November 11, 2013

The Relationship Between Product Density And Conversion Rate

Here's a way to think about conversion rate, in absence of marketing activities.

Your "brand", if you will, is responsible for generating half or more of your conversion rate. Customers decide they want to buy from your business, generating a significant amount of the conversion rate.

After we account for customers who "had an agenda" and were going to buy, regardless, we have everybody else. These customers need to be informed.

We inform customers via merchandise, we inform customers via discounts/promotions, and we inform customers via creative/imagery.

And when we minimize the amount of information presented to the customer, we minimize our conversion rate.

This is happening in mobile. We're unable (at this time) to provide as much information as we can on a website, or via a catalog. This drives conversion rates down.

When we drive conversion rates down, we respond by offering deeper discounts/promotions, or we gamify the experience (cheap prices end at 11:00am, act now).

When we attract customers via discounts/promotions, we shift the focus away from merchandise.

In other words - mobile is (at this time) shifting the focus away from merchandise. The form factor employed by mobile demands this - the customer has to know what the customer wants before hand, using mobile to simply transact. The art of getting the customer to "shop" is, at this time, not part of the mobile experience.

Just as interesting - when we reduce the amount of merchandise featured on a mobile website, we, by default, try to jack up conversion rates by offering the best products, the ones most likely to increase conversion rates. This leads to a small amount of highly productive "winners", and everything else that sells less well - in fact, selling at lower rates than forecast, causing us to have to increase liquidation activities, hammering gross margins in the process.

The whole process is quite interesting to observe.

The ramifications are significant, and worth considering.

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