arguably one of the most important to set up. These are emails sent after a user leaves the site with products in their cart but haven’t purchased. With distractions being ever-present online, It’s easy for a user to click off and forget to purchase. The cart abandonment automation is great at grabbing user’s attention, reminding them why they were going to purchase and can even sweeten the deal with a discount code.

With these emails in place, you’ll soon be able to turn those first time customers into loyal advocates who keep coming back again and again.

But this is just the tip of the iceberg as far as email is concerned. If you want to take your email game to the next level, please do get in touch. 

When it comes to referrals, digital word-of-mouth (WOM) is a powerful component to further enhance recruitment and retention. Encourage WOM through tactics such as:

  • Refer-a-friend scheme
  • Competitions
  • Brand ambassadors Scheme
  • Facebook groups
  • Reviews & testimonials
  • Blogs & events
  • Gift cards
  • Online points schemes

Imagine a scenario where every new customer refers a further two. That’s a great position to be in.

So, before you start spending your budget on new customer acquisition campaigns, make sure you have these things in place, so you can maximise your LTV.

And that’s a wrap. These are the things I personally look at before spending money running ads. I want to make sure that when we start our paid activity, that we are in the very best position to capture optimal value from any media investment.


So, to summarise…

  1. Understand your numbers – make sure you know your max/min ROAS/CPAs. Think of it this way, if you know you’re generating a profit using Facebook ads then effectively you’re advertising on that platform for free.
  2. Review your on-site conversion rates – you want to make sure that your checkout process and landing/product pages are as optimised as they can be. Even a small increase in your conversion rate can have a big impact on your revenue.
  3. Choose your offer and products carefully – often you’ll find that a small percentage of your products drive the highest revenue. Take the time to identify and exploit them.
  4. Fully understand your customer – really take the time to build profiles of your customers and review your competitors. This isn’t a tick box exercise; it will truly help you to write better copy and build better creatives.
  5. Garbage in, garbage out – make sure that your tracking is all set up correctly. This includes making sure you have consistent URL parameters, you have created the appropriate data segments, you are optimising the right things etc.
  6. Have your retention process in place – this is the very best way to encourage repeat purchases and turn your one-time customers into brand advocates. This will increase your LTV, which is the linchpin for maximising your GROSS profit margin.