Marketingsherpa just released a chart showing overall conversion rates for ecommerce. Not surprisingly the majority of the nearly 3,000 respondents reported conversion rates of less than 5%, with almost 18% reporting conversion rates of less than 1%. That’s a lot of money being left on the table.
Combine that with recent stats from Hubspot that show the average banner ad has a 0.1% clickthrough rate (ctr) and its no surprise that everyone is writing about consumers having a low attention span and demonstrate a lack of interest in much of digital marketing. If I use these two statistics, I come up with a mind numbing conclusion. For every display ad impression, only 1 in 20,000 people will actually convert.
Taking the math a little bit further, according to Bigcommerce, the average ecommerce order size is $54.00. Monetize Pros reports an average CPM of $2.80. Which means if it take 20,000 impressions for a single conversion, than the cost per conversion is $56.00, or a couple of dollars more than the gross revenue of the average ecommerce order size.
Some will accuse me of manipulating the data to produce a desired result. While I did not, even if my numbers are off by a magnitude of ten, they clearly show that the current state of online advertising as a driver of ecommerce is in a very sad state. The picture looks better when we look at search and email channels, but still the conversion rates are extremely small when you multiply CTR by site conversion rate.
What’s the answer? There’s no silver bullet, but it appears that there are two major touchpoints that influence success. First, is the ad message, regardless of whether it’s delivered via a banner ad, a search result or in an email, contextually relevant to the recipient. And secondly, once they’ve been successfully driven to the ecommerce website, is both the experience and the content compelling enough to drive a sale.
I talk about context with regards to driving a CTR from an inbound message. Context means understanding the mindset of the recipient at the time, location and device of the viewer. Most of us have had the experience of seeing an endless series of display ads for weeks after we researched and subsequently bought an item. If I’ve already purchased it, seeing an ad is no longer relevant to my context. If I’m presented a video on a device that can’t play it (yes, this still happens), not only will I not consume the content, I will probably become annoyed that the brand or publisher can’t meet my needs and the likelihood of my buying from that brand significantly decrease. And finally, if the SEO gurus have gamed the system so much that I am served up with a set of search results that are not relevant to my immediate needs, I will not click on them no matter how many impression I’m served.
Once I finally do make it to the website, I’m still faced with a lot of contextual questions. Am I in a buying mode or a researching mode? Understanding where a visitor is on their particular customer journey is critical to delivering a relevant experience. If I am in the purchase stage, is the site presenting me with personalized content and choices based on my past behavior, my current session conduct and from where I came from? Managing to these variables are critical to successful conversion and revenue.
Going back to the beginning, if you could increase your clickthrough rate by 1/10 of 1%, you could double the volume hitting your site. And then if you can increase your conversion rate on the site by 1% you would improve your performance by an average of 20%. Combined you would increase the number of conversions by 240%, which isn’t too shabby no matter whose math you’re using.