Sometimes, offering an abandoned customer a small incentive is exactly the nudge they need to come back and complete the conversion. All too often, however, incentives are carelessly implemented and end up creating irreversible damage to that customer’s value. It is generally recognized that customers who redeem coupons are not the loyal consumers who come back time and time again, but rather the traffic segment that will add to website abandonment rates by jumping from merchant to merchant looking for the best deal. In this article, we’ll explore the methods UpSellit uses when determining if a partner should offer an incentive, who they should offer it to, and when they should offer it.
Should You Offer an Incentive?
Generally speaking, the type of business and your brand’ perception will predict the success of an incentive being used to reduce website abandonment. When considering the effect of an incentive, marketers should ask themselves these three questions:
- Are consumers abandoning in search of a better price?
- Does your business have high profit margins?
- Does your business have a high rate of recurring customers?
If the answer to any of these questions is yes, then your business is most likely a great candidate for using incentives to reduce website abandonment. When the incentive directly addresses a consumer’s concern, (such as getting the best price or paying too much for shipping) then it will work exactly as intended and recover the customer. If your business’ profit margins are high enough that offering a small incentive won’t cause any risk to profitability, then testing and optimizing an incentive strategy is an obvious choice. If your business works on a recurring pricing model or has a high number of repeat customers, then the lifetime value of the customer will outweigh the small loss the initial incentive may incur.
Who Should Be Offered an Incentive?
As a best practice, UpSellit configures its solutions to either completely ignore repeat customers, or to provide them with a different incentive strategy. Repeat customers are often 10X more likely to buy, and so a discount can simply cut into your profit margin and negatively affect the customer’s purchase behavior. However, encouraging a repeat customer to increase their next order value with a strategic incentive can contribute to conversions, revenue and profits. Another effective strategy for encouraging repeat purchases is offering a free gift with a perceived value that is much higher than the actual cost of the item.
It is also an UpSellit best practice to segment and analyze the effects an incentive has on different traffic sources. Direct or type-in traffic will often have an increased probability of coming back to complete the purchase on their own, so testing the incentive provided or when it is provided will produce the best results. Alternatively, high-cost PPC traffic typically has a much lower rate of returning to the website, so a more aggressive incentive strategy can produce the highest lift in conversions, revenue and profit.
When to Offer an Incentive.
Incentives are most effectively used to expand market share and peak the interest of new consumers, or to reduce website abandonment. In terms of reducing website abandonment, coupons provide the largest gains in conversions, revenue and profits when offered as a reaction to website abandonment. There are many solutions that offer in-page incentives to keep the visitor on the site, however these are more or less a buck-shot that will reduce revenue and profit by lowering the consumer’s average order value.
The key to using incentives to reduce website abandonment is to offer a targeted incentive to specific traffic segments post-abandonment. By providing a targeted incentive, marketers are addressing the reason the consumer abandoned the website. By addressing and resolving purchase concerns, consumers are much more likely to come back and convert. With traffic segmentation strategies incorporated into the incentive program, marketers are able to mitigate the concern that they are ‘training their customers to abandon.’ Creating an unpredictable incentive offer is a sure way to prevent would-be customers from lowering their order values.