The notion of ecommerce arose as the Internet grew out of its infancy and became available to a large number of people. As the Internet became accepted and more approachable to the majority of the population, without requiring technical knowledge for its use, it became possible sell products through this new medium.
In 1995, some of the first ecommerce stores, such as Amazon and eBay, became operational.
Since then, ecommerce has continued to grow almost exponentially. According to a study by eMarketer, ecommerce retail growth will continue is expected to reach $4 trillion US in 2020.
But despite the ecommerce industry’s fast growth (or rather due to it), competition on the market is intense, and all the advances in technology still have some hurdles to overcome.
Challenges faced by online stores
- Physical disconnect between the consumer and the product/store
- Security concerns about payments
- Security concerns about personal data
- Concerns about the quality of delivered products, as opposed to what’s shown on the page
- Amazon — A challenge of its own, since it sells everything at great prices with affordable (usually free) shipping
Overcoming the physical disconnect is not an easy proposition. An ecommerce store needs to present its products to potential customers in a way that makes the customer decide the product is something they would pay for.
Since the prospect can’t touch, smell, or taste your product, they have to rely only on what they read, see, or hear on your site.
All those early ecommerce stores had a clear vision of what they wanted to be and how they would operate. This vision, however, was not aligned with available technology. The early Internet was a novelty, and most consumers didn’t trust it; nor was the user interfaces evolved enough or the access fast enough for the majority of users.
At first, ecommerce stores faced the obstacle of prospects who were unfamiliar and ill at ease with buying products online. The concept required consumers to make a mental switch, actually deciding to buy something they could not touch or feel. Early adopters proved the concept had merit, and eventually, more and more people decided to buy online.
As turnover of ecommerce stores grew, various techniques used to gain consumer confidence developed — all with the ultimate goal of turning as many visitors into customers.
While brick and mortar stores need to get window shoppers to purchase products, ecommerce stores need first to convince their prospects that the shopping window was real. These efforts resulted in the creation of techniques to foster trust and increase a prospect’s likelihood of buying, and their systematization led to the creation of a number of industry-wide best practices.
Finally, every ecommerce store must consider the fact that Amazon.com is the most popular ecommerce site online. Virtually every product can be bought there and Amazon offers free shipping everywhere in the U.S.
Your store can only succeed online if it positions itself in a niche segment and offers better conditions for specific products. Every store still needs to overcome the credibility gap that exists between its offer and Amazon’s.
The basic psychology of conversion
Before we go any further, let’s examine one of the most renowned theories of conversion psychology. According to a model created by Stanford professor B.J. Fogg, the primary elements of conversion are motivation, ability, and trigger.
When combined, these three elements lead the prospect to a desired behavior or action. In terms of ecommerce, that desired behavior is purchase.
“Motivation” is the initial value that reflects the customer’s desire to solve their problem using your products. This is largely a given value, and there’s very little that can be done to increase it.
However, you can actually lower prospects’ motivation to purchase if your website doesn’t fulfill certain requirements. Motivation can be thought of in three subcomponents: pain/pleasure, hope/fear, and social acceptance/rejection.
This is the point where triggers and ability come in. “Ability” means that prospect is actually able to turn their motivation into action. The easier it is to act (AKA purchase), the more likely a prospect will be to convert, and vice versa.
Ability depends on a variety of factors, such as money, time, effort, state of mind, social deviance (we’ll get to this), and how routine a task is.
The “trigger” is the specific spark that drives a customer to action. In practice, it’s called a “call to action”. Triggers begin to succeed at the intersection of motivation and ability. Below that line, they’ll fail, and you’ll need to reconsider where your trigger (call to action) is placed and what your prospect’s motivation is at that moment.
Two ways to generate more ecommerce revenue
Before we begin talking about CRO, let us just briefly examine an alternatives.There are two basic ways to increase the revenue of a website. One is to bring in more visitors (increase traffic), and the other is to turn more visitors into prospects (increase conversion rate).
Way #1: Increase total traffic
Getting traffic is vital for any website on the Internet, so there are multiple ways to attain it. Plus, doing A/B testing without traffic usually doesn’t make sense.
Cost of traffic acquisition
The cost of traffic acquisition is usually expressed as cost per thousands of visitors delivered. Search engine optimization can be highly variable in pricing, starting from a couple of hundred dollars and reaching into the tens of thousands. SEO is an indispensable marketing activity for low-traffic ecommerce sites.
Pros of traffic acquisition
The benefits are obvious. More people will come to your website, and you’ll rank higher in search results as they research purchases. This enables you to grow traffic further, attracting even more visitors and more customers.
It’s a lot like the ancient credo of brick and mortar stores: “Location, location, location!” Except instead of a prime physical location, your store will enjoy top search engine results page rankings for relevant keywords.
Cons of traffic acquisition
There are two problems with traffic acquisition as a main engine of ecommerce growth.
First, the cost of traffic acquisition tends to curve as it grows, reaching an exponential as your traffic increases. Second, the potential of traffic acquisition is finite — there are only so many people you can attract to your website.
Sooner or later, you will encounter one of these obstacles.
To solve this problem, you can turn to other solutions like growing the likelihood of purchase, expressed as your store’s conversion rate.
Way #2: Increase conversion rate
An increased conversion rate is the balm to soothe the growing costs of traffic acquisition. It allows you to grow revenue from your existing visitor base without having to bring more visitors to the website.
By improving your content, user interface, and other elements of your website and/or offer, you can both make it more likely for visitors to buy and to leave with a positive impression of your website (positive enough to influence other visitors to buy, too). Customers can encourage potential prospects through reviews, testimonials, or social network activity.
CRO works hand-in-hand with SEO to improve your website’s relevance, clarity, quality of content, technical functionality, and more. Together, these two disciplines can improve both your website’s appeal to prospects, and the performance of your selling process.
By determining your target audience and identifying the best-performing customers, you can better focus your marketing and SEO efforts.
The role of conversion optimization in ecommerce
Eventually, the entire process of analyzing a website from the ground up in order to increase its profitability and total revenue became known as conversion rate optimization.
It can be broadly defined as “all activities aimed at increasing the likelihood that a visitor to the website will actually convert from prospect to customer”.
By its very nature, CRO for ecommerce is a multidisciplinary approach to increasing purchases and improving the performance of online stores. It combines customer psychology, website copy, UX, design, and functionality into a mix that makes the visitor want to buy from your store again and again.
While conversion optimization can be seen as an exact scientific approach to the problem of increasing conversion rates, there are some caveats. Unlike with math or other exact sciences, there are no definitive answers and solutions in CRO. What might work for one ecommerce store might not work for the next one.
Yes, there are some best practices, but the rest of the process involves researching and testing ideas for improvement. Testing ideas means that optimizers can implement the winning solutions to enhance your ecommerce store, improve revenue, and provide a smooth shopping experience for your customers.
Next week we will cover what the business case for CRO is. Stay tuned!