Ultimate Guide to Scalable eCommerce: part 11

By Ian & Mark Hammersley, Smartebusiness
8th June 2022

KPI SUCCESS DEPENDS ON YOU

Are we making e-commerce too complicated? Often when we brainstorm about a new customer and how to grow their revenue, we imagine the online store as a physical store. This visualisation makes everything seem much simpler. Just imagine you are a supermarket manager. You come into work and an employee tells you that 100 people have abandoned their shopping trolleys full of food. The obvious question would be, where did they do this and why? Let’s say that they all abandoned at the fish counter because of the smell. Well, you can fix that.

However, on an online store, unless you have set up Google Analytics add- to-basket events, it’s impossible to know where those full baskets are being left. Creating a segment in Google Analytics to only show people who add something to the basket and then exit the site without buying is fascinating. What tends to emerge is some category pages where people just give up and knowing this means you can optimise these pages.

Coming back to the supermarket analogy, imagine walking past the self- checkouts and seeing customers kicking the tills in frustration. Again, you would do something about it, yet on a website click rage is common and most of the time not seen and not acted upon.

If 25 people asked your supermarket employees a question, like ‘Where is the Gouda cheese?’ and got an answer and then you watched the customers run out the door, you would know something was wrong. Onsite search has exits like this every day.

Or how about people walking a supermarket aisle with only one item in their basket, ignoring everything else. Not one person, but many people. As a supermarket boss you would talk to them and ask why they don’t buy something else at the same time. You would get instant feedback, but it’s not common to survey customers on an e-commerce store and make changes.

The point is that what’s not seen gets ignored. You need to bring the pain of your customers right smack bang in front of your team, so it gets acted upon. It’s hard to watch customers leave the store. Buy a big TV and show live users on the store moving their cursor, so that everyone understands what’s important.

WHERE TO START

A good e-commerce owner is like a great investor. The main decision is where to invest time and money.

Joel Greenblatt’s book You Can Be a Stock Market Genius sounds like a lofty title. But when you look at Joel Greenblatt’s investing track record you must take your hat off to him. Over a 10-year period he averaged a 50% return on investment. That’s crazy good! This means that every 1.7 years he would have doubled your money. So, what’s his secret?

Well, there are many investments you can make but you don’t have to make them all. Joel focuses on those investment areas where he has the wind behind him. He looks for special situations where in the past on average things have gone well.

Take spinoffs, for example; on average, these tend to outperform the market. So if you invest in spinoffs, you are already playing off the ‘ladies tee’ and starting a little ahead of the market.

He also invests in areas that are too complicated for the average investor to understand or are places that stink and put investors off. If he can find an area where most people will put it into the ‘too hard’ basket but with a bit of digging gold nuggets can be found, this is where he will invest. Here he would look for bankruptcies, warrants and options. Again, because a lot of the competition has given up the wind is behind him when he makes an investment based on sound research.

So, what’s this got to do with us as e-commerce site owners? Well, we are investing in our websites all the time, either in time or in actual money. Where we allocate that spend is important is it dictates the return we get. Also given it’s our own business we should be getting decent returns.

If we are to invest in our businesses like Joel, then we must look for where the wind is behind us. This means looking for what’s already working and making this go further. Don’t invest in everything, invest more in what’s working. Invest in the product categories that do well. Invest in the customer types that buy the most. Invest in the marketing channels that work.

This might sound obvious. But time after time we see e-commerce sites trying to expand to new countries before they have maxed out the marketing spend in their own market. We see sites adding new product ranges when they have not dominated the existing categories they serve.

We must also look for those ‘too hard’ categories that other competitors avoid but customers want. Think back 10 years in e-commerce and those businesses that first offered ‘free delivery, free returns.’ Much of the competition would have put this into the ‘too hard’ category thinking that they would lose money. But those that tried it realised it was a winner.

If you are a business to business site, maybe customers want a certain payment plan or buying on account. Most sites will put this down as ‘too hard’ but it might be a game changer.

WHERE TO END

Where to end? This is a trick question because there really is no end to the optimisations you can do.

In this book we have been looking at the KPIs and sales funnels as a whole across all marketing channels and traffic types. But as you grow you can segment them down into silos that make sense, such as AdWords, existing customers, new customers, lapsed, etc.

Doing this fits nicely into the wave of artificial intelligence that’s being applied to e-commerce as we write. It’s the dawn of AI and that’s here to stay for e-commerce. What this means for us marketers is that the one-size-fits-all split test just does not cut it anymore.

Look at the tests run over the past five years on sites like WhichTestWon and you will see big AB split tests mostly across all traffic; for example, split testing two different category header images is now dead. We need to go deeper. How? With artificial intelligence adding to the equation we need to think of our e-commerce site as not one site, but many sites for all the segments of users coming to it. Given that, for now at least, the magic number of conversions per month needed for an AI engine to optimise on Facebook and AdWords seems to be around 50, we need to slice the website into at least 50 conversions a month. This might look like the following segments:

Existing customers who bought within the last six months.
Existing customers who bought within the last 12 months.
New visitors.
Repeat visitors within the past 30 days but never bought.
Lapsed customers.

