Kozminski Techblog

FACTORS AFFECTING THE CONVERSION RATE

Whatever the conversion rate is, undoubtedly you will want to raise it to a new level. The problem is how to increase website conversions. To do this, consider the factors that directly or indirectly affect conversion rates. These factors can be divided into two categories – external and internal.

EXTERNAL FACTORS – are actions that take place with the visitor before he gets on the sit:

Advertising resource. The interest of the user depends on the source where he came from.

SEO. Obviously – the higher the resource in search results, the more likely it is that the visitor will go to your site and make necessary actions. Accordingly, those chances drop significantly if the site is outside the front pages.

INTERNAL FACTORS – the elements of your website that can make a person stay on the site and perform the necessary actions for you:

Design. The first thing that people see when you go to the site. Pleasant appearance of the website can hold visitor, and thus increase the chances of performing the desired action. Design can not be neglected, as poor appearance repels visitors even with good content and services.

Content. Undoubtedly, this is one of the most important components. In most cases, visitors to the site looking for any information. To the visitor to take appropriate action, all your content has to be of high quality, useful and easy to understand.

Usability. This, in general, the rate of usability. Often the owners of the websites are added to the page a lot of waste material which confuses visitors.

The technical condition of the site. It indicates all of the technical components. If you plan is to increase the conversion of the site, it should load quickly, do not contain extra pages. In addition, you must choose a reliable hosting, and that the resource was available to the public at any time.

Semantic core. Very often it is the text located on the site may cause poor conversion.

A FEW TIPS FOR INCREASING WEBSITE CONVERSION

• Always make sure that your website displays correctly in the most used browsers (Opera, Chrome, Mozilla, IE), and their versions.
• Do not forget that any resources should be contact information. Visitors often refuse to buy something or find out details only because of differences of mobile operators. Accordingly, you need to give a complete list of contacts for which you can be contacted.
• When selling items be sure to include a detailed description and price.
• You may place a separate page on the site with a description of the company, awards, publications. Thanks to this information the confidence in you will increase, which leads to an increase in conversion.
• Reviews – one of the most important components. According to the reviews and experiences of others, visitors can make a decision – whether or not to trust you.
• Remember the simplicity and convenience. Make the process of acquiring the product for the user as easy as possible, without further action.
• Make sure that the navigation is able to answer all the questions the user, or to show him the way to the desired section.

Thanks for reading.

In this article I will explain you how retention rate works. Retention rate reflects the numerical estimate of the level of customer retention. It is relevant for every business, not only for e-commerce. It plays a special role when an e-commerce shop has repeat sales or works as a subscription model.

The level of customer retention shows how satisfied customers are and how business is developing. If you manage to keep more customers, it will lead to the rapid growth of the business.

How to calculate the Retention Rate?

The retention rate (RR)  is calculated using the following formula:

RR = ((CE-CN) / CS)) x 100, where:

CE = the number of customers in the end of period;

CN = the number of new customers for a period;

CS = the number of customers at the beginning of a period;

For example, you start the month with 100 clients, and by the end of the month you have 105 clients (15 canceled their contracts and you’ve got 20 new clients).

Using the formula above, we get: ((105-20) / 100)) x 100 = 85%

That means that 85% of the customers continue to use your services.

Why RR is so important?

• Every lost customer constitutes costs to the company;
• Loyal customers generate 10 times the value of their initial purchase (money is here);
• To acquire a new customer is 5-7 times harder and more expensive to maintain than the old one.

Retention rate – is an accurate indicator that shows how loyal and satisfied your clients are.

Perhaps the most important aspect e-commerce analytics is retention rate (retention of users). After all, if users used your service once and never again after in most cases the service is going to fail.

Let’s start with how to calculate the retention rate. There are several ways. The easiest is to divide the remaining number of members to the number of all users who joined your service. For example, 100 unique users visited your website per day. Of these one hundred people, ten returned to the website. So, the retention rate is 0.1, or 10%.

Typically, this indicator is calculated for the first day, seventh, fourteenth, twenty-eighth, etc. For example, on day 0 hundred people visited the website and only 10 came back in the end of the month. Retention on day 28 is 10%. This is called the classic retention. Of course, the more days have passed from the day 0, the lower the retention rate.

Below are the common tips to improve retention:

Events. Promotions, bonuses, sales, tournaments, etc. Users should be aware that the frequent visits of the website will give him some prospects or benefits.

