My kids love when I tell them stories at bed time. Thankfully they don’t mind that I’m not that creative. I end up telling versions of the same stories over and over again. More specifically I retell bits and pieces of stories from larger narratives. The Chronicles of Narnia is the go-to in my house, and the details are critically important. Every now and again I need to go back and re-read those books because I realize my renditions of them aren’t having the effect they once did.
In a similar way, many of our customers get in the daily groove of selling their wares online and their growth starts to plateau. Promotions don’t have the effect they once had or product category revenues start to decline. You could call it a form of complacency but it’s more likely just the effects of managing complex businesses with limited resources.
Occasionally as e-commerce professionals we need to be reminded a few basic principles to help maximize conversion and increase average order value. Here are 9 tips that will hopefully reinvigorate your sales and give them the jolt they might need.
1. Up-Sell vs. Cross-Sell
We have a wealth of tools and strategies to employ as commerce professionals and I’m the kind of guy that will use all the tools at my disposal to accomplish my goals, but sometime less is more. We don’t cross-sell and up-sell at the same time. They distract and detract from each other.
Let's say a customer comes to my site looking for a generic category, say “drills”. Because he used a generic search term, he is probably not a brand shopper. That might means he will only be persuaded to buy the drill that best fits his needs or perhaps has the most appeal. My goal would be to use product descriptions, enhanced product details, promotional pricing or rich media to get him to buy the slightly more expensive product.
On the other hand, if those same customers come to my site looking for “Dewalt Drills” then I know they already have brand preferences. I could try and up-sell them to the highest model Dewalt Drill, but I’d probably fare better letting him pick his own preference and cross-selling them some Dewalt branded accessories.
Bottom line: up-sell customers who browse categories and cross-sell customers focused on specific products.
2. Shipping Expenses
In 2014, the primary reason cited for cart abandonment was shipping costs. Most everyone expects to see some shipping offer and when they don’t the additional cost makes them reconsider. Who in their right mind wouldn’t spend a few key strokes and mouse clicks to save $5.99? So having a free shipping promo is relatively important these days. In B2C (direct to consumer) e-commerce you really do need this if you want to optimize conversion rate. If you don’t offer free shipping then make sure you show estimated shipping costs as early as possible since unexpected costs make abandonment rates skyrocket.
A few weeks ago, I was visiting with a potential customer who told me very proudly their average order value was $74. I discovered later that they have a permanent policy of giving free shipping on all orders over $50! Absent a competitive driver forcing the free shipping threshold down, they are just throwing away money.
In general free shipping promotions are supposed to be either a value adding customer experience tactic or a differentiating factor. In either case the use of such a promotion is to increase conversion or raise the average order value. Placing the threshold so far below the existing average order value essentially means you’re giving it away to people who would have bought anyways.
Bottom line: Placing your free shipping threshold just beyond your average order value is a great way to incrementally grow revenue.
Be careful through, you don’t want to raise it too high or you could cause the opposite effect.
This point is really a corollary from another tried and true principle: show shipping costs early and often, even if it’s free. If you have free shipping make sure your customers know about it and know how to get it. If shipping isn’t free, don’t surprise them on the checkout page. I generally suggest flat rate shipping is best because its most easily advertised earlier in the buy flow.
3. A/B Test Your Cross-Sells
Building off #1, you have to test your hypothesis. Maybe a set of drill bits is a fine complement to a new drill, but perhaps this person is looking to replace an old drill and already has the drill bits, what should you do?
Don’t assume you know the best price point or accessory until you test. Maybe this person wouldn’t buy the more expensive drill but they would buy a more expensive accessory. The numbers won’t lie. I have seen some cases where cross-selling a more expensive product fewer times is ultimately better for your overall revenue stream. In other cases it’s all about selling less expensive add-ons and accessories with higher velocity.
Bottom line: A/B test both your specific cross-sell product and price range effectiveness.
