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The Three Keys to Optimizing E-Commerce Revenue

Introduction

No matter what you sell online, there are three core constituents to revenue:  Traffic, Conversion Rate, and Average Order Size.  In fact, it’s a cubic equation: Revenue = Traffic (#) x Conversion (%) x Average Order Size ($).  So if you generate 21,000 visits in a month with a conversion rate of 3.00% and an average order size of $156.23, your revenue is $98,424.90 (21,000 x 3.00% x $156.23).

If you can analyze each of these variables effectively, the e-commerce world is your banana.  I hope that by the end of this article series, you’ll understand the “sub-variables” that affect each of these core revenue variables, equipping you with the tools to optimize your e-commerce revenue.  (btw, many of these principles apply to business in general, not just e-commerce)

This first article will relate to generating Traffic and the variables that affect it.

Keys to Traffic

Traffic is calculated according to the following equation:  Unique Visitors x Average Visit Frequency

Keys to unique visitor traffic are Medium (where they found your site) and Presentation (what they experienced through the medium/media that made them visit).  The key to repeat traffic is the Visit Experience (their evaluation of their visit retrospectively).  Every single person that visits your site has a corresponding medium and presentation history, and if they visit the site more than once, they have an experience history as well.

Medium

The primary factors of a medium are relevance and accessibility.

The key relevance question:  Is the medium used connecting with the kind of people that will see value in what you offer and need it now or at some point in the future, preferably in the near future?

The key accessibility question:  Is it easy for the recipient of the message to take action in response to the message?

Presentation

Every presentation has a persuasive effect that depends on two variables:  To WHOM it’s presented to and WHAT is presented.  WHAT you communicate is worthless without the right audience (they need what you’re offering and they need it now or soon), and likewise, it doesn’t matter how targeted and ripe your audience is for what you’re presenting if WHAT you communicate is poorly constructed.  In fact, it can do more harm than good to make a poor presentation to the right audience by appearing unprofessional and incapable to deliver quality.

The presentation variables depend heavily on the medium in question.  If it is word-of-mouth, the presentation is what is being communicated by the referrer to the referee.  What are they saying about your site and what you offer?  If it’s search marketing, is what you’re communicating in your ad relevant and does it point to a highly relevant landing page?  Are you using highly targeted keywords with ad copy that is tailored to those keywords?  There are quality questions to ask for each medium, and they vary significantly.  But all media should be based on the same quality questions:  Are we communicating to the right audience?  Are we communicating the right message to that audience to effect the desired behavior (click a link, request a quote, submit an e-mail address, buy a product, etc.).

Visit Experience

Experience is the single factor that determines whether a unique visitor becomes a repeat visitor.  In short, visit experience, how a visitor evaluates their visit retrospectively, is defined by if the visitor:

1.  Felt that the content was relevant to them

2.  Felt that they could navigate and access what they wanted easily and intuitively

3.  Has a compelling, memorable reason to return.

If these three criteria are met, the experience will likely develop into a repeat visit.

E-commerce traffic means nothing if you can’t convert that traffic into sales.  In my next post, I’ll discuss the key to optimizing the conversion rate.

Tags: conversion, E-Commerce, optimization, revenue, traffic

This entry was posted on Monday, January 25th, 2010 at 3:55 pm and is filed under E-Commerce, E-Commerce Optimization, General Business, Magento. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.