If we have at least 50 conversions per month for each of these segments, then we should be able to optimise them further.

Once you are done, you might have very different user experiences for each segment, as what converts one segment might lower the conversion rate in one and vice versa.

Using free tools like Google Optimize we can start to segment the traffic into silos like the above and find out exactly what makes them buy.

You will find out that the traffic to your site is very different in motivation and buying trigger. For example, we found that for segment 1, making the reward points on the checkout MASSIVE had a big difference in their conversion rate. However, reducing the reward points prominence for segment 3 had no effect and instead putting in testimonials here was much better.

The key eyeball real estate on your e-commerce store is quite small. The places that people focus on are narrow and they will miss your main sales points unless positioned carefully. For example, an existing customer knows you have free returns and free delivery and so might respond better to other messaging, whereas this is key for first-time buyers. So, start cutting your traffic into segment silos and throw some variants at an AI engine and let it find out what converts best. It’s exciting times.

IN SUMMARY

Lastly, remember that your KPI success ultimately depends on you.

Let’s recap the most important points. You’ll need to define your KPIs and use Google Analytics and other methods to determine whether your site falls below the average statistics in the three areas we’ve established:

11% of visitors will add a product to their basket.

Of that 11%, 55% will proceed to checkout.

Of that 55%, 84% will place an order.

The other KPIs are going to be unique to your industry and so it’s important to measure them and improve them. While this book is a start, it’s hard to provide different industries with a blanket rule of thumb. You need a professional to look at the statistics and evaluate the ins and outs of your website for the best results.

Start with the bounce rate for your categories, products and search results at the add-to-basket, basket-to-checkout and check-to-order confirmation steps, then invest your time and money at the most critical point.

Once you’ve finished this, benchmark your website against your defined KPIs again. Repeat the process, month after month, to ensure your e-commerce site continues to perform the way you want it to and provides you with the increased revenue you’re looking for.

Most importantly, don’t rely on your e-commerce agency to do everything for you. Get into the mix and evaluate your category pages, product pages and search terms yourself. Many of these items may not work the way you want them to, but you may have better insight into the reason why. You know your product better than anyone—or you should!

Also, set KPI targets for add to basket, basket to order, AOV, traffic, etc., to take into seasonality. Some months you’re naturally going to want to spend more on AdWords and reach for higher conversion rates. This is one of the first things we do with our new clients. We get the monthly KPIs sorted out so that we know how well we are doing each month.

Continually come back and decide where you want to invest to keep on increasing your statistics. This will result in steady and predictable scaling of your e-commerce business, and that’s exactly what you want!

We hope this information has helped bring clarity to the way you think about your products and the entire purchasing process on your e-commerce site. Keep learning and growing! We are always here to help.

GO FOR IT

Recently we had lunch with a good friend of ours. He runs a very successful e-commerce store selling outdoor sports goods. He started with about 5K worth of personal funds and has grown in five years to be a global business turning over millions. We dropped what we thought was a simple question: ‘If you went back three years what changes would you make to your business knowing what you know now?’

He replied, ‘I would set my expectations higher; the only reason we didn’t do more revenue that year was because I thought that it was a big number. If I had changed my outlook and believed that x turnover was too low, then we would have done more.’ We see this a lot.

Sometimes the limit on an e-commerce business is our own belief in what it can do. We think that hitting a million in sales is amazing because we have never hit it before. But what if you could easily be doing more?

Have you set your business thermostat too low? Why have you set it at that level? Could it go much higher? If you spend 5K on AdWords and get back 40K—why not spend more?

We don’t realise how scarce the opportunity is or how time dependent it is; even more so if this is our first e-commerce business and it’s a big hit. Imagine you are prospecting for gold and you hit it big first dig. You would be convinced you were a gold mining genius. However, if you have been digging for gold for years and failed and failed, when you hit gold you would realise how difficult it is.

If you have good arbitrage in your business, let it run, as it’s as rare as hen’s teeth and there are a thousand people behind you trying to find the vein of gold you are sitting on. Go for it, now, today!

KPI WORKBOOK
KPI 1: ADD-TO-BASKET RATE

Your product pages are just as, if not more, important than your category pages, especially when using Google Shopping. Make sure all essential details and the Add to Basket button is above the fold, provide info about other similar items and make sure customers can easily return to previous products they were looking at. Put it to use:

11% of visitors should be adding to their baskets. If your percentage is less than 11%, this KPI needs attention.
Determine your type of buyer: spontaneous, methodical, humanistic or competitive.
Adjust your product pages so that all pertinent information occurs above the fold. This makes it easier for customers to see everything and make quick decisions.
Look at the middle reviews to determine what your site is doing wrong.
Improve your worst-performing searches to increase add-to-basket rate.