Basic eCommerce Terms revisited

When you work in the digital and eCommerce consulting industry, there's the tendency to assume that the person you are speaking to always has enough experience to be able to understand what your saying and act accordingly. However, this is not always the case (e.g. when the person has just been moved or promoted into a new role) and sometimes it takes time to cover the basics with a client, even though you don't always want to make it too obvious.

I therefore thought I would revisit some of the more common eCommerce terms used. Not just in case a current or potential client was reading this blog, but also to help anyone else who may be venturing in the world of online transactions, etc.

Acquisition

The processes and tools used to get new customers to start using / visiting any digital company touch-point (e.g. website, app, social media presence, etc.). Acquisition rates can be increased by using different marketing techniques (e.g. paid advertising or search engine optimisation).

Example KPI = Website visitors

Conversion

The amount of people who complete a required online goal (e.g. a booking or a purchase) divided by the total number that visit. It is sometimes called the 'look to book' ratio and in some markets / companies it is one of the most protected (e.g. Secret) of figures.

Typical average conversion  rates by industry:

http://www.marketingsherpa.com/article/chart/average-website-conversion-rates-industry

Retention

The number of customers who come back to the digital channels and book/purchase again within a given time period (sometimes set as the entire customer lifetime) .
There are no recognised benchmark figures on digital customer retention that I'm aware of and this depends considerably on industry, product, customer type, etc.

AOV:

Average order value is typically the sum of revenue that has been generated divided by the number of orders taken. Again, there are no standard measures for this, as the range of products and prices vary from company to company.

Increasing customer value on travel websites

Having worked on a number of travel sites in my career, it is surprising to see that some travel companies still aren’t looking to maximise online customer value at every opportunity.

However, there are different ways of doing this online, each with their own merits, approaches and supporting technologies:

1. Increasing customer revenue per transaction

This is the strategy of trying to get as much out of each online customer order as possible. In ecommerce terms this is known as AOV (Average Order Value) and is a key metric that most travel websites live & breath.

The enabler of this maximisation is a decent user experience within the booking process that should give the visitor enough information to make all the booking decisions they need and presenting the relevant opportunities for:

• up-selling: trying to get the customer to order the better option of what they have selected (e.g. room upgrade)
• cross-selling: trying to get the customer to buy additional items that enhance their stay (e.g. car hire, excursions, etc.)

2. Increasing customer revenue per complete booking cycle

Once the customer has done their booking and left the site, that’s not the end of the sales relationship with them… that’s the beginning. The opportunities to increase the value from each customer will depend upon their budget, circumstances and how they want to spend their holiday (relaxing, touring, playing badminton, etc.). But failing to recognise these opportunities is potential lost revenue and may actually mean the customer misses out on something they didn’t know about.

The two enablers of this activity are:

1. Marketing to the customer and informing them of the relevant opportunities you offer (e.g. via email, telephone, etc,)
2. Allowing the customer to return to the site to easily upgrade and to incrementally buy items they want by themselves.

Care should obviously be taken not to bombard your customers with too much or unnecessary messaging and don’t forget that each different type of person will be have their own decision cycle/timings.

Hint: The idea is to understand these different customer types and be able to market to them in a better & better revenue-generating way as they lead up to their eventual stay.

Also, you have to make the self-service functionality of you website easy enough to be used by anyone… if it becomes a complex application that only a travel agent with a PHD* could understand, then you will unsurprisingly find that this service isn’t used very often. (* and there aren’t too many of them around)

3. Increasing lifetime customer value

A person booking with your site once is a sale, a person booking twice is a retained online customer. In my experience, marketing to the retained travel customers is usually easier than marketing to a new customer…. They have previously used your services and you know information about them that will help you speak to them in more relevant and effective way (assuming they didn’t get a completely negative experience previously).

Therefore it should be in very travel website’s interest to encourage existing customers to book more often that they currently do and to try to increase their order value each time. Eventually you should get to calculate / measure the value of a customer over the entire time they want to do business with you (their CLV or customer lifetime value )

For this you need to consider using CRM systems and processes which pull together customer information such as purchase history, AOV, etc. and then need integration into online systems for personal emails, etc.