The power of five is something that was researched by the people at Future Now (Future Now – ROI, 2006). Future Now helps traditional companies increase the effectiveness of their sales force and their eCommerce conversion rates. Understanding the concept can be very rewarding and has great value. There are ten business metrics, or operating measurements, an eTailer must track to measure the on-line performance:

1. Visitors;
2. Conversion Rate;
3. Sales;
4. Average Sale;
5. Gross Revenue;
6. Margin;
7. Gross Profit;
8. Overhead;
9. Net Profit; and,
10. Growth.

Of these ten important metrics you need to track, five of them are key. These are:

1. Visitors;
2. Conversion Rate;
3. Average Sale;
4. Margin; and,
5. Overhead.

These are the key metrics that the owner of an eCommerce website can influence. You have absolutely no direct control over the other five metrics. They are the mathematical results of the key metrics.

1. Visitors – Do your SEO/SEM, and other types of on-line marketing, advertising, and pay-per-click.

2. Conversion Rate, we’ll talk more about this more below.

3. Average Sale – Increase your average sale by making the shopping cart easy to use, easy to add additional products to, and by including Up-Selling and Cross-Selling.

4. Margins – Be sure to negotiate the lowest possible prices for your products. Renegotiate often or change vendors.

5. Overhead – Always watch your overhead costs and continually keep them as low as possible.

To improve the overall success of your eCommerce web site, there is something that is called the 5% solution. The 5% solution recommends using a system similar to what the Japanese call “Kaizen”; steady, regular, incremental, unrelenting growth. More visitors, higher conversion rates, larger sales, and larger margins all result in maximized profits.

Focusing on these five key metrics is how you can achieve triple digit growth from single digit improvements.

For example: What if we were to increase conversion rate by only 5%, for the first month. If we started off the month with a 1% conversion rate we would have only a 1.05% conversion rate by the end of the month. What would that do?

Seems like a lot of investment for so little return; however, over the course of the following year that 5% a month would compound to 1.796%. The resulting power of compounding would return an almost 80% increase in conversion rate and profits.

When considering this study, we see that while conversion rates overall are getting better, shopping cart abandonment still remains the biggest issue for E-Tailers. Industry research shows that up to 75 percent of shoppers will abandon their online shopping carts before completing the checkout process.

Numerous factors influence this rate. In an article by Bryan Eisenberg on the web site ClickZ.com, titled “How Many Holes Are In Your Bucket”, http://www.clickz.com/showPage.html?page=898531, Bryan explains how each step of the entire check-out process is a “hole in the bucket”, where you can loose your customers.

In addition to this research a number of observations grew from their findings (Clickz – Cart, 2006).

1. Is the number of steps in the checkout process critical? This is usually what most people focus on. The average eCommerce checkout process ranges from one to seven steps. This study discovered that the number of steps is not as critical as you might think. One client was able to bring the checkout process from six steps down to only one. Further, the study found little correlation between the reduction of steps and reduction in abandonment rate. Once people found what they came for, they were willing to take the necessary time to follow the check-out procedure no matter how many steps were involved. Still you should reduce the number of steps in the checkout process.
2. Include a progress indicator on each checkout page. No matter how many steps there are in the checkout process, let customers know where they are in that process. Number and label the task clearly for each and every step. Give your shoppers an opportunity to review what they did in the previous steps and provide a way to return to their current step if they decide go back.
3. Provide a link back to the product. When an item is placed in the shopping cart, be sure to include a link back to the product page. This allows your shoppers to easily jump back to make sure they selected the item they wanted.
4. Add pictures inside the shopping basket. Placing a thumbnail image of the product increases conversions by as much as 10 percent. Also, add an enlarged view of the product whenever possible.
5. Provide shipping costs early in the process. Always provide an estimated shipping cost while your visitors browse. They want to buy, but want the answers to all their questions up front. Too many sites are listing themselves in shopping engines such as Froogle showing a low product price only to charge outrageous shipping costs, which you don’t find out until you’ve fill out their entire shopping form and given them your credit card information.
Total cost is one of those critical questions that every customer asks. Also, remember to include a checkbox that automatically fills in the shipping information if it is the same as the billing information.
6. Show stock availability on the product page. Shoppers should not have to wait until checkout to learn that a product is out of stock and back ordered. If it is, give an estimated delivery date. Deal with the “I want it now” mentality. That’s part of what drives Internet purchases. Let them know when they should expect to get their products.
7. Make it obvious what to click next. Include a prominent “Next Step” or “Continue With Checkout” button on each checkout page. Make the button you want them to click next the most obvious.
One top 50 E-Tailer mistakenly placed its “remove from cart” and “continue checkout” buttons next to each other. Neither one stood out. Many people clicked the wrong button clearing their carts. When they went to check out, they found nothing in them and immediately abandoned the site out of frustration.
8. Make editing the sale easy. It should be simple to change quantities, options, or add and delete an item from the shopping cart. If a product comes in multiple sizes or colors, make it easy to select or change those values in the shopping cart. Also, don’t forget up-selling and cross-selling. On my Paper Models eCommerce web site, up-selling and cross-selling increased revenues to 232% when implemented.
9. Communicate Errors Clearly. If information is missing or filled out incorrectly during the checkout process, give your customer a meaningful error message that’s obvious to see. It should clearly tell your visitor what they need to correct or fill in. The tone should be “Our system was unable to understand what was entered”. Don’t make your customer feel like they made a foolish mistake.
10. Show them you’re a real entity. People’s concerns and insecurities increase during checkout. Let them know that you’re a real company by them giving full contact information during the checkout process, especially your telephone number.
11. Site Certification improves conversion. Site certification remains a key tool for boosting online conversion rates at e-commerce sites and a study done with FogDog.com demonstrates to what extent. FogDog is an eCommerce retail site and was rated No. 231 in Internet Retailer’s Top 400 Guide to Retail Web Sites, but is also a research and development outlet for third-party service providers, and site operators for GSI Commerce.

GSI Commerce ran an A/B split test in which the Hacker Safe logo from a security certification service “ScanAlert” was predominantly displayed to every other site visitor. Throughout more than 14,000 orders, GSI Commerce recorded 357 more orders on FogDog from those visitors who saw the logo than from those who didn’t see it. While a 2.6% increase doesn’t seem like a lot, it’s still an additional 2.6% increase in revenue with nearly no investment of time or expense.
In a scientific A/B test by more than 150 online retailers, including national chain stores, HACKER SAFE certification increased sales conversions an average of 14% compared to the control group web sites.

ScanAlert conducts comprehensive daily security audits of eCommerce infrastructure, then certifies the security of that site in real-time by allowing the HACKER SAFE certification mark to appear only when a sites’ current status meets the highest published government industry standards.

Successful eCommerce is a balance of good sound marketing, pay-per-click advertising, and SEO, coupled with keeping your total costs and expenses as low as possible, and most important, maximizing your conversion rate.

Lon Safko
Innovative Thinking