A Better Way to Measure Conversion Rate

It’s been a while since we discontinued the Friday-link-list we used to call Blogger’s Digest here at Get Elastic. Blogger’s Digest was a collection of the week’s essential reading for ecommerce fans from around the blogosphere. In the spirit of Blogger’s Digest, I’d like to point out a post that is essential reading for anyone who measures a website conversion rate.

Multichannel savant and President of MineThatData, Kevin Hillstrom, shared his method of measuring conversion rate across time. The idea is to segment visitors based on their site engagement:

  • Homepage or Landing Page Visit Only
  • Multiple Pages Visited
  • Shopping Cart Abandoned
  • Purchaser

Wouldn’t you like to track whether the customers who didn’t purchase eventually purchase the following month, or at least move toward conversion — like return to the site, view more products, add products to cart, or place an order? Would you like to know how many purchasers buy again in the next 30 days?

Kevin’s method maps your segments with their possible future behaviors:

  • No Return Visit
  • Homepage or Landing Page Visit Only
  • Multiple Pages Visited
  • Shopping Cart Abandoned
  • Purchaser

Here’s an example grid of one month’s site behavior by segment, where segments are established the previous month:

As Kevin points out, understanding customer behavior overtime gives you some context around your site metrics.

“If you know that customers who abandon a shopping cart are unlikely to come back to your website, then shopping cart abandonment is a REALLY bad thing. If you know that two-thirds of the visitors will come back over the course of the next thirty days, well, you think about abandonment with a little bit less fear.”

From a targeted selling perspective this information is also valuable. If you knew that 13.7% of customers who abandon their carts will return and abandon their carts once more, you can set up rules to identify these customers (through cookies or authenticated [logged-in] session tracking) and target them strategically. If your goal is to reduce the re-abandonment stat while boosting the conversion for this segment, you might offer a live chat prompt to this type of customer (reserving your precious live chat resources for those most likely to need it). Or you may offer an incentive, a discount or free gift with purchase — time limited.

Further segmentation of your data is also useful. What if you discovered a high percentage of customers who abandon their cart are international visitors, spooked by the high shipping charge or unable to complete purchase because of shipping restrictions. You can segment out these visitors and concentrate on the conversion rate that matters — your domestic market.

It’s worth the time to wrap your head around segmentation. It can lead to a better understanding of your customer and more intelligent marketing activities to maximize your conversion rates and revenue.


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10 Responses to “A Better Way to Measure Conversion Rate”

  1. I read Kevin’s post earlier this week, and he certainly make some good points. Segmenting your customers, and analyzing that segmentation data is a trait that successful online retailers all have in common.

    I take some small issue in calling anything a “conversion” if it happened over a 30-day span or longer. This simply doesn’t line up with consumer purchasing behavior. Analyzing segmentation data as Kevin suggests is very important, and I think you can learn a lot from it. However, it’s important not to get a false sense of security from conversion metrics that look better as the time span increases. The ability to convert a customer within the first 10-14 days from the initial visit or abandonment is a more telling metric, and a better indicator of what is working (or not) on your site.

    Segmenting customers and analyzing the behavior over time? A very good thing! Considering the purchase behavior as a true measure of conversion? Not so much.

  2. Thank you for sharing this article with your audience, how nice!

    Kent — no hard and fast rules here, if your business has a 10-14 day window, then plug that into this framework, and away you go.

    I consult for a lot of businesses … for some, the right window is 10-14 hours, for some, 1-2 days, for some, 10-14 days, for others, it is a few months. Every company is different. My goal was to share a framework, not to dictate the time used in the sample framework.

  3. Tim Peter says:

    Be still my heart. Two of my all-time favorite bloggers talking about my all-time favorite topic: conversion rate. Kevin, this is sweet. Kevin, this is a very cool method for measuring conversion. And Linda, it’s also cool of you to point this out to your readers.

    @Kent, I’m with Kevin on this one. I sell luxury travel and hotel accommodations online. A few years ago, I sold economy hotels. And prior to that, lead gen in financial services. All three exhibited different purchase windows and different purchase frequencies.

    Clearly, the more we can convert visitors the first or second time to the site, the better. But, different products and services are going to reflect different customer behaviors based on the nature of the service.

  4. Hi Linda,

    I think Kevin’s suggested segmentation framework is fantastic.

    The only snag, as I mentioned in a comment on Kevin’s blog, is the practical implementation. Both GA and Omniture do not support time-based segments. Which makes this framework impractical unless you can export the data into BI tools such as SPSS or SAS. How many ecommerce web analysts have access to these tools?

    There are some potential solutions if you are using SiteCatalyst. Happy to share if anyone wants to get in touch directly (michael.feiner at aepconvert.com).

    Thanks
    Michael

    http://www.aepconvert.com

  5. Kouba says:

    Are you a professional journalist? You write very well.

  6. Thanks for the sharing this website. it is very useful professional knowledge. Great idea you know about company background.
    web application development

  7. ben gold says:

    Thanks for the sharing this :)
    Kampyle also raises conversion rate…check it out

  8. We have a Volusion store and the conversion reports are not very detailed. I would love to be able to study conversions more in depth.

  9. Two of my all-time favorite bloggers talking about my all-time favorite topic: conversion rate. Kevin, this is sweet.

  10. I have facebook account, twitter account and linkedin account but need some help to drive qualified traffic and leads. I need assistance from one who has passed through the agony of increasing traffic by learning it himself in the hardest way. i look forward to your response. Regards

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