We recently took on a few new clients for our outsourced head of e-commerce service. We promised them more sales by tweaking their e-commerce KPIs (key performance indicators) from the top end of their funnel (website visitors) to the bottom end (purchases). In all 3 cases with a few weeks of us starting we noticed their sales figures dipping slightly. Not a good look for us. One KPI (Total Visitor Volume (TVV)) revealed what was happening, but not why. E-commerce is all about psychology, but we only considered the customer. It turns out our clients have their predictable patterns as well.
But first an analogy.
You own an old house. It is cold. The house hasn’t been restored or updated since maybe the 1990s. You have old windows, little insulation, lots of draughts, and an oil-fired boiler. How do you increase the heat? You turn up the boiler. The heat is pushed in at a great rate and most of it promptly escapes through the walls, windows, and doors. But the house will eventually become warmer. Simple to understand.
In my analogy your website is a 1990s house, and your revenue is the heat. Your website visitors are the boiler. How do you get more revenue? You turn up the visitors. You blast away on Fakebook, Instascam, and TakeTok. You offer discounts and you do likes and shares. You sponsor a roundabout with a fishing boat in the middle (a pet peeve of mine) and you get a slot on Pat Kenny. You get sales, but the reward doesn’t match the effort and as soon as you stop the sales stop. Your visitors are not being efficiently turned into revenue generating customers. Your boiler is working hard and achieving little.
Let’s stick with the house and have you decide to call in the professionals. Perfidious Albert Insulation and Heating Ltd give you the best sales patter and you decide to take a chance. They promise you massive savings on your heating bill, a warmer and cosier house, and a happier life. You pay the money, and they start the work. Triumphantly and with great expectations you go out to the boiler house and unplug the boiler. I won’t be needing that anymore says you. And of course, your house goes cold and stays cold.
This is what has been happening with our website clients. They are tired and fed-up of hawking themselves on every social media channel. We start working with them and we do the website equivalent of installing new windows and doors and insulating the walls. We increase average order value (getting more heat with the same amount of oil) and we increase conversion rates by turning visitors into customers (retaining the heat). And so, our customers see revenue rise and they think it is great and they no longer need to waste time trying to get visitors.
But unfortunately, if we increase conversions by 100% and you reduce visitors by 50% the net result is the same level of revenue (and an unexpected extra invoice from us).
So, it turns out that not only do we need to be psychologists when it comes to your customers, but when you work with us you need your head examined as well (!!). Now I bet you are thinking this is easily solved – just turn the boiler back on. And you are right, and that is the short-term solution. However, if you have been keeping up you know that we dislike social media for business as much as you do. But that was another email about two weeks ago – perhaps in hindsight I tried to sell you the heat pump before the insulation.
Anyway – the purpose of these articles is to share my insights and help you grow your business. I believe I am an expert in e-commerce, but the truth is that a real expert only knows how little he knows. Learn with me and please pass this article on to anyone who it might help – they can also join our mailing list...