Practical Ecommerce

Notable Views: Improve Your Conversion Rate with a Manufacturing Approach

Editor’s Note: “Notable Views” is a series where we ask experts to address critical ecommerce topics. For this installment, we corresponded with David Sasson, the founder of OverstockArt.com, an online retailer of original art reproductions.

The company is based in Wichita, Kansas, but Sasson was raised in Israel. He says, “I was born in Kibbutz Ein-Shemer, a small town close to the center of Israel and about 10 minutes east of the Mediterranean Sea. Growing in a kibbutz was a great way for a child to develop independence and passion.”

David Sasson

David Sasson

After serving in the Israeli army, Sasson emigrated to the U.S., where he studied business administration at Wichita State University. He graduated from there in 1997, and launched OverstockArt from his living room, in 2001. Fast forward to 2011 and the company has offices in three continents, offering hundreds of original art reproductions from its Yahoo! ecommerce platform.

But Sasson has not forgotten the keys to his success. “We focus on the two groups that provide us with the best returns,” he says. “Our customers and our people. If we are able to please both of these groups, we will continue to grow aggressively and profitably.”

Sasson’s ecommerce tactics are innovative. In this piece below, for example, he compares conversion rate improvements to manufacturing.

When we hear words like “continuous improvement” and “reducing defects,” we typically think of a manufacturing operation. However, ecommerce merchants can take the same approach and apply manufacturing concepts to ecommerce conversion-rate improvement.

Valuing Visitor Actions

Every action by a visitor to your website has a certain value. A sale is value-based on the average revenue or gross profit; a lead is valued-based on percentages that convert over time. For example, assume a close ratio — also called a “conversion rate” — on a website is 1 percent and it is equal to $100,000 of value, from a marketing spend of $20,000. If we can increase the close ratio to 2 percent, we will get — for the same marketing spend — $200,000 worth of value. If we increased sales without improving conversion then we would have likely had to increase marketing expense, which would have decreased or destroyed profitability. But using close-ratio improvement allows us to grow sales without increasing expenses, which allows the company to now invest in many other aspects that create additional growth.

In other words, the close ratio is a measure of operational improvement and efficiency, much like the “continuous improvement” and “reducing defects” mentioned above. The goal is different since we cannot hope to close 100 percent of visitors. But the incremental approach of reducing the defects and looking at every detail and every impact point remains the same.

Another advantage of using continuous improvement methodology is zero investment — or very little investment. The idea is small incremental improvements that do not have a high cost but create impact on your close ratio. Ten small steps each creating a 10 percent improvement are easier and less costly than a major overhaul that may — or may not — provide 100 percent improvement.

Traffic Quality, and Onsite Performance

There are two main factors affecting the close ratio. The first is the quality of the traffic to your website.

The second is the performance of the website once the visitors arrive. You need to review the different traffic and navigation options that your visitors take, once they come to your site. This review should include the following.

  1. Determine landing pages. What landing pages are most commonly visited?
  2. Identify popular categories. Which categories or subcategories are mostly used?
  3. Locate traffic sources. Do most visitors use search? If so, how many searches? What keywords seem to move forward towards a sale and which are typically resulting in search or site abandonment?
  4. Decide where purchase decision is made. Do most people add to cart at the product page or the category page?
  5. Compute abandonment rate. Once buyers are in the funnel what percentage falls out? At which step do you have the most fallout?

The above data could be derived from your analytics program. Once you determine the navigation patterns, look for the weak links and easily-remedied problems. These will be the areas where your work would have the most impact and the most results.

Common Conversion Problems

Once you’ve identified where the traffic comes from and its navigation patterns on your site, you are ready to corrected common performance and conversion problems. From my experience, the following are two common conversion glitches.

  1. Lack of standard navigation and buttons. On the web there are standards and conventions that have been established over time. Visitors expect those standards. These involve specific locations for the search box and the company logo, specific shapes for buttons, and other normal conventions. Don’t divert from those conventions. Customers are used to them.
  2. Failure to define the purpose of a page. Each page on your website has a purpose and it should deliver on that promise. Therefore, prior to evaluating pages we must first understand the purpose of that page. Once we understand, we can look in the data and evaluate: Is this page performing or not, and why?

Unproductive Pages Are Similar to Manufacturing Waste

Unproductive web pages are similar to manufacturing “waste.” In lean manufacturing, the three types of waste — which are comparable to “wasted” web pages that fail to deliver — are as follows.

a. Muda. This term refers to nonproductive action. In our case it would be nonproductive navigation. A page that attracts customers but does not move them towards the purchase process or, even worse, it is a dead-end page which means they get there and leave the website.

b. Muri. This term refers to unreasonable work that line employees are asked to perform. In our case, it refers to unreasonable work that is asked from customers in order to advance in the process. This could be entering full contact information before they can see the price of a product, or asking for an unreasonable amount of information in the purchase process.

c. Mura. This term refers to uneven flow in the different production processes. In our case, it refers to two separate situations. The first is when some pages load very fast and others take much longer. This inconsistency creates doubts in the customers’ minds that the site is not functioning properly. The second exists with very complicated pages that customers don’t understand. In both mura situations, the customers leave the site without buying anything.

Summary

Much like lean manufacturing, improving the close — or conversion — ratio is not easy. It is an ongoing process of improving page after page, and then measuring the results and improving again. However, when this process is applied correctly and repeatedly, the improvements can be great.

David Sasson

David Sasson

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