Follow A-B-C: Acquisition – Behaviour - Conversion

As an online retailer you already have access to an enormous amount of data. Reports show that more data was created in 2017 than in 5,000 years of human history. Given the constantly changing customer behaviour, trends and market dynamics, collecting and analysing all this data is important to make better decisions concerning marketing strategy, as well as to serve your customers better. If you’re reading and acting on that data appropriately, it will offer you a great advantage over your competition.

Unfortunately, only a few online retailers are doing this. A lot of e-commerce business owners seldom analyse their data and aren’t tracking important metrics. That means a clear majority of decisions website owners make are based on faith rather than data, and a lot of opportunities are wasted.

But how do you start the process of web analysis? In most cases it´s not as simple as opening your analytics tool and "find something interesting". While e-commerce experts probably can refer to hundreds of data points I would like to encourage you to start by answering these three questions:

1. Where do your visitors come from? -Acquisition

Visitor acquisition (fancy word for source of traffic) is an important indicator for anyone running an e-commerce store. You won’t have any purchases without visitors. But you don´t want just any visitors. To succeed you need a balanced portfolio of traffic sources: Search, Referring Sites, Direct, Campaigns. How much money are you spending on each traffic source? What are you getting in return?

traffic sources

Example of traffic sources distribution. We often see organic search accounting for, on average, 40% of the traffic and for almost half of total revenue. But how much do you need to spend to produce high quality website content and backlinks to earn those clicks?

Some visits are more valuable than others and some channels bring traffic that is more likely to convert, others are more likely to bounce. It is important to tie this analytics data into budget allocation models, as one click may be worth considerably more than one from another source.

Some of the main benefits of finding the most profitable traffic sources to your e-commerce site are:

  1. It gives you an understanding of what traffic sources you should focus on to improve your revenue.
  2. You can compare the performance of different traffic channels, like organic search, social media, ad campaigns and referral traffic.
  3. You will be able to determine how well your campaigns are performing in terms of generating revenue.

Metrics to analyse could be Cost Per Acquisition (CPA) and Click Through Rate (CTR).
Cost Per Acquisition is calculated by dividing the total campaign cost with the number of conversions (usually purchases). In the case of SEO for example, where you may not have a direct cost, use your overhead costs such as labour and indirect expenses like content production. To determine what is an acceptable CPA you will need to know your Average Order Value (AOV) and Customer Lifetime Value (CLV).

2. What happens on your site? -Behaviour

A lot of e-commerce business owners obsess about acquisition and conversion metrics and a lot less about behaviour metrics. But it is what happens on your site, the behaviour, that determines the outcomes. By doing your analysis you can find out what’s working and what’s not.

Think about what you are expecting customers to do when they interact with your site. What pages should they see? Should they visit repeatedly? Have a look at the metrics Checkout Abandonment Rate and Bounce Rate.

Baymard Institute, the e-commerce design authority, reports an average online shopping cart abandonment rate at 69%. This represents visitors who clicked on the “start the checkout” button but never placed an order. They send strong signals of intent: they find the product, they add the product to their cart and they start the checkout process. A high checkout abandonment rate is a good indication of a broken checkout process and needs to be looked in to.

 checkout statistics

Example showing statistics of the checkout process. A typical checkout process consists of 3-4 steps. Analyse the drop off in each step and think about how you can decrease the rate.

The Checkout abandonment rate is easiest to calculate by determining the percentage of orders placed on your site out of the number of visitors who started the checkout process, then subtracting that percentage from 100%. For example, if 80 orders were placed when 100 people started the checkout process, then the checkout abandonment is 20%.

According to Google, a bounce is a single-page session. This means that a bounce occurs whenever a user enters your e-commerce site and does not further interact with other pages on your site. For example:

  • Immediately returning to the search engine
  • Closing the browser
  • Following an outbound link
  • Staying inactive and timing out the session

The bounce rate is the percentage of all sessions on your site in which users viewed only a single page. The aim for e-commerce sites is to minimise the bounce rate to between 20 - 45%, or reduce it even further if possible.

3. Are you making money? -Conversions

Which interactions deliver value to your business bottom-line? For e-commerce it´s often pretty straightforward - you want people to buy something. These conversions are commercial outcomes that deliver against the company’s main objective and are of obvious importance. However, fixating on this single metric is probably a bad idea.

There may be a multitude of other user actions that indicate how your site is performing, actions that may add value over a longer timeframe, for example email signups, loyalty programme memberships and PDF brochure downloads. These actions indicate user engagement and can lead users to complete an order in the future, but by themselves they do not immediately drive revenue. Best practice is to set up these “micro conversions” as goals in your analytics tool and assign them an economical value (by default you only usually see values reported on e-commerce transactions). Now you can keep track of the Per Visit Goal Value.

The number of conversions on the site is also important to e-commerce retailers, i.e. the number of sessions which result in a purchase. A good advertising campaign will increase the traffic to the site, and the number of conversions.

A key metric is the Conversion Rate. This is usually calculated by the percentage of conversions against the total number of sessions on the site. For e-commerce sites, a better formula is to use the number of unique visitors rather than total number of sessions.  The conversion rate is particularly meaningful when measuring the effectiveness of your UX (User Experience) optimisation over time, as it will smooth out the effect of the advertising campaigns that also take place that increase both traffic and conversions.

Conclusion

As the old saying goes, knowledge is power. When you are running an ecommerce store, data is your power. If you know where your most valuable visitors are coming from you will know where to spend your money. Stop investing in sources that don´t have a good Cost Per Acquisition. Invest more in ones that do.

With knowledge of what visitors do on your site, or don’t do, you can begin to work on underperforming pages, campaigns where you are targeting the wrong people or find out if you are sending relevant traffic to irrelevant landing pages. And by analysing other visitor actions than just conversions you get really good performance insight for individual pages.

Knowing your analytics data empowers you to make informed decisions and produce the best possible results for your e-commerce store.

E-commerce site analysis - Checklist

E-commerce site analysis - Checklist
Focus Questions to answer Actionable insights

 

ACQUISITION
Where do your visitors come from


METRICS
cost-per-acquisitionclick-through-rate
Do you have a weekly routine for assessing the sources of your traffic?

Do you have a balanced portfolio of traffic sources?
- Search
- Referring Sites
- Direct
- Campaigns

How much money are you spending on each traffic source?
- Earned
- Owned
- Paid
What are you getting in return?
Experiment with budget allocation to understand what maximises the relevant traffic for you. Invest more in sources that deliver more.

Stop investing in sources that don´t have a good Cost Per Acquisition.

Focus the attention also on aspects that may require other than investments (think: influences, referring sites)

 

BEHAVIOUR
What happens on your site?


METRICS bounce ratenot ready to purchase
What are you expecting your customers to do when they arrive at your site?

What pages should they see?

What journey on the site produces more effect?

How can you ease or shorten your visitor journey to a placed order?
Work on under performing pages.

Adjust campaigns focusing on wrong people or wrong products.

Find out if you have irrelevant landing pages. Streamline your checkout process

 

CONVERSION
Are you making money?


METRICS conversion-ratesper-visit-goal-value
Do you have a routine for assessing the sources of your return?

What outcomes deliver value to your business bottom-line?
Don´t focus entirely on eCommerce purchases

Do you assess ‘micro conversions’:
- email signups
- loyalty programs
- brochure downloads

Do you assign micro-conversions an economical value to assist evaluations?
Adjust your site, calls-to-action, landing pages and campaigns to support both visitors’ journey and your understanding on what leads to conversion.

Focus on what your quantifiers tell you
- for example, if email campaigns deliver most, make sure their content is (constantly) optimised.