How to Drive Growth for Your Online Business at the Point of Sale [Deep Dive]
What matters most to a business at the end of the day? Revenue. I am sure most of you would agree with me on this. All your marketing efforts go down the drain if you are not able to generate enough conversions at the end of the day or retain your customers for that matter.
The ability to generate more revenue from customers over time is referred to as increasing the lifetime value (LTV) of customers. And it’s not rocket science, every millennial has grown up responding to merchants who would ask them, “How are your parents doing?” every time upon meeting.
A personalized approach to make sure the relationship with the customer sustains in the long run.
Nothing much has changed at the core. Yes, businesses are backed by technology these days. But the purpose pretty much remains the same. If you are a retail company, you persuade your customers to buy more of whatever you sell. If you’re a subscription-based SaaS company, you want your customers to upgrade to a premium version or renew their subscriptions.
And if you’re a company that sells advertising space, you want more and more advertisers to buy the advertising space or pay more for that matter.
With that in mind, let us look at the best ways to drive growth where it matters the most i.e. the point of sale.
Identify the Pinch Points
There is always a juncture in the consumer journey where the probability of maximising revenue is the highest, no matter what the business is. In the case of an e-commerce website, the checkout page is of utmost importance.
The overall user experience plays a key role, including how the items in the shopping cart are listed. For SaaS companies, it matters how clearly the different services and their corresponding prices are explained.
Similarly, in the case of a website that relies on advertising space for revenue, all the pages where ads are displayed are extremely important.
Once you are done with identifying these crucial junctures in a business, the next step is to identify pinch points that are essentially the revenue leakage points depending on the business model.
Similarly, if the ads on your page are intrusive for the user, you know they are going to be monetization sinkholes.
Now that you are done with identifying the pinch points, the next step is to experiment your way around that problem till you find out a solution.
For example, experimenting with the placement of the ‘buy now’ button if the pinch point lies on the checkout page or alternative call-to-action options in lieu of ‘buy now’ for that matter.
Make the most of cohorts
In order to get the most out of your audience data, you will need to divide them into cohorts in a number of ways. However, for this particular purpose, that is to maximise revenue at the point of purchase, it makes sense to divide your cohorts on the basis of revenue.
For example, in the case of an e-commerce company, this is going to be on the basis of the amount spent by a user per purchase, and for a subscription-based product, this will come down to the level of subscription plan among users.
This is in addition to breaking down your audience into different groups on the basis of age, gender, location, where they are acquired from, web browser used etc.
They found out from their cohort analysis that the people using 3G or 4G were more likely to book a room from their app compared to the ones using Wi-Fi. The underlying reason behind this rather confusing finding was the fact their competitors’ websites were slow and sluggish over a 3G/4G network compared to a Wi-Fi connection.
Thereon, the app ran its ads to users who weren’t on Wi-Fi and drove higher purchase rates.
The idea is to look at all kinds of cohort groupings that may be relevant depending on your business model. You don’t know where you will find an insight to drive growth.
Understand your customers’ needs
Every marketer knows the key user personas for their business. It is easy to categorize the audience based on some of the similar characteristics they share: same location, same experience, purchasing power etc. The idea lies is coming up with better ideas to satisfy your customers’ needs by better understanding them.
If you know the broader clusters your business caters to, you can customize your promotional offerings to suit the needs of each cluster.
But what would you do when you want to get a deeper insight into their wants and needs? You ask them.
If you are clueless what additional features would make your product more desirable than it already is, you have got to ask your audience about it, because it’s important to slowly keep introducing new features to evolve with your users. Look at Facebook and Amazon and you will know what I mean. A great example of this is a survey sent by BitTorrent to its users to decide the features to be added to its next update.
They further incentivized the participating users by offering to give a few of them a free copy of the product with the added features included.
Surveys are a great way to know what kind of modifications are needed in your business to suit your customers’ needs or understand their problems better in the first place.
