Over the past month, Brady and I have used this column to discuss several cost-effective multi-channel messaging tactics. (Now that was a mouthful!) For example, we outlined different ways of combining banner advertising, opt-in email list rentals, and in-house email campaigns to convert prospects into customers.
We both realize that, in the end, these tactics are just tools. Each marketer will have to decide how to employ them as part of a larger marketing strategy that takes into account her industry’s unique dynamics. A report focusing on consumer drop-off rates, released by Avenue A’s Atlas Institute on May 7, makes the need for industry-specific thinking more apparent.
In brief, the report shows that consumer drop-off rates are linked directly to the price of the product being considered and that different types of industries have very different drop-off rate characteristics.
Those with less than 30 percent drop-off were these:
- Sports and Recreation Content
- Food and Drink Content
Those with 30-70 percent drop-off were these:
- General Content
- Family Content
- Health and Beauty
Those with greater than 70 percent drop-off were these:
- Computers and Electronics
- General Shopping and Auction
- Apparel and Accessories
- Entertainment Content
“Drop-off rate” is defined by the Atlas Institute as the percentage of people who make it to the final step of the purchase or registration process on a Web site without ultimately buying or registering for the product or service. The report does not include the drop-off between the home page and other interim pages; that is, the study focuses on those customers who were obviously interested and may have spent several minutes navigating through the site to get to the final crucial decision point, but then, for whatever reason, chose not to complete the transaction or registration.
Interestingly, the main driver behind the drop-off rate seems to be the average price of transaction rather than the type of product. Web sites that averaged transactions greater than $500 exhibited the highest drop-off rates, regardless of their business model or product selection. For example, travel and computer sites both have drop-off rates greater than 70 percent although they have very different types of products.
On the other hand, sites with transactions of $100 or less displayed drop-off rates of less than 30 percent. A common characteristic of many of these sites is that the call to action was a registration rather than a purchase, which obviously requires less consideration on the part of the consumer.
Such price sensitivity seems intuitive and obvious to anyone who took Economics 101, but little hard cross-industry data has been published to support this hunch. People, including Brady and me, have written about general industry averages. The Atlas report will allow marketers to refine their assumptions in their models. The lesson learned is that each marketer should spend the money and time necessary to develop, through testing and analysis, a better understanding of what the drop-off rate is for her specific industry and product type.
Young Bean Song, director of the Atlas Institute, claims that it is “critical for a company to understand the importance of tracking a user’s activity not only from the advertisements to first impression but throughout the sales process.”
Once armed with a deep understanding of how customers are interacting with her site, a marketer can develop a custom contact strategy that motivates prospects to register or buy. It also becomes possible to develop a robust model that clarifies the tradeoffs between buying more banner advertising and sending more email.
Another implication of this report is that in industries characterized by high drop-off rates, marketers should spend resources on trying to collect a prospect’s email address before they try selling anything. For example, if 10 prospects visit a travel site and use its tools and database to plan a vacation, only 3 will actually buy the ticket or package. Again, this is after all 10 visitors spent time doing the research, loading preferences, and waiting on the World Wide Wait for pages to load.
The seven visitors who did not buy may have had a myriad reasons. They may have wanted to shop around at other sites. Or they may have wanted to wait to see if new discounts would become available. This does not change the fact that 70 percent of visitors to this travel site were at the counter with a product in hand and then walked out the door — perhaps never to be seen again. At the very least, if the marketer did not capture some identifiable personalinformation (e.g., an email address), then she will never know if that individual visitor ever returns and purchases.
If the savvy marketer uses a lead-capture form as the landing page rather than pushing a visitor through the sales cycle, she would, most likely, be able to convert more of these prospects into customers. Based on the Atlas report, she could be talking to 7 out of 10 visitors over an extended period of time rather than selling to only 3 out of 10. (Since visitors are rarely dropped directly to the final purchase, this number should be even larger. As already mentioned, the Atlas report deals only with the final step in the purchase process, and there is a significant drop-off between interim pages.)
Once the marketer captures a prospect’s email address, she can then use email to engage the prospect in a conversation. She can use targeted email to encourage the prospect to come back and buy that particular package or to send the prospect new deals or promotions to encourage him to buy based on his past purchasing behavior or profile.
Finally, this type of multi-channel messaging strategy must include a broad understanding of the costs associated with both acquiring and retaining customers; it also requires deep insight into the cost drivers of these two activities.
“Drop-off rates provide yet more evidence that advertisers cannot base their campaign effectiveness on click-through rates alone,” Song states. This is essentially what Brady and I (along with others) have been arguing for as well. Marketers need to consider many variables when assessing the real return on investment (ROI) of a multi-channel messaging strategy.
The costs associated with an email campaign used to continue a conversation with a prospect need to be added to the costs of the banner campaign first used to talk to this prospect. These two costs need to be weighted and counted against the ultimate sales generated.