Gifts for the return. Game currency, options, etc.

Tasks. Daily missions, quests, puzzles, etc.

Characters and plot. People become attached to specific characters and watch the development of the plot/story.

Progress. Number of victories, medals, crystal, experience points, awards, status, results.

New faces. The more the user on the website, the more it opens up new opportunities, levels, mechanic, worlds, etc.

Remember that to attract a user is much easier than to retain him and to retain him is much cheaper than to attract a new one. This rule is working in any e-commerce and the money spent on retention of the customers have to be taken into account while calculating the LTV. Of course the high retention rate does not come for free, however to retain a user is much cheaper than to attract a new one.

RETENTION RATE IN OFFLINE WORLD

In the article I have mentioned the tips how to engage the users to increase the retention rate so that users could come back more often to the service/website. As I have already mentioned in most cases the retention rate increase comes at expenses which are quite necessary if you want the customers to com back.

To remember the essence of retention rate, please try to solve the following:

Let’s assume that some Cool Polish University spent PLN 4000 on attraction of new students to some Cool Master Degree Program. The program is funded by EU (meaning it is free and student are not paying for the program). The only payment that students have to pay is exam fail-fee which is PLN 610, which is the only income to the University from the admitted student.

Let’s imagine that in the beginning of third semester the students of this program started to complain that they want to have seminars on Google AdWords and Google Analytics otherwise they are going to leave the program and the University decides to organize such seminars. The seminar on Google AdWords and Google Analytics costs PLN 2100 and for the Cool Polish University it is a “retention event” (meaning that people are going to leave the program if they will not have these seminars). For the Cool Polish University these PLN 2010 are additional “retention costs” which are not foreseen by the EU funding.

Now the question: How many students have to fail the exams in 3^rd semester to have Google AdWords and Google Analytics seminar in the beginning of 4^th semester?

Thank you.

Names, places and incidents either are products of the author’s imagination or are used fictitiously.

What is LTV?

LTV (Lifetime Value) or CLTV (Customer Lifetime Value) – is the total profit received from a client during all the time while he/she is using the service.

Simplified example of LTV calculation:

Assumptions:

• Cool Master Degree Program is free;
• The only cost of Cool Polish University is marketing to attract new students;
• The only profit from students – their fails on exams;
• Fail fee is PLN 610.

Some Cool Master Degree Program of some Cool Polish University lasts 2 years. The program is free, however if you do not pass an exam, you will have to pay PLN 610. So, if during these 2 years of free studies you will not pass 2 exams, you will have to pay PLN 1220. PLN 1220 is your LTV for Cool Polish University i.e. total profit received by Cool Polish University from you during all the time of your free Cool Master Degree Program.

Why is it important to know the LTV and CAC (Customer Acquisition Cost)?

LTV – is one of the most important metrics in the business (especially e-commerce) even if your business is registered as non-profit organisation. The majority of companies die because of the fact that the cost of attracting of a new customer (CAC) “outweighs” the lifetime value of the customer (LTV). Most such situations happen due to the fact that entrepreneurs are focusing on the transaction and often forget about the experience that the customer receives after conversion achieved (retention rate).

Simplified example of CAC and LTV calculation:

Assumptions: the same as in first case.

The marketing department of some Cool Polish University spends certain funds on marketing to attract new students. Let’s assume that marketing department spends PLN 200 on average to attract new student. This is our CAC. Let’s assume that 20 students were admitted to Cool Master Degree Program. So, the total budget spent to attract new student is PLN 4000 – total CAC. The question is how many students have to fail the exam during the 2 years’ master program to cover these costs? It’s simple. 4000/610. So, approximately 6 fails will cover costs for marketing of Cool Polish University. Of course the example above is extremely simplified. But the main idea here is to understand that LTV has to be higher than the CAC. Otherwise the business model is going to fail like these students on exams 🙂

Why LTV is so important?

LTV can help you:

• Identify the ROI (focus exactly on the channels that will bring you the best customers).
• Improve customer retention strategy.
• Increase effectiveness of communication with the customers.
• Improve behavioral triggers (understand why your customers pay you).
• Improve productivity of customer support.
• Focus your time on the special attention to the most valuable customers.

In my next post I will give you several approaches to calculate LTV and they will be more complicated.

Thank you.

Names, places and incidents either are products of the author’s imagination or are used fictitiously.