4. Up-Sell Your Higher Margin Products
For all the talk I hear about revenue it’s important to remember that the end game in business in general and e-commerce specifically has and always will be profit… unless you’re Amazon, which you’re probably not so let’s not worry about that right now.
The temptation is that an “up-sell” means a more expensive product. It may, but that isn’t always true.
For some e-commerce managers and merchandisers this can be hard. A lot of times you may not have margin data for your products. This task becomes doubly hard if your performance is based on total online revenue rather than total profit. If this is the case, you should still do what is right for the company but bring this to the attention of your executives. It’ll make you look smarter, more business savvy, and you’ll sleep better at night. Hopefully you can also change the way your company does business.
Bottom line: Your bottom line is more positively impacted by “up-selling” to the product with the best price performance, which is margin.
5. Boost and Bury to Grow Margin and Increase AOV
It is a universal fact that not everyone likes the same products. It is also true that people like the top search results more than the bottom results. Search based merchandising is really great tool at your disposal. You could consider this an extension of #4.
Within reason, boost your higher margin products within relevant search results. There are two important components to making this tactic successful.
The first is that your search results must still be relevant! Don’t show me socks when I searched for pants. I know you might be tempted to put that left over seasonal inventory at the top of every search result but don’t. Just don’t. You’ll sell more by helping your customers find the right products.
The second component to a successful search based merchandising campaign is that you apply the rules from #2. It only works in some situations. If I am looking for a specific brand, give me those brands and move on to a cross-sell but if I am looking for a category of items then you can try to up-sell me.
Bottom line: Merchandising and marketing can be just as effective on search pages as it can be on product pages.
6. Make Promotions Promotional
A promotion is a temporary tool to help increase sales. Customers are also too savvy to be tricked. If you have a promotion that runs every month then customers will learn to wait until that time of the month to get the discounted price. To help change consumers behavior I recommend that you make promotions highly targeted by segment or by category. You can always expand a promotion if absolutely necessary.
Bottom line: a lot of companies would be able to increase their average order value simply by reducing the number of discounts they give to customers who don’t need it.
7. Make Promotional Pricing Elusive
Urgency and the feeling of missing out are strong motivators. If a customer is considering buying something you sell you may be able to pull that purchase forward by offering limited time promotional pricing. The effect this has is to make your customer consider if they really wanted the item. If they do, wouldn’t they regret having to pay a higher price for it later? This strategy also lends itself to bundling and cross-selling if you place a minimum order value on the promotion.
Bottom line: Number 6 (above) is about promotion frequency, this is about promotion duration. Promotions can be powerful but only if they seem elusive.
8. Don’t Compete on Accident
It may sound trivial but I know of a major auto parts retailer who consistently undercuts their retail store prices online. The most frustrating part of that situation is that the customer can buy online and pick it up in the store!
The challenge with managing pricing and promotions in multi-channel businesses are legion but the reward is almost always worth the work in terms of consistency of customer experiences, efficiency of business operations, and optimization of revenue.
Bottom line: If you are a retailer with both retail and online operations make sure you align your in-store and online pricing and promotions.
9. Incentivize the Purchase
Not everyone who visits your site has intentions of buying but everyone who visits your site does have a desire to buy something from somewhere at some point. If they didn’t have that desire they wouldn’t be browsing. If you can connect to that desire at a deeper or more convincing level you can bring that purchase into the present.
Incentives are a very convincing tool. For some it might be a free gift with a purchase that makes them feel like they are getting more than they paid for. I was convinced to buy a shirt a few weeks back because I got my choice of tie to go with it. Emotionally, I got a complete outfit just for buying one thing I already needed.
For others it might be future savings. My wife bought a few maternity items that she needed last week because the store she was shopping in was offering store credits on future purchases that day only. She needed the maternity clothes but could have shopped around a bit. Instead, she bought them right then because she liked the brand enough and knew she would need some newborn clothes in a few months. Now she gets the baby clothes brand she likes at a discount just because she bought her clothes during that promotion.
Bottom line: Incentives change by shopper. If you can find the right incentive for the right shopper they can be a boon to your bottom line.