The holy trinity, the terrific trio, or more realistically - the money printers … What are they?
In this blog, we're going to take a look at the 3 most important variables to the growth of your business, what they are, why they’re so important, and how you can increase them.
CVR (Conversion rate) - Increasing your CVR results in more revenue from the same amount of traffic.
AOV (Average order value) - Increasing your AOV results in more revenue from the same amount of sales.
LTV (Lifetime value) - Increasing your LTV results in more revenue over a certain time frame from the same amount of customers.
The fact of the matter is, ROAS isn't too reliable anymore.
CPM’s are continuing to rise, which means it’s costing more and more to drive the same amount of traffic to your site. So save yourself the headache and focus on the things you CAN control; CVR, AOV and LTV.
I recently wrote a Linkedin post (shameless plug) regarding us, as marketers, being amplifiers.
I alluded to the fact that paid advertising will NOT work for brands who don't have their house in order. There’s no way to sugarcoat it!
These 3 variables being healthy is exactly what I meant by having your house in order.
Let's look at some examples of good numbers, and bad numbers in a two year period.
CVR: 4% (Industry standard)
2000 Site visitors
Purchases = 80
Order value = 80 x £80 = £6,400
LTV = 80 x £400 = £32,000
2000 Site visitors
Order Value: 20 x £40 = £800
LTV: 20 x £40 = £800
Having a 3% higher conversion rate results in 60 more customers from the same amount of traffic.
Having an average order value £40 higher results in nearly £6000 more revenue from the same amount of traffic.
Having customers return 5 times over a 2 year period results in more than £30,000 in revenue versus customers only purchasing once.
Now do you understand the importance of optimising these 3 variables?
If you’re on Shopify, your conversion rate will show in your analytics dashboard. If not, you can find it in Google Analytics.
Typically, its calculated by the following:
Transactions / sessions = conversion rate
Standard conversion rates differ between industries, although in 2021 due to the pandemic, Unbounce reported industry standard conversion rates rising to 5.2%. If yours is between 3 and 5%, you're making good use of your inbound sessions.
How can you improve your conversion rate?
Optimise your site speed
The day to day life of your consumer is busy, they haven't got time to sit and wait 20 seconds for your landing page to load. They probably saw your ad when cooking, or at work. If it doesn't load quickly, they’ll more than likely bounce off your site before actually seeing the product and forget about your existence.
Reviews are non-negotiable. They are a be all and end all factor when a consumer is unsure whether to part ways with their hard earned money. An app on Shopify named ‘Lucky Orange’ screen records your customers actions once landing on your website up until they leave, and from research conducted using the app, we’ve seen that users typically don’t spend time reading landing page copy. They land, scroll through images, scroll down and read the reviews, before either leaving, or purchasing.
Using a recognised service provider like Trustpilot, or Reviews.co.uk adds a sense of security to your brand.
Rewind 10 years. You go to a shopping centre, see a product you like, touch it, pick it up, and analyse it from every angle before purchasing. In the digital world, this just isn't plausible. Therefore, having a range of high resolution images showing your product in different situations can act as a substitute. It's counterproductive taking months to develop a product to do it an injustice on your website.
Adding trusted payment methods again adds a sense of security to the consumer.
Apple pay, as well as buy now pay later options are a must.
Average Order Value
Increasing your average order value is essential to the growth of your business. Simply put, the more money a customer spends per order, the more you can spend to acquire a customer through paid acquisition.
How can you increase your AOV?
Adding upsells is a tactic used by most big E-commerce brands. It allows you to offer a customer an additional product when they’re in a buying state of mind, which is when they’re most likely to spend more.
There’s a range of apps on Shopify such as OCU (One click upsell) which allow you to offer upsells pre and post purchase.
You're most likely to see success if you offer upsells related to the product being purchased. Example: Shoes - Offer socks or shoe care kits. Coffee - offer a mug.
Frequently bought together / paired well with
This is a great feature on your product page. Again, something the consumer will see when they’re in a buying state of mind. Offer similar products which work well in tandem with the product shown on the page.
This is something many top brands use to draw a consumer into spending more. Offer free shipping or a gift / credit when a certain amount of money is spent. This incentivises customers to reach the threshold to acquire something for free.
If you have a range of similar products which compliment one another, bundles are a no brainer and will undoubtedly increase your AOV. Bundles have a bigger perceived value, and can be positioned as a money saver. Win win for you and your customers.
Lifetime value is the amount of revenue you will receive over a certain time frame from one customer. Many industry leading brands will acquire a customer at a loss on the first transaction knowing over a 1 / 2 year period they’ll return several times resulting in a large ROI.
How can you increase your LTV?
Are you using premium delivery services to ensure your customers' products are arriving on time? Is your customer able to fully track the delivery from the moment it’s packed to the moment it arrives? Are your products packaged nicely? Are you thanking customers for their purchase with either a thank-you card or an automated email?
The little things make the biggest difference.
Create a members club allowing your customers to acquire points for each purchase. Give away store credit for a certain amount of points. This incentivises customers to spend more to work their way towards receiving something for free.
Not only will this 10x your LTV, it will also create a sense of community.
Save a small amount of budget to retarget customers on your paid marketing channels who have already purchased from you. This is the lowest hanging fruit as the customers already had a good experience shopping with you, therefore can be acquired at a very small cost.
Make it personal
How personal can you get with your customer to make them feel connected to you?
No, I'm not referring to using a value formula in your email to call them by their first name. Deeper than that.
Offer special deals or discounts which apply directly to the individual. Reach out to them on special dates such as birthdays offering a discount.
Go the extra mile, show your customer you are thinking about them.
If you’ve had enough of ‘agencies’ pushing vanity metrics in your face, and you think
it's time to actually make some real money from your paid marketing, drop us a message
This is our sh*t.