Optimizing Your E-Commerce Conversion Rate: The Two Conversion Criteria
E-commerce traffic is worthless if you are not converting any of your traffic into sales. The percentage of visits that result in a purchase is called the conversion rate. So much emphasis is put on generating traffic, but it's only the first step in building e-commerce revenue and profitability. It is typically very expensive from a holistic resource perspective (money, time, focus, etc.) to generate traffic, so to pay no attention to conversion rate is committing a cardinal e-commerce sin. There are a few critical components that determine how high your conversion rate will be.
Step back for a moment. What would it take to produce a 100% conversion rate? Every single time someone visited your site, they would purchase something. Any time a visitor meets two criteria, they make a purchase. There are many factors that affect each of these criteria, and I will analyze each of them in this article and following articles.
THE TWO CONVERSION CRITERIA
(Here it is. The secret recipe for converting visits to sales.)
To convert a visit into a purchase, the visitor must:
1. Perceive the value of what you offer is higher than the value of the cost to acquire it.
2. Have the resources to absorb the cost at the point of purchase.
I will analyze these Conversion Criteria from the perspective of a different set of variables. While it isn't a quantitative measurement, you can determine the likelihood that an individual will make a purchase via a cubic equation: Traffic Quality x Value Presentation x Ease of Purchase. If you have a very high value for any of these variables, it doesn't necessarily mean you will have a high conversion rate. Just as with the broader e-commerce revenue equation I covered in the first post of this series (Traffic x Conversion Rate x Average Order Size = Revenue), attention must be given to each of the variables to optimize the outcome. If any one of them is shirked, it can ruin all of the efforts made to improve the other two. While you cannot attach a numeric value to these variables as easily as you can to the Revenue variables, it's still important to understand conceptually because the conversion variables relate in the same way as the revenue variables.
In the next article, I will dig into the first variable that affects conversion rate: Traffic Quality.
Posted on February 23, 2010
Posted by Kurt Theobald