So your ecommerce store is making money… but you want to make more money?
There are 3 leverage dials you can adjust to increase your ecommerce profits:
1. More Traffic
2. Higher Conversion Rate
3. Better Products/Pricing Strategy
1. More Traffic
Increasing traffic is the first thing that most people think of for making more ecommerce profits. More eyeballs = more money. Traffic is definitely important but only one part of the equation.
Sure you can pay some random spammer to send your ecommerce store a thousand random visitors today… but chances are they won’t buy anything. Why? Traffic quality matters as much if not more than traffic quantity. You want to increase the traffic from the right visitors… those who are searching for your products and want to pay you to solve their problems.
So how can you increase your traffic? Buy it or Bait it.
How to Buy Traffic:
Adwords, Bing Ads, Facebook Ads, Display Ads, etc.
Advantages: You start getting traffic immediately and will know fairly quick if the ROI is worth the investment. Google is moving towards showing more paid advertising.
Disadvantages: Some niches are highly competitive in paid advertising. Requires initial capital up front to invest.
How to Bait Traffic:
SEO, Content Marketing, Social Media, etc.
Advantages: Can start with little or no capital. Momentum builds up over time when building an audience. In the long run can be cheaper than buying traffic.
Disadvantages: Slow to build momentum. Can take many months before seeing a return on investment. Trend is less organic results being shown in favor of paid ads.
2. Higher Conversion Rate
So now that you have the traffic… how do you turn them into paying customers?
You can either improve your initial impact and convince more visitors to buy now or you can work to build a relationship with the visitor over time so they will purchase later. Both are important.
Initial Impact – How does the visitor feel when they first see your site?
Headlines, Page Layout, Sales Copy, Split Tests, Heatmaps
According to studies the average web visitor makes a decision to stay or leave your website in just 4 seconds. Are you sending the right cues to get visitors to stay… or scaring them away? A nice looking website, indicators of credibility, and headlines that match what the user was searching for are just some of the pieces in your initial impact.
Also visitors often don’t scroll down – so keep your most important information above the fold. One simple change that can have huge results is to make sure your “Add To Cart” button is in the top 600px of the page (link).
You should be regularly split testing your “money pages” (the ones that are making you the most money) to improve your conversion rate. Testing new headlines, page layouts, sales copy, button colors, etc. Here’s a useful 91 point list of Conversion Rate optimizations. My favorite split testing software is Optimizely (aff link), which is easy to use with its drag and drop interface.
It depends on the type of products you sell. but you should usually aim to convince the first time visitor to become a buyer right away or at least convince them to give you their contact info to sell them over time.
Bring Visitors Back – Can you re-connect with visitors who left without buying?
Email Marketing, Remarketing Display Ads, Abandon Cart Follow-Ups
Especially if you sell expensive products – it may not happen that you turn a visitor into a buyer on their first visit to your site. If possible, offer something to get their email address like a product catalog, special sale, or free ebook. Then you can use an email autoresponder (like Aweber) to build trust and sell them over time.
The most important visitors you want to bring back are the ones who expressed some sort of interest in your products like filling out a form, or even better, adding your product to the cart. Abandoned carts are usually warm prospects, who for some reason decided not to finalize the purchase. Maybe they got confused with the checkout process, or didn’t like high shipping prices. You need to reconnect with these lost customers and find out (and fix) the reason they didn’t buy. They are a hidden gold mine…
Some ecommerce platforms (like Shopify) have a checkout process that will ask the visitor for their email address in the first checkout step, which then gives you the opportunity to follow up via email with prospects who abandoned their cart before completing the sale with apps like AbandonAid.
Another option to recover these lost carts is to use “remarketing ads”, which allows you to set a cookie on your site visitors and then serve them targetted ads on the Google Display Network. These are super powerful and can have great ROI for ecommerce stores.
Example: Your customer added your cat litter box to the cart but then failed to complete the sale. Your site automatically sets a tracking cookie on that visitor. Later that day when that visitor is browsing celebrity news sites (or anywhere with Adsense) you serve them up an ad showing that exact cat litter box they almost bought and an offer for free shipping in the next 24 hours. They click the ad, are back on your site, and then buy the cat litter box. $$$.
3. Better Products/Pricing Strategy
This one is kind of a dark horse and the least obvious of the three. Testing different pricing for your products and packaging your products differently can have a dramatic impact on your profits.
Offer New Products
You can get new product ideas by listening to feedback from your existing customers and iterating on your existing products. Maybe you created a small size litter box and your customers want a large litter box. Or you can position your products for a new market like selling workout shorts for basketball and then also selling them for weightlifters.
Adjusting your pricing can have a huge impact on the bottom line. Most ecommerce stores are always thinking to lower prices, but in many cases charging higher prices is actually better. Tim Ferriss talks about this extensively in the 4 Hour Workweek. If your target market is only worried about the lowest price then you will likely deal with a lot of customer service hassles. It may seem counterintuitive but targetting a higher end customer not only allows you to charge a higher premium price, but often these high end customers are less likely to give you headaches.
Increase Average Order Value –
One of the best ways to improve profit is to increase the average amount that each customer pays you by crosselling related products they might also like or trying to upsell the customer to purchase a more premium version of a product.
Cross-sell – “Do you want fries with that?”
It’s always easier to sell to someone that has already bought from you and trusts you then a brand new customer.
You can see this cross-selling all the time in physical retail stores – if you buy the iPhone they will also try to sell you accessories and insurance. It’s psychology – if you just spent $800 on a new iPhone, wouldn’t you also want a case for $30 to protect it… and why not $50 earbuds also? The store makes a huge markup on those addons, sometimes even more profit than the big ticket item itself.
Upsell – “Do you want to super size your order?”
Always be thinking of ways to sell more to your existing customers. Not in a sleazy way, but in a way that adds real value to their purchase.
If you are planning to buy a 16gb iPhone for $500, wouldn’t you want to upgrade to the 32gb version when its only an extra $100? The customer gets double the storage space which seems like a great value compared to the smaller difference in purchase price. The store makes a higher margin on the more expensive version.
Another way to encourage larger orders is by offering free shipping on orders over a certain amount like Amazon does with free super saver shipping over $25.
Improve Margins / Business Operations
Many ecommerce stores dropship their products which is easier to start with, but comes at the cost of lower margins. Depending on the products sold and your capabilities, it might be beneficial to switch to sourcing the products yourself which will improve margins.
A great way to increase the lifetime value of your customers is to get them to come back and purchase from you again. If you can get your customers on some kind of recurring subscription then do it. Check out Amazon’s subscribe & save where they offer a 15% discount for you to subscribe to get regular delivery of the items.
It’s important to remember that all 3 leverage dials work together and influence each other. You can’t have one without the others.
- Conversion Rate
- Product/Pricing Strategy
If you have high traffic but bad sales copy you won’t sell much.
If you have great products but the checkout is confusing you won’t sell much.
If you have amazing sales copy but low traffic you won’t sell much.
So where can you turn up the dials to increase your ecommerce profits?
Leave a comment below.