The ultimate conversion rate or ...


...  there is a world behind the buy-button

During the recent decades I have to deal with various forms and definitions of fulfillment of functions and conversion rates. And I heard from various representatives of clients, third party companies, team members and external sources what is the most important overriding factor and key factor to get the ultimate conversion rate (by the way an often used abbreviation is CR for conversion rate).
Again and again quite a lot of marketers and experts get bogged down in details and in arguments over the most important fields of activity to improve conversion rates …

SEO - search engine optimization
CRO - conversion rate optimization
CRM – customer relation management
UXD - user experience design
Visual design – look and feel

… and other individual responsibilities.


Mostly when we think about conversion optimization, we are thinking and dealing within the confines of our own or another area of responsibility but again and again only within the ‘digital world’. Yes the well-known proverb ‘sweep first in front of your own door’ isn’t wrong, but if we talk about conversion rate we often neglect that we talk about a complex flow with many tiny and big steps and opportunity and risks of diversion.
Most people start with the search-engine-result-page (SERP) and end with the shopping cart or with the checkout's confirmation page. As an UX guy I always think broader and more holistic.
What I'm suggesting, however, is that there are ways to extend the 'observation terrain' from the digital world into the real world.



A general and overall definition defines CR as the amount / number of visitors who take a desired action.

And it’s quite normal and easy to understand that successful conversions are interpreted differently by individual marketers, advertisers, and content creators.
If we talk about e-commerce and the sale of products, a successful conversion is often constitute the sale of a product to a consumer whose interest in the item was initially sparked by clicking for example a banner, advertisement or a search engine result of a public search engine like Google, Bing, etc..
If we take the upper ‘e-commerce definition’ of conversion rates – the desired action is the purchase of a good. I still ask you, what ultimately defines success? … the conversion? You might think 'What a stupid question! It’s when the customer orders the good!'
On the one hand you're right, because it should be clear what is meant by 'Conversion' - but it isn't.
Until not so long ago that was also my understanding -  But since I know a company and work with an for an company that covers the whole e-commerce, m-commerce channels, the supply chain, customer hotline and support communication, etc.  - my understanding changed or more precisely I broadened and extended my understanding.

Let me explain my extended understanding. Conversion rate is defined by the percentage of visitors who take a desired action, and as I said in case of e-commerce the action is general defined by the acquisition of a product but the final criteria for success isn't the click on the 'buy-button' at the end of the shopping-cart and payment-process.
After all an acquisition is only ultimately executed when the customer keep the goods without exchange or returns. And regarding on your client’s products you should have attention on further aspects. Are there problems during the customer’s ownership phase?  Does the user use the good without problems and the shop has no further problems regarding shipping problems, additional service (hotline, call-center, etc.), subsequent deliveries or subsequent improvements.
Once again you might ‘say what cares? The user has completed the desired and defined action and for that reason it’s a successful conversion!’ My answer is NO – because what counts for the shop owner at the very end, is whether the shop makes money without returns and other following problems and not is the CR very high.

In the context of conversion rate and e-commerce one big issue and challenge are the returns. Because returns are expensive – they costs resources in many ways (manpower, storage area, administration, etc.), third party expenses, diminished value (fashion being seasonal, an item loses its value from week to week and more at the end of season).  and last but not least it costs nerves.
Your customers may return the product for many reasons, such as, wrong color, not fit for their particular use, damage package, repair, lease returns, recycle, refurbish, stock rotation, etc. Providing a good customer experience in this after sale processes are just as critical to a business as the e-commerce  shop itself.


Reasons for Returns

In the following chart you will find a few of the customers’ reasons. Please don't be confused about the fact that the sum is higher than 100% - it's because most customers have more than one reason to return an order.



The average return rate in the US and UK for apparel is 25%, in Germany it's 40% (These percentiles are interpolated numbers from various sources and you should keep in mind that these numbers depends on various factors (line of business, brand, target groups, countries, …).
And it’s often the case that the return rates show discrepancies among the product categories e.g. ‘easy’ item like scarfs or cheap items such as t-shirts are being returned less but for example gloves, dresses and helmets (motorcycle) that have to fit well have very high return rate. Germany has a higher return rate. In Japan, the return rates are among the lowest; one reason is for sure the cultural differences - "losing the face". Free returns encourage sales, but at the cost of higher return rate.

Nobody can try to be all things to all men – but what you can do, you can gather as much information about the target groups as you can – that will depend on your schedule, man-power and budget, but each effort is worth it. The more user-centered you start your project and the more you involve the upcoming user by testings the smaller is the risk to fail. And if you have problems, left shopping carts etc and I promise you will have problems, because nobody is perfect and as we all know the devil is in the details, all these research will help you finding another solution.
Try to understand how your users think, feel and behave? What about the consumers’ experience and expectations regarding the products, services and brand? 
If we talk about conversion rate and e-commerce we often neglect that we deal very often with the whole customer life cycle – Attention, Awareness, Consideration and Purchase.




Summary

A high conversion rate depends on various factors, each factor has to be considered and supported yielding the desired effects and results.
Most important is that you understand the relationship between metrics. It’s always vital to consider the revenue improvement, not just conversion rate improvement. Removing product recommendations from shopping cart pages, for example, might improve conversion by several percent, but if average order value fell the same or more and your return rate increase, it’s not a winner.
There are so many other analytics relationships that aren’t so obvious …
  • Campaign: More people bought, but at a lower price – profit did not increase
  • Promotions or Coupon: More people purchased, but a percentage would have purchased anyway without the discount
  • Remove negative reviews: More people purchased the item, but the partial refund and return rate increase.
In this context I like to mention just a few other metrics …
  • Revenue per visitor
  • Average order value
  • Items per order
  • Gross margin
  • Profit margin per visit / per customer
  • Lifetime customer value
I am a firm believer that each working field has to go hand in hand and one metrics may not turn the scale – that we have to work cross-border and cross department as a team with the same spirit and with a holistic view to support an e-business as its best. It's clear that all strategies (company strategy, brand strategy, campaign strategies, offline strategies and online strategies) must be tightly linked and harmonized and adjusted.
This brings me to an article I wrote a few years ago on the boxes and arrow site - The article is titled 'UX Design-Planning Not One-man Show' but in the end the article does not only deal with UX Design-Planning in conclusion the article is about 'working together' http://boxesandarrows.com/view/ux-design-planning

Comments

  1. Thanks for this great detail about Conversion Rate Optimization. The main goal of every website is to have higher conversion rate. And in this post you have provided a rich guidance about how to work on this factor.

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