December 26, 2000, 9:55 AM

Five steps you can take today to reduce abandoned shopping carts

The more we learn about Internet shoppers and shopping, the greater the pressure to succeed. Both pure-play dot-coms and brick-and-mortar retailers have spent tens of millions on market-defining sites-only to see them littered with abandoned shopping carts. A recent survey by Internet market researchers BizRate and the NPD Group found that three-quarters of online consumers bail out before buying.

The battlefield is set. As e-retailers spend millions of dollars on print, radio and television ads meant to attract attention and establish their brands, competitors are just a click away. A single mistake can mean that all the money spent attracting new customers goes to waste. Any advantage can shift the outcome-and just a percentage or two improvement in conversion ratios can mean the difference between winning and losing in a vertical market.

Fortunately you don’t have to look any further than your own site for many answers on how to improve your Web store and get a jump on the competition.

Every site tells a unique story: Why do users come there? Why do they leave? By listening to the story your site is telling, you can better understand your customers and what they want, better allocate your resources, and accelerate your business. While your competitors flood the market with broadcast messages hoping to hit anyone who’s listening, you can make strategic, surgical strikes and get the response you hoped for. It all begins with understanding your online customer. Here are five ways to do that-and begin steering more shopping carts through the checkout.

1. Realize nobody’s average

If you put one hand in hot water and the other in ice water, and I ask you to describe how you feel, you would be perfectly correct in saying, “On average, I’m warm.” But a much more accurate response is that one hand is hot and the other is cold. In much the same way, many electronic marketers mistakenly assume there’s an “average user” who typifies a site’s entire customer base. Let’s say you determine that your “average” customer logs 2.3 page views per visit and spends $12.50 per purchase. In fact, averages give you very little information to act on.

Most sites have clusters or segments of users who behave similarly. It’s unlikely that an entire cluster of people browse 2.3 pages per visit and spend $12.50. Instead, sites typically have a large group of people who come in and leave after the first page without buying anything. Another group might browse a handful of pages and spend a few dollars per transaction. And a third group lingers over even more pages, returns often, and spends a lot of money. Though the latter group only accounts for 5% of your customer base, they may be responsible for 90% of your revenue.

2. Think segments

As soon as you recognize that no customer is average, you can start making more intelligent decisions about your business and achieving better results. Instead of casting your net far and wide for a small return, identify your most valuable customers and focus your efforts on trying to acquire more of them: Which ads attract them? Which products interest them? How can you best serve this group?

Once you’ve done this, turn your attention to the middle group and consider how they differ from your most valuable customers and determine what you can do to move people in this group into your most valuable segment.

By making the simple observation that your customer base contains segments of users, and then focusing on the needs and profiles of each segment, you can tailor your site and your promotions to attract the customers you want.

3. Experiment boldly

To determine the wants and needs of a particular group, you need to test out various possibilities. Are your customers price sensitive? To what extent? What happens if you offer a 10% discount versus 5%? What about offering free gift-wrapping? Or free shipping? Starting a sweep-stakes? With so many options, it’s tough to know which promotion will work best and whether you’re giving away too much.

Fortunately, the medium has the message. Because many retail sites have thousands of visitors every hour, the Internet is a perfect forum for targeted experiments that yield near-immediate feedback. If you suspect an offer of free gift-wrapping might boost sales, try it for an hour and measure the results-before you go ahead and order a truckload of wrapping paper.

With products from companies like Vignette Corp. and Net Perceptions, you also can test one offer on 10% of shoppers and a different offer on another 10%. Within a matter of hours, you can easily compare the results and then target your offers to bring the maximum response according to the tactic you found most effective. You willingness to rate promotions and strategies is essential to success.

4. Identify what doesn’t work

Most online merchants can point to their most popular products without thinking twice. But how many know which products aren’t selling? And more importantly, how many can say which products are most often examined-even put in the shopping cart-and then abandoned? Many e-marketers focus only on what’s working. But that makes it difficult to know what to fix.

Various solutions will help increase sales. Should you spend more money on ads to bring new customers to the site? Should you offer better promotions to convince customers already visiting the site to buy or buy more? Or can you revamp the layout and performance of your site to make it easier for every customer to purchase? Each option requires resources-time, money or people-and setting out on the wrong course can be costly. Rather than guess where your problems lie, measure them.

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