I received this from a reader a week or so ago:

I’ve read your post on cart abandonment rate with interest.The one thing that puzzles me is that a standard cart abandonment rate calculation is nowhere to be found. Some merchants calculate the filled carts against the placed orders, while others calculate the first step of checkout against the placed orders.

Those could be quite different numbers. I think that both instances are useful, but I can’t understand if, say, a 50% cart abandonment rate, is bad or good if I don’t know how it’s calculated.

After all, filled carts which never got to the checkout process could double or triple my statistic base, compared to those who started it.

Could you specify if your numbers are calculated against filled carts or against checkout processes?

Here’s my answer:

Ecommerce conversion rate can be broken up into 3 different calculations, which is probably why there’s not one single shopping cart abandonment calculation. These three calculations are:

1. Site conversion: The most popular of the conversion rate calculations, this is the ratio of the number of total site visitors to the number of completed orders over a given period of time.

What’s a good baseline number? According to data collected from the Fireclick index today, the average ecommerce conversion rate is 1.80%. Industry conversion rates vary, though:

See more granular data at the Fireclick Index.

2. Cart conversion: The ratio of the number of visits to the shopping cart to the number of completed orders.

There’s also a metric called cart abandonment rate that is related to this calculation.

3. Checkout conversion: The ratio of the number of people visiting the first checkout page to the number of completed orders.

You can get more granular data into why customers abandon checkout by setting up a checkout funnel.

Do you need help calculating your conversion rate, setting up a conversion funnel or interpreting your web site analytics? Check out our e-commerce analysis and conversion rate services and contact us — we’d be glad to help you today.

Almost every site that sells something online could use improvement in their conversion rates. Prospective ecommerce clients frequently ask what causes poor conversion rates, thinking that a broken checkout process is the answer. Often, it goes far beyond the checkout process. When I perform a site audit, I look at three factors (and yes, one of them is the checkout process).

Look upstream

Many online retailers don’t realize that factors influencing conversion rates occur before customers visit your site. Some shoppers are price shoppers, while others are goal-oriented. Regardless, visitors most frequently find web sites as a result of some marketing activity.

Whether it’s an organic SEO campaign, a paid search campaign, an online shopping guide, buzz, noticing your web address on marketing collateral or good ‘ol fashion word-of-mouth, it’s typically marketing that brings customers to a retailer’s web site. Retailers need to understand that the message customers get from the marketing campaign influence their attitudes when they visit the retailer’s site.

Understanding this is critical, because if retailers can maintain clear, consistent messages in all marketing vehicles, then it makes the web site’s job easier.

The web site

Of course, the web site is a factor in conversion. I’m not speaking of the checkout process here, but instead the user experience starting on the homepage or landing page, and radiating throughout the other pages customers look at on the web site.

It’s critical to reinforce the marketing message on the web site to bridge the gap between marketing and the web site experience. I wrote a while back about how Verizon Wireless likely lost customers when they advertised a service but the service was not explained on the homepage of their web site. Creating synergies between marketing and the web site help to orient the customer and make them comfortable and more informed about the product or service.

Navigation and labeling on a retail site is also important. One challenge retailers that sell many products face is categorizing the products in a manner that is intuitive to their customers. Site search becomes a factor also, and building a robust search engine for a web site can not only help customers find what they are looking for — it can also upsell and expose customers to similar items they might not have otherwise considered.

High consideration products need a sufficient level of detail to make the customer comfortable with purchasing the item. Product information could include large or multiple views of products, what’s in the box, requirements to use the product and items that accessorize or make the product more enjoyable. Great sites always find a way to engage customers. In addition to describing the product, it also helps to show customers how the products are used in everyday life. Crutchfield’s “digital drive-thru” is a great example of a site feature that provides product detail on iPods but also helps the customer choose the right iPod and gear to hook it up properly. Integration with Crutchfield Advisor throughout the site gives great information on how to install and enjoy products and even shows examples of how other customers have installed and use their electronics.

Color and positioning of page elements also play a factor in conversion. After all, if a customer can’t find an add to cart button, you won’t get the sale.

Finally, messaging is important. Ally any customer apprehension by clearly showing pricing, offering a privacy and security policy, shipping rates and information, and other industry-specific considerations. Don’t forget to ask for the sale, and use strong call-to-actions.

Downstream — your checkout process

Whether retail sites have a one-step checkout process or a multi-step process is largely irrelevant. What’s critical in checkout is to keep the customer focused on making the purchase and removing distractions. Removing site navigation can aid in improving conversion rates in some instances. Clearly showing all prices and shipping costs early in the process will help customers decide if price is a major consideration. There’s an opportunity for multi-channel retailers to send customers to a store nearest them if shipping costs are perceived to be too high.

Design-wise, highlighting required fields and keeping the page design clean is important to encourage users to check out. Upselling and cross-selling in checkout is a risky proposition, so retailers should test it carefully before deciding to sell anything in checkout. Making action buttons primary and any “back” or “cancel” links recessive will provide adequate navigation while urging customers forward. Never label the button that completes an order “Continue.” Retailers should instead be more descriptive by labeling the button “complete order” or “send order.”

Retailers should also remind customers about privacy and security during checkout, and it should be more visible during the payment step.

Hopefully, reading about these factors have given you a to-do list that will help your conversion rate soar. My take is that it’s never okay to be normal when it comes to conversion rates, so periodic assessment and testing of your site will help your conversion rates improve over time.

