January 4, 2006, 12:00 AM

The Secret Sauce

The E-Retailing Group`s study of conversion rates—and how to improve them.

We live in tactical times where it is always desirable to deliver traffic-but conversion is essential for survival. In recent research on conversion rates, commissioned by MarketLive, the e-tailing group identified key ways to think about conversion rates and ways to create higher conversions. Our goal is to share insiders’ tips and secrets that we learned by talking to the merchants who toil daily to move the conversion needle. As one merchant succinctly noted, “It’s not just about conversion, it’s about profitable conversion.”

Continuous benchmarking

Merchants are continually benchmarking their performance, internally as well as against their competitors and the industry at large. Conversion has become one of the most important indicators among merchants and we don’t foresee any change in this analysis methodology or the enthusiasm surrounding the topic. Data continues to drive decision-making and merchants have moved from rudimentary tools that began with little or limited data to a greater emphasis on numbers, profitability and, ultimately, accountability. Merchants are looking at everything from the cost of driving qualified traffic, to winning marketing strategies, to onsite merchandising tactics that they can improve for delivery of higher conversion.

As listed below, the world of merchandising and conversion has more questions than answers. Analysis of these three key issues should help direct merchants in their quest for optimal conversion.

1. How well are you communicating your value proposition?

All brands have a unique challenge when it comes to communicating with customers online. The home page once received the lion’s share of attention as it was the first place most consumers became acquainted with the brand. Today, external search drives much of the site traffic where landing pages, often resembling product pages, are likely introductions to the site. Merchants now must think about communicating their value proposition throughout the entire site.

To determine how to communicate your value proposition, ask yourself:

-- Are you a household brand or does your value proposition need to be reinforced?

-- Is your product full-priced or promotional by nature?

-- How important is image to your shoppers?

-- What are the top five messages you hope to communicate to your customer?

-- Do you have a tagline or slogan that supports your brand?

-- What role does customer service play in the overall equation?

-- Are you a true multi-channel believer who is channel agnostic when it comes to sales?

Sephora’s holistic home page, for instance, clearly articulates the brand position as a high-end beauty merchant. Brands are an essential part of the mantra with shop-by-brand dropdowns. Sephora’s free sampling and free gift packaging continue to win customers in a category where this might be considered essential. Rounding out the experience with Tips and Trends, Best Sellers, and What’s Hot encourages customers to embrace and shop Sephora.

Service is front and center in the Crutchfield value proposition, starting with visuals of people throughout the site and a clear articulation of reasons to shop at Crutchfield. This category page, as well as positioning on the home page, product page and customer service pages, reinforces that notion.

Price and promotion play out at Overstock.com. Whether it’s a limited time promotion for $1 shipping or creating a sense of urgency among shoppers with a Christmas countdown, Overstock leverages a series of tactics to brand the shopper experience. That approach is further supplemented with Deal of the Day, featured products and messaging that inspires the impulse purchase.

2. How do you stack up vis-à-vis the competition?

Now that you know your own brand, the next step in being successful is benchmarking your site against the competitive landscape. The e-tailing group is currently completing our 8th Annual Mystery Shopping, looking at 100 sites from both merchandising and customer service points of view. Over the years, we have found that merchants want to, and must, understand how they stack up against their competitors. We would suggest the following rules of thumb to assess your positioning. It’s a time-consuming effort and if dedicated internal resources are not available, we recommend outsourcing that work.

Here are 10 ways to determine where you stand in relation to your competitors:

1. Define your competition clearly online and from a multi-channel perspective.

2. Rank your top 10 competitors, identifying those that should be monitored on a quarterly basis.

3. Identify a series of elements that you will review from a branding, merchandising, multi-channel, and marketing perspective.

4. Sign up to receive e-mails on all sites and evaluate throughout the year with an emphasis on seasonal peaks.

5. Evaluate key baseline templates including home page, category page, product pages, search, and customer service.

6. Note the presence of innovative onsite merchandising.

7. Shop your own site and those of your competitors to understand the real shopping process from adding an item to the cart to post-order merchant communication.

8. Be honest about your own performance and share findings with your entire team on a quarterly basis.

9. Keep a running set of priorities to maintain a best-in-class site.

10. Attempt to add a critical innovation to the site each year.

3. How much of your traffic is truly qualified and likely to convert?

Delivering the right experience starts with the customer-and not all customers who visit a store or site are of the same type. As mentioned in the merchant’s words of wisdom, taking the long view of the customer is smart. Accordingly, my cardinal rule of thumb is “Know your customer.”

We will address three main shopper types from which most others are derived as this clearly points out where customers are in their readiness to buy. Merchants who sell across the retail channel often have a different outlook from those who live under a direct model and thus their conversion rate goals are quite different. All however need to qualify their customers.

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