'ACRA' Defined, Part 2: Conversion

(Click here for “‘ACRA,’ Part 1: Trawling for Customers.”)

“Conversion” is a funny word when placed in the Internet marketing context.

If we think about conversion from a religious standpoint, we would be led to believe that it is an otherwise irreversible process. Yet, in the Internet space, we use it quite loosely to describe a scenario in which a visitor happens to buy a CD or two. (I wonder if the loss-leading discounts had anything to do with it?) But, for all we know, this person may never come back.

In fact, rather than being a one-time event, conversion is essential during many different phases of our relationship with the consumer.

I’ve always turned to the traditional loyalty ladder (a sequence of evolutionary phases in the customer relationship process) to better understand the various types of conversion:

• Advocate
• Client
• Customer
• Prospect
• Suspect

The most common conversion type is the one in which a suspect or prospect becomes a customer. In this case, the probability of conversion success is very much dependant on whether you’re reaching a suspect or a prospect (targeting is key!). The former is more likely to be a clicker, whilst the latter will be a sticker. Additionally, though both may initially convert, prospects are much more likely to end up as long-term customers.

The second kind of conversion is the looker-to-booker type. There’s an interesting conundrum here: Is it possible to have a customer who does not purchase online? I would argue that it is, based on research that supports Web-influenced offline spending. But there’s still plenty of room for improvement online. The analysis of navigation patterns and abandoned shopping carts is critical for this type of conversion. The idea here is to find the holes and plug ’em. Identify the points at which falloff occurs and take immediate steps to streamline the process.

The third kind of conversion is the point at which a customer becomes a client. A client is defined as a returning customer — in other words, anyone who purchased from you more than once. Sounds simple enough, but check your log files and you’ll soon see how many one-hit wonders you have on record.

Michael Porter, one of business strategy’s founding fathers, put an interesting spin on the boom and burst of the Internet bubble. While we attribute many of the one-time-only customers of the “dot-gones” to faulty business models, Porter identifies a really interesting behavioral trend, which he contends pretty much affected every online storefront.

According to Porter, many of Amazon.com’s transactions (for example) were “novelty” transactions: Many people were curious about the whole online craze, bought a book, and then returned to sipping lattes and buying books in their local Barnes & Noble stores. Luckily for Amazon, the company’s execs realized it, too, and loaded the site with unique community and content services that brick-and-mortar competitors simply can’t imitate. To convert your first-time customers into returning clients, you will have to move beyond price — offering them multiple reasons to believe in your brand and keep coming back.

The fourth form of conversion is tiered conversion. Frequent-flyer and loyalty programs are designed to recognize and reward your most valuable clientele (my next article, on retention, will touch on this). Your challenge here is to identify ways to get returning customers to spend more — and become more loyal to the brand — with each new purchase.

Of course, you can’t really talk about conversion without discussing its definition and the ways of measuring it. Conversion can be defined based on a variety of success criteria. Whether you’re building an in-house list of opt-in email addresses or leading up to a transaction, any objective along the way that helps you build your business — short or long term — can be considered to be conversion.

Measurement of conversion, though, can be a tricky thing. Research suggests that “conversions” based on clicks alone account for only 25 percent of the total conversions. Although we do have advanced reporting tools available that help us measure acquisition resulting from online ad “exposures,” we’re still pretty limited in terms of our ability to track migration paths from clicks to bricks.

In all of the above cases, the first step on the road to conversion is identifying these different groups of consumers — from suspects and prospects all the way through to advocates. Once you know who they are, you’ll be able to place these conversion milestones into context: on a vertical hierarchical scale (similar to the loyalty ladder), a horizontal sequential timeline (corresponding to the lifetime value of your customer), or both.

Once you’ve done this, you’ll be able to evaluate each individual based on his or her ability to build your customer base and your business. You’ll also be able to better figure out the appropriate investment amount for marketing initiatives aimed at each segment.