A common misconception among e-commerce brands is that generating traffic is the only way to increase profits. While the idea of exposing your business to new leads via new traffic (paid, SEO) is alluring and might have been successful when e-commerce was booming…
The reality is: competition over traffic is booming instead, and there’s a simpler (and more profitable) way to increase your bottom line by optimizing your traffic without funneling new visitors to your site.
This article will cover three little-known ways to maximize customer conversion and boost profits.
Customer conversion: why optimize existing traffic?
The COVID-19 pandemic resulted in an e-commerce boom and, as a result, more individuals than ever are shopping online. But while the number of online shoppers is increasing, so is the cost of generating traffic to your shop.
Data shows that the cost per thousand impressions (CPM) is rising in all regions year-over-year. This means that paid social ads are getting more and more expensive. Take Facebook for example: during the pandemic, their CPM increased almost 50% in one year.
As generating traffic becomes more expensive, merchants must pay special attention to converting customers stemming from their existing traffic.
Merchant strategies for customer conversion
There are three sound ways that merchants can increase customer conversion rate.
By reducing false declines, decreasing involuntary payment churn, and automating their payment recovery, merchants stand to make more money from the customers that are already eager to buy.
1.Reduce false declines
A false decline happens when a merchant mislabels a customer as fraudulent. As a result, their legitimate transaction is declined.
Each false decline harms a merchant’s bottom line – these declines are responsible for an estimated $386 billion in annual revenue losses.
Merchants must do all they can to reduce the number of false declines in order to satisfy customers who are already prepared to purchase.
One way to combat false declines is by implementing fraud prevention solutions that can follow transactions and analyze them post-purchase versus declining them based solely on the information available at the check out page.
This can help to separate the customers who are fraudulent from the ones who are looking to make a legitimate purchase. And more legitimate, successful purchases mean more profit for the merchant.
All without having to find a new customer via costly traffic generation.
2.Decrease payment churn
Payment churn occurs when a customer is unwilling or unable to complete an online order at the payment phase. This can happen for a number of reasons – all of which could be mitigated by the merchant.
For example, they failed to provide a one-time password, or they refused to register to the site prior to payment.
Because finding and securing a new customer is 5 to 25 times more expensive than retaining an existing one, focusing on reducing payment churn is essential for merchants looking to save money and thus boost profits.
The smartest way to decrease payment churn is to complete the transaction first and delay any identification challenges using fraud mitigation services. These services can identify customers asynchronously post-payment, and ensure that no transaction is abandoned due to overly rigid security policies.
This way, the merchant minimizes their exposure to payment churn while also maintaining the ability to cancel an order for security reasons.
3.Automated payment recovery
Recovering lost payments is clearly important for customer conversion, but automating this recovery process is important too. Digital tools can assist merchants by performing necessary steps to recover a payment that otherwise might have been lost.
Tools that prioritize the abandoned transactions at the payment phase can regain purchases from customers who otherwise might not have been reached in time. It’s essential to have an automated solution to almost immediately perform this outreach for you in a time-sensitive manner. That way, the prospect is more likely to cooperate and complete the purchase.
What’s more, leveraging a software service for this task means reducing operational costs. This is just one other reason why merchants should consider automated payment recovery systems.
Customer conversion strategies: small changes, large rewards
Making these three small changes can have a huge impact for e-commerce merchants.
One FUGU customer case study demonstrates the power of these small adjustments on a merchant’s bottom line.
An online fashion retailer, selling mainly to North American based clients, had around 1 million dollars in sales generated through around 22,000 transactions. In five short months using the fraud prevention software, a customer logged a profit increase of $20,000. And headcount savings of $12,500.
These savings meant a 2.3% increase in the retailer’s gross profit. (Which doesn’t even account for the lifetime value of any regained verified customers.)
Less traffic generation, more traffic optimization
Overall, less transactions falsely flagged as fraudulent and less man-power required to analyze the ‘fraudulent’ transactions means more money in the merchant’s pocket.
If merchants want to protect their bottom line, they must avoid the mistake of focusing only on the traffic they want. And instead, take full advantage of the traffic they already have.