Dec 22nd 08 Posted by admin in Featured Articles, Usability

Convert Shoppers to Buyers vs. Increasing Site Traffic

Last year, over 70% of shoppers abandoned their online carts before checkout. If Wal-Mart had that conversion rate, it would be bankrupt in 9 months.

You may have the best/least expensive/coolest products in the world. You may even have a really awesome-looking website with (what you perceive as) a great online store; but what is your conversion rate?  More importantly, how can it be improved?

 

While most online store owners concentrate their funds on increasing the amount of visitors I encourage my clients to increase their conversion rate. Not only is it less expensive with better results; but it increases customer happiness and loyalty.

 

Put it this way –

If you have 1 million monthly visitors and it costs you $100,000.00 to double that number then you have 2 million visitors. But if only 20% of them are buying and 30% of the buyers are completing the checkout process; you just spent $100,000.00 to gain 60,000 buyers.

 

Now try this –

You have 1 million monthly visitors. Only 20% of them are buying and 30% of the buyers are completing the checkout process. Spend $60,000.00 to increase the VSR (Visitor to Shopper Ratio) to 30%; and increase the percentage of buyers that finish the checkout process to 70%. You’ve just spent $60,000.00 to gain 150,000 buyers.

 

OK, if you think you’ve got the gist you can stop reading now. If you decide to continue to the case study; you may get a headache…

 

IF YOU’RE STILL READING THIS THEN DON’T SAY I DIDN’T WARN YOU.

 

Let’s take a look at a scenario shall we…

In 2005 XYZ-store (fictitious name) had approximately 1,233 VPD (visitors per day). They spent $12,800 that year in sponsored links, banner exchanges, ads and the like to get visitors to their site. In 2006 they had 1,179 VPD. They spent $13,500 in marketing. This year, with the help of a few new investors, they were looking to spend $48,000 in marketing in hopes of achieving 4,000 VPD.

 

BREAKDOWN

Year	2005	2006	2007  **
Spent	$12,800	$13,500	$48,000
VPD	1,233	1,179	4,000
Grossed	$140,208	$747,092	$2,554,158
Gross after marketing	$127,408	$733,592	$2,506,158

** Projected

I convinced them otherwise. We started by concentrating on the site analytics; focusing solely on the checkout and the UIPs. As it turns out XYZ-store accomplished 13% SVR (shopper to visitor ratio) and had retained 31% through checkout. Average… not bad, not good. We asked sales to give us the total sales figures from 2006 and from that figure we deduced an average sale of $43.41.

 

Let’s do some math…

1,170 VPD x 365 days x 13% x 31% x $43.41 = $747,092 (Total sales for 2006)

If they increase VPD to 4,000 that figure becomes $2,554,158. Wow, not bad.

 

I took their $48,000, brought in some experts, and in 2007 increased their SVR to 24% and their Conversion Rate to 74%.

 

Ready for more math?

1,170 VPD x 365days x 24% x 74% x $43.41 = $3,295,206 – $2,554,158 = $741,048 this is the money they will now spend on acquiring 7,000 VPD next year after buying out the investors.

 

Year	2007  **	2007  ±	2008  **
Spent	$48,000	$48,000	$87,000
VPD	4,000	1,700	7,000
Grossed	$2,554,158	$3,295,206	$19,698,069
Gross after marketing	$2,506,158	$3,247,206	$19,611,069

** Projected       ± Facilitated

 

As you can see by concentrating on converting their existing customer instead of acquiring new customers, XYZ was able to grown faster with less overhead.

 

EXTRAS:

1. Visitors cost bandwidth so a high conversion rate can save you money.        

2. Notice in 2006 they spent more but attracted fewer customers? Once a customer has a bad experience, they usually won’t return. So you’ll spend more and more every year trying to attract a shrinking potential customer base.Conversely, if a user has a good (or great) experience they will likely return. So you’ll spend less and less while increasing your reciprocal customer base.       

3. This theory of higher conversion rates not only applies to online store but also online applications. Retaining more applicants through an entire application process yields a far better ROI than increasing the site visitors.

4 Responses to “Convert Shoppers to Buyers vs. Increasing Site Traffic”

1. Convert Money says:

   August 26, 2009 at 6:48 am

   Good Day EXpert, what entice you to post an article on Convert Shoppers to Buyer vs. Increasing Site Traffic? This article was extremely interesting, especially since I was searching for thoughts on this subject last Wednesday.
2. Eva says:

   August 26, 2009 at 10:29 am

   Interesting article. What are your sources?
3. gaelan says:

   November 23, 2009 at 8:07 am

   An expert is a person who has made all the mistakes that can be made in a very narrow field.
4. Missouri Health Inurance says:

   February 20, 2011 at 10:53 am

   Thanks for this great post. The info I have gained from your blog is truly encouraging:)