April 15th, 2016

How to Increase Sales without Improving Conversion Rates

“Mobile is taking over as the top customer channel but generating less revenue than web. What should I do?”
– Major fashion retailer

‎Our clients were surprised when they saw how many of their customers were actually buying through the mobile channel despite a poor user experience a couple of years ago. Since then, they’ve spent millions on responsive websites and omni-channel backend upgrades. Now they are worried that their mobile conversion rates are too low when a majority of customers are going mobile.

The Facebook Success Story

‎The general consensus was that Facebook would miss out and make less revenue when social media usage went mobile. Instead they did the opposite. How did they do this and what can retailers learn from them?

‎Contrary to what people think, Facebook is extremely user-focused in everything they do. Revenue is always secondary.

They focus relentlessly on the customer journey and the problems they solve for their customers in terms of connecting people and content. Data-driven design is at the core of everything. They research, concept, build, test and repeat until they get it right. Then measure the total impact on customer engagement (which correlates with revenue) and not individual products, services or channels.

Facebook leaves very little to chance as you can hear from the TED Talk by Margaret Gould Stewart about the redesign of the Facebook like button. They research, prototype, test, measure and improve everything.

How Do You Make More Money from Mobile as a Retailer or Brand?

Direct revenue ‎from mobile transactions is important but not everything. Customers viewing but not buying a 1,500 USD Louis Vuitton bag on mobile is not a bad thing if it results in a purchase in store. The key thing is the overall contribution from mobile to customer engagement and revenue.

“My manager won’t give me more budget for mobile unless I improve the conversion rate.”

If It Exists, It Can Be Measured

The great thing about digital ‎is that everything can be measured. In theory you can track the life-time value of each customer acquisition and optimize your advertising and business accordingly. It can also enable you to show the contribution from each channel showing e.g. how much in-store revenue is generated from the mobile channel and vice versa. The founder of Ikea believed that a visitor to the store generates more revenue than a visitor online. Now it can be proven and they can carefully manage the balancing act of completing the purchase online versus driving the customer to the store.

Use Data to Solve Business Problems‎

Customers are not numbers and they will leave if they get treated as such. Amazon doesn’t just optimize their funnel, they constantly create new products and experiences that will improve the overall customer experience. ‎User engagement, conversion and sales graphs are all good metrics, but they don’t solve business problems for you‎.

To solve real business problems such as improving conversion rates or charging the customer ‎the right amount for shipping, you need to make the data work for you. One of the top lingerie brands in the world found through analytics and research that shipping costs had a major impact on conversion rates. Reducing the shipping cost across the board was the easy answer, but this would have had a negative impact on profit. The hypothesis was that the shipping cost could be optimized based on the profile of the customer, including life-time value. ‎Data was used to put the theory to practice with an algorithm that changed shipping costs dynamically. The algorithm is still improving (based on more data) but is already forecasted to generate hundreds of millions in incremental revenue per year.

What Can We Learn from This?

Conversion rates and direct revenues are just two measurements of success for mobile. Always look at the bigger picture, put the customer first, measure and analyze the data and use it to optimize your services and business.

Want to learn more? DMI powers the omni-channel platforms for some of the top retailers in the world. Contact us to discuss how you can drive more revenue from mobile.

Magnus Jern,
President DMI International

Tags: analytics omni-channel retail

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