Conversion and Acquisition

In the world of ecommerce, there are two terms - conversion¹ and acquisition² - that, in general, are bandied about with little regard for what they mean. Of course, part of the problem is that their meaning is partly contextual, but even so, words have meaning and when you're getting paid to think, part of that is thinking about what we mean and how we're communicating.

"Why", you may ask, "is this discussion important" - and here's the reason. The two terms have very different meanings and without understanding them you cannot be as successful as you would otherwise, because in most cases the two measures have an inverse relationship.

Wait...I sense a great disturbance. It's almost as if the universe cried out "that cannot be so".

When people are buying online - not shopping, but buying - interrupting them will negatively affect whether or not they complete the process, and there are times that even selling will interfere with a purchase. People who have been in the ecommerce game for a while should already recognize this³ but not all do, as is evidenced by the number of sites cross-sell or up-sell or that require a customer to create an account before (or during) paying for their purchase - sites that don't appear match the priorities of the business.

There are a number of reasons that you, as a merchant, may want a customer's information - most of them legitimate; for example, you will need billing information to complete payment and shipping information to fulfill the order (in most cases). Your general need for information, however, ends there - aside from perhaps slightly more information regarding the individual(s) purchasing and receiving the goods to verify that the transaction conforms to laws those which those individuals are subject.

I do not question whether or not it will be in the customer's best interest to create an account with you - you can store billing information as well as shipping information and purchase history - all of which is, clearly, a benefit to the customer. However, the data is clear - forcing a potential customer to create an account will lower your conversion rate - and if you are using a payment gateway⁴, if they force your customer to create an account - even if you do not - it will lower your conversion rate.

So, how do you 'fix' this problem - after all, you want satisfied, repeat customers - that's the greatest return on your marketing investment, right? The answer is really quite simple. Make the value proposition when the user is not distracted by purchasing. Ask for their email address during checkout by offering to keep them updated on the status of their purchase (if it's a purchase that needs to be fulfilled) or offering to check to make sure they're satisfied with their purchase. Of course the trick here is to actually follow up - not doing so will be counter-productive at best.

An email follow-up approach has the additional benefit of reduced cost. Consider this - if the customer does not want to give you their email address they likely do not anticipate being a return customer. Their intention clears you of securing and storing personal information as well as spending marketing funds to retain or re-engage customers who will not be bringing you repeat business.

The solution is simple and effective, allowing you to focus your energies toward making your customers satisfied rather than acquired accounts...and isn't that what really drives your business - satisfied customers?

Notes: links open in a new window

1. Conversion is the measure of those potential sales that become actual sales. For example, if you have 10 customers with items in their cart and 9 buy their items and one leaves without purchasing, your conversion rate is 90% (and your abandonment rate is 1%).
2. Acquisition addresses acquiring a customer, without regard to whether the acquisition is either temporary or permanent.
3. If you sell online and don't recognize this, there is a significant chance that either you have selected the wrong indexes as KPIs or you are not performing A/B testing and are not measuring the impact of activities assumed to be beneficial or at least benign.
4. A payment gateway is a service provider that authorizes payments, typically by acting as an intermediary between the merchant and a credit card issuer. Learn more about payment gateways at http://en.wikipedia.org/wiki/Payment_gateway.