Customize your Offerings to Customers’ Needs
While surveys are a good way to delve deeper into what your customers want from your business, today, there’s a great deal of data at your disposal that can be used to build a stronger relationship with your customers.
In that regard, there’s an opportunity to use personalization as a monetization tactic. We are all familiar with the recommendation engines used by Amazon and Netflix that make sure we stay on the website a little longer than we intend to.
As complex as a recommendation engine sounds, it is easy to determine recommendations using the Jaccard index, which is basically a simple formula to determine how similar two products are to each other.
Jaccard similarity coefficient is the union of two products A and B divided by the intersection of A and B. So for example, if the total number of people who have purchased bread and jelly in a day is 100 and the number of people who have purchased both bread and jelly is 30, the Jaccard similarity score would be 0.3.
In contrast, the similarity score for two products on the opposite end of the spectrum, like baby shampoo and men’s shaving cream, would be much lower.
As good as personalization sounds, there’s always a chance of being too intrusive with it. We live in an era where users don’t want their online privacy invaded and doing anything that makes them feel you’re encroaching upon their personal space can backfire.
The right price matters
Pricing products and services is something where businesses have gone wrong in a number of ways, with many companies even reluctant to experiment with it.
The process of setting prices takes the purchase, operational, marketing costs and profit margin into account in a conventional setup. However, for pricing a SaaS product where there is no raw material cost involved, it is not that simple.
The first information you need is how much your consumers are actually willing to pay for your product or service.
Once again, the best way to know how much your product is worth is by asking your target consumers for the same — surveys are the best way to this. While you may argue that asking your consumers directly will only give you ‘lowball’ insights, you will at least get to know who your customer is who is willing to pay that price and give you some direction in setting prices.
Remember the user personas we created earlier and the surveys we did for your product, now it’s time to map those findings with the amount users are willing to pay for your product.
For example, there may be certain users who are willing to pay a higher price for your product, they should be mapped to the highest-priced plan in case your business model is subscription-based.
Another thing to keep in mind when pricing an online product is to keep your pricing in proportion to the value a user is deriving from your product. Like how SurveyMonkey charges its customers based on the amount of surveys they are able to generate.
As important as it is to set prices, it is equally important to communicate these prices on your pricing page, like the one below. With that being said, it is always better to have a dynamic pricing strategy for your online business than having them set in stone.
Pricing Relativity: What your users think about the price is always influenced by the prices of other options they are offered. So always look at experimenting with pricing options with an intent to make customers understand the relative value of the different plans you’re offering.
Less isn’t always more: Don’t forget that there are people out there looking for best-in-class products as well, and not necessarily the lowest priced ones. So, be mindful of that while pricing.
Prices shouldn’t fluctuate: While experimenting is important, nobody wants to see a product priced at 75$ one day after they purchase it for 100$.
Explore the freemium model: Sometimes, users are reluctant to pay even a small amount of money for a web-based product. For those reasons, a freemium model with paid add-on features can be extremely lucrative because you can always drive monetization through ads.
Know how consumer psychology works
Customers are never easy to understand, they say something, then go on to act in a completely different way. This makes their behaviour very unpredictable, so understanding the psychology of consumer behaviour can be very valuable.
Let’s look at Robert Cialdini’s six principles for influencing consumer behaviour from a monetization point of view.
Principle of Commitment and Consistency: Once we take a step in one direction, we are bound to take the next one that is consistent with the first one. Amazon Wish List is one such example, making us move one step closer towards purchase by expressing our desire for a product.
Principle of Social Proof: It is no surprise why online businesses and e-commerce sellers are so particular about reviews. After all, testimonials of genuine people or the number of users currently shopping on your website are all ways of building trust with the customer.
Principle of Scarcity: Triggering the fear of missing out among customers is yet another marketing tactic that can drive purchase. This is achieved by limiting the time of promotions, showing inventory when few items are left, or limiting the number of people who can take advantage of an offer. Because when we feel like we are going to miss out, we are most likely to take action.
If you liked what you’ve read and want to connect, write back to me at [email protected]