Entries categorized as ‘eBiz Payment & Checkout’
Despite many weeks of resistance, I had to yield to team pressure and start learning about the latest buzz word in site and offer development: multivariate testing (MVT). Apparently good old split testing (A/B) is no longer good enough.
Jupiter Research state in a report from 2006 “Multivariate Testing and Site Optimization, STO-06-C06” that “Thirty-two percent of site operators in companies with $50 million or more in annual revenues have deployed site testing and optimization applications. Site operators should incorporate site testing and optimization into a usability framework that leverages traditional usability principles, customer satisfaction measurement, and Web analytics to comprehensively measure and improve Web site usability.”
We are now in 2008 and I can clearly see that MVT has gained a strong foothold in my organization. I guess the $50m kind of defines the scope of MVT as a growing set of applications for big corporates.
So what is Multivariate testing?
MVT can be described as a quantitative way to understand and influence your customers’ user experience. According to Wikipedia multivariate testing is “a process by which more than one component of a website may be tested in a live environment. It can be thought of in simple terms as numerous split tests or A/B tests performed on one page at the same time. Split tests and A/B tests are usually performed to determine the better of two content variations, multivariate testing can theoretically test the effectiveness of limitless combinations. The only limits on the number of combinations and the number of variables in a multivariate test are the amount of time it will take to get a statistically valid sample of visitors and computational power.”
The primary purposes of testing in order of importance (according to Jupiter research) are:
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Site content
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Promotions
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Step processes e.g. checkout
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Landing pages
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Site navigation
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E-mail marketing
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Performance metrics e.g. revenue, average order value
In setting up an MVT, Jupiter recommends that you:
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Create hypothesis for testing on user behavior e.g. lifestyle images connect better with target segment than product images.
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Establish multiple objectives such that not only conversion is tested but the general interaction with the site and fulfillment of KPI e.g. revenue/ user.
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Segment test participants based on the hypothesis – go narrow rather than wide.
As I start to use this new tool I will update my blog with more in depth views on this emerging field of optimization tools.
Categories: Web Analytics · eBiz Merchandizing · eBiz Payment & Checkout · eBiz Promo & Pricing · eBiz Upsell- & Crossell
Tagged: A/B testing, merchandizing, Mulivariate testing, optimization of site, pathing and KPIs.
Most managers of e-businesses need to address multiple levels of visit to business transformation or “conversion”. In most businesses I would recommend to measure multiple levels of conversion e.g. store conversion, basket conversion etc.
In my business we separate the generic browsing traffic from the traffic that continues to the configuration/ basket layers. We call the first level of browsing the consideration layer. Hence, the first level conversion of traffic to the second level – the configuration layer – is referred to as consideration %. When customers chose to check out from the configuration layer (including basket etc) we call this conversion.
This may sound confusing. But the point is that using different lingo for these different types of conversion makes it easier to communicate. The final word we use is convergence. This is the product of the two factors consideration and conversion above. In essence, the number of checked out customers (receipts)/ site visits = convergence.
I have seen a number of different terms in this area but I am finding the above system of terms more and more useful. Make sure you separate the levels of conversion because they all tell you very important things about where you need to fix your business when things aren’t working.
Categories: Web Analytics · eBiz Merchandizing · eBiz Payment & Checkout
Tagged: Different levels of conversion, store conversion, visit consideration and convergence.
When designing promos in your business there are an infinite number of options. The standard considerations are balancing units, margins and average revenue per order in your chosen area of incentive. The tools to do this are many. This article will address one of these tools namely what I call “thresholding”. By thresholding I mean setting a monetary threshold as a requirement for a reward expressed as a rebate %, dollar amount or complimentary product or service e.g. buy for more than $1000 and you get 20% off.
The key driver of a thresholding play is to shift the mean of your average order value to the right on your distribution bell curve. And the success criteria is that the cumulative dollar cost of promo (e.g. 20% rebate off $1000 = $200 x the units at or above cut off) in your sample scenario is lower than the incremental margin$ of the orders that will be up-sold from below the cut off, to at or above the cut off.
Simply speaking if the incremental margin$ from the anticipated up-sells > the $ cost of the promo for those normally purchasing at or above this level. See example below for a very limited sample size:
TRU = Total Revenue per Unit ~average order value, Systems = computer
The above histogram is a very useful tool of estimating the cost of a threshold up-sell offer. By bucketing historical orders in average order value buckets, you should discover a normal distribution. From this you can build scenarios around thresholds and simply calculate the margin cost vs. your estimated upsold units to the threshold. This is not exact science but will provide with the rigour you need to prove to your management that you have made some sound assumptions and assessed the risks involved.
Good hunting!
Categories: eBiz Payment & Checkout · eBiz Promo & Pricing · eBiz Upsell- & Crossell
Tagged: online promos, threshold offers, Threshold promos, thresholding
Any entrepreneur knows that sales are worth nothing until they are converted into cash. In a technical accounting term this is referred to as cash convergence cycle, CCC.
The cash convergence cycle gives us business managers some important direction on how to look at our business. The diagram above is applicable to physical goods selling and inventory holding businesses (in a company like Dell where cash is collected before goods are produced (built-to-order) and accounts are payable, the CCC is negative).
One of the most important take aways is that we need to manage the collection of cash effectively. In layman’s terms this means offering the customer adequate payment options to balance maximizing sales (i.e. every thinkable payment method) vs. minimizing the time between day Y and day Z above.
So what are the key payment options?
Invoicing customers is probably my biggest nightmare. The biggest problem is in my view not the risk of default (which can be effectively addressed with credit worthiness systems) but the lower velocity (sending invoices back and forth) and the unpredictability of time of payment. Many companies that sell to consumers manage this with fees and auto transfer schemes, but this is often only relevant for subscription type products and services.
Leasing and consumer financing have obvious advantages. They open your sales to a cash drained segment of the market, but much like invoicing velocity is even lower. A third party is involved and leakage due to documents not returned etc is in my view a show stopper. If you want to offer this the process has to be bullet proof. It is in very few cases.
Many suggest credit card as the most easy and simple. But depending on your bargaining power and type of card, big players will pay at least 1% and smaller players 2-3% of receipt values. This is not ideal. Especially if you are running a business with gross margins of <=20%. In addition, if you have an automated execution system of credit card payments you will have to manage exceptions as there are many reasons for credit card payments not being accepted. Velocity slows down and you need people that outbound on missed opportunities.
Paypal is very simple for the user but will still be linked to a credit card in most cases so it shares some of the inherent problems and costs of credit cards (see table below from paypal).
Often over looked is direct bank transfer. In most cases this is done at no fees and it provides the most simple and cheap way to collect cash upfront. Obviously you will be addressing the liquid portion of your market segments but given the lack of fees, the higher velocity and the simplicity for customers, this is a very strong proposition for markets with high internet penetration and ebanking.
There are probably no rights and wrongs. But I never seize to be surprised by the arrogance in big retailers towards this crucial part of any business. Collect your cash – or someone else will.
Categories: eBiz Management · eBiz Payment & Checkout · eBiz Processes
Tagged: bank transfer, Cash conversion in online, credit card, invoicing, leasing., optimizing payment methods, pay pal