I thought I’d share a real story about how important your web site design (specifically, your landing pages) is to your search engine marketing program’s success. Here’s the story.

A company recently approached me about a running a Google Adwords campaign for them with the goal of getting more people to their web site. After some initial keyword research, I confirmed my hunches that their target keywords bring a hefty price tag.

I told myself that I could still make it work, but after looking at their web site, I’m squarely sitting on the fence. The web site isn’t structured well at all — in fact, there are no good destination pages with relevant content on the site, and the homepage is one image (no text at all). Surely the quality score that Google will assign to the client’s destination pages will be very low. Unless we build some custom landing pages, we’ll have to live with the higher price-per-click and a low conversion rate.

When companies hire consultants to revamp their search engine marketing campaigns, they should understand that an effective search engine marketing campaign often requires more than just the campaign setup and monitoring. We consultants want to make our clients’ campaigns as effective as they possibly can be, so allowing a consultant the budget to create some targeted landing pages to place on the client’s web site is something that should be included in every campaign.

Here’s why — Persuasion/the selling process doesn’t end with the ad.

Selling and generating leads online requires that you capture the user’s attention in the ad, get them to click, and then push them to your web site where you can convince them to do business with your company. After they are sold, they will call or buy online.

If your landing page simply provides a phone number or contact form, you’ve missed the opportunity to convince that visitor to do business with your company. Worse, you’ve wasted your money on the click.

A quality landing page on your web site is critical to the success of the search engine marketing campaign. Your web site is where most of the selling should happen, and your web site should engage your potential customer with relevance and credibility. It should also make the process of becoming a customer intuitive.

Understanding this concept will make your company’s search engine marketing campaign much more effective.

This morning, Internet Retailer came out with a release that said that web site performance is more important to web shoppers than brand loyalty. Read the release here.

90% of web site shoppers will give up after three or fewer unsuccessful attempts to complete a purchase. Survey respondents went as far as to say that 75% of sites load too slowly, and half of those would consider shopping on a competitor’s site to make the purchase.

If you run a small internet retail operation, this underscores the importance of keeping your web site running as quickly as possible. Additionally, just as many customers abandon web sites because they can’t find what they are looking for and order totals are not shown early in the checkout process.

I wanted to post a follow-up to yesterday’s post regarding shopping cart abandonment rate to provide a real-life example of why shopping cart abandonment matters.

I have a new client—we’ll call them “Client A”—that recently asked me to improve their conversion rate. There was one problem, though. Client A didn’t have a web analytics package in place to accurately measure their conversion rate. After installing Google Analytics on Client A’s site and configuring a checkout funnel, we found that their cart abandonment rate was a whopping 87% (industry average is about 60%). This is one case where higher-than-average isn’t better.

“Client B”, a long-time client, has a much better cart abandonment rate. We’ve worked for years to improve checkout and get it running as efficiently as possible. After all, Client B doesn’t get as much traffic as Client A, so stellar conversion is a must if they want to make money. Client B’s cart abandonment rate is currently 19%, so their site is getting 80% of their users that reach the shopping cart past the cart and into checkout.

Client A only sent 1 of 10 people through their shopping cart into checkout while Client B was sending 8 of 10 people through.

Knowing this, I can now turn my attention to solving Client A’s cart abandonment problem. We’ll try different page designs and process flows until we achieve Client A’s goal of getting 4 of 10 customers through to checkout, and this will have a huge impact on revenue.

This, in my opinion, is why monitoring cart abandonment is so valuable. Not only will your site generate more revenue per visitor as your shopping cart abandonment rate decreases, but your ad spend also becomes more effective.

An article from Kevin Hillstrom called “Shopping Cart Abandonment” recently asked the question, “Is there anything wrong with a sixty percent shopping cart abandonment rate?”

Hillstrom was reacting to a blog post from the Marketing Experiments Blog that concluded that simple page changes could increase conversion rate by decreasing cart abandonment rate.

In his blog post, Hillstrom concluded that “an abandoned shopping cart is a non-issue.”

I couldn’t disagree more.

There are definitely cases where having high shopping cart abandonment is inherent. Having worked in electronics and consulting for a golf retailer that frequently sells products governed by Minimum Advertised Price guidelines, I understand that a customer must place something in the shopping cart to see the actual price of the product.

In all cases, however, you want as many customers as possible to proceed through the shopping cart and into checkout. It’s a natural part of improving your checkout process. So isn’t it at least worth testing different designs and messages to see if you can improve your conversion rate rather than just dismissing abandonment as a non-issue?

Absolutely! It’s a no-brainer. Why? Let’s assume you have a site with 10,000 visitors per month. 25% of shoppers on average place something in their shopping cart, which means that 2,500 shopping carts are created per month. If the industry average—40%— proceed to checkout, then 1,000 people per month enter checkout. Increase the success rate to 45% and 1,125 people per month enter checkout. That’s 125 more chances per month to get a sale!

You can see that even a small decrease in cart abandonment will result in thousands of dollars per year (or more) in incremental revenue. The only cost of getting this incremental revenue is the time it takes for staff to run and analyze one-page shopping cart tests. We’re not talking rocket science here— simply changing the size, placement and color of a button could be a test.

All retailers should run tests to optimize their ecommerce checkout processes. If they don’t they’re leaving lots of money on the table.