After getting called out on Twitter, Scott brings us up to date on the productized service offerings Blackfin Media now offers, and how he is presenting the products to customers. Brecht gives us details on some of his new conversion experiments and dishes out some advice on outsourcing.
Some of you out there may find this Google Analytics feature overview to be mostly review. That’s awesome! That means you’re really taking ownership of your data. However, if you’ve never used any of these features, only experimented with them a little, or aren’t sure you’re using them correctly, you should read on.
From the time you set up your account and put your tracking code on your site, Google Analytics, starts to capture and display a lot of data.
But the one thing Google Analytics doesn’t know right out of the box is your business and the definition of a successful transaction or interaction on your website. By itself, the data doesn’t tell a story, or answer the detailed questions about your visitors without help from you.
Some of the questions basic GA data doesn’t answer by itself:
- What are the activities that visitors perform on your site that equal success for your business?
- Which visitor actions earn you money?
- Which actions drive additional visitors or repeat visits?
- What visitor activity is signal and what activity is noise?
- What are the specific circumstances that lead to success or failure?
- What are the characteristics of a successful visitor?
Adding features like Demographics & Interests, and Ecommerce can help you see more about who your visitors are, the products you’re successfully selling, and how much revenue you’re earning.
But there are three features of Google Analytics that really help you answer these questions (and many others) in a nuanced and detailed way:
- And Events
When used properly, they can add meaning to your data, and transform it from flat tables of numbers to a story of how visitors are interacting with your website.
Armed with these details, you can making more educated decisions about how to serve your audience.
Segments: Extract More Detailed Answers By Asking More Detailed Questions
Several years ago at An Event Apart conference I had the privilege of seeing Jared Spool speak about user experience, and one of the things that really stuck with me was the idea that in many cases, alphabetical order is the same as no order at all.
What? Really? “No order at all?”
Yes. It’s a common default way of ordering information, but what makes alphabetical order weak is that it may not take into account important context cues that make the data meaningful to the person viewing the list.
In the case of looking at numerical data, a similar principle can be applied: sometimes looking at all the data is just as good as looking at no data at all.
Or, as it was captured in a quote from this year’s MeasureFest:
“It’s more important to reach the people who count than to count the people you reach” #MeasureFest
— Tara Stockford (@tarastockford) October 8, 2014
Segmenting your data is one huge step forward in discovering who, out of your counted visitors, are really the visitors who count.
You can look at your landing page report and see that your home page is the most popular landing page of your entire site. You can even see that it’s the highest converting page in terms of volume of conversions.
Looking at all the data in the default view, you could infer that your home page is the absolute most important page for getting conversions on your entire site.
But you could guess that without ever looking at the numbers, because it’s fairly common for home pages to be the first step involved in the user experience. So you’re left with your #1 page for traffic and conversions as a basically meaningless “no shit” statistic.
So how do we make that data more meaningful?
One of the fastest ways to add detail to your reports is by using Advanced Segments.
Quick Facts About Segments
- In July 2013, the Advanced Segments tool got a total overhaul.
- Segments can be shared with others via link.
- Segments can be added in batches through the Solutions Gallery.
- You can build Remarketing lists using Advanced Segments.
One of the biggest advantages of Segments over other ways of filtering and organizing data is that Segments can be applied over all your data at any time.
Many features, such as Goals and Filters, only affect the data from the time they’re created going forward. Segments apply to all of your data, current and historical.
The only caveat to that “all time” strength is if you are creating a Segment that uses a Goal, Event, or other data point that didn’t exist in the past, the Segment will have no data prior to that point.
So How Do We Use Segments?
By clicking anywhere near the default “All Segments” label above your data charts, you can start applying and creating Segments. You can apply up to four segments at a time, and you do not have to keep “All Sessions” as one of your Segments. Segments apply to your reports by splitting the data into buckets that you can quickly compare, like this:
Not only are the summary area and visual charts now split to show us the difference between All Sessions, Converters, and Bounced sessions, but the individual line items will be updated also.
Segments built into Google Analytics have a number of useful traffic types to let you see how factors such as traffic source or device affect your bottom line.
All the built-in Segments are visible under the System sub menu available to the left when you click the default All Sessions (or anywhere in that upper bar above your charts). You can also create your own, or star Segments for quick access later.
Clicking on the Actions menu next to each of the built in Segments gives you two options: Copy, and Build Audience. The first option does exactly what it says on the tin; it lets you create a copy of the Segment, with your own additional changes.
The second option allows you to create an Audience for the remarketing feature that connects your Google Analytics data to your AdWords account. Anecdotally, I can tell you that the Google Analytics remarketing tie-in feature is extremely powerful for creating hyperfocused lists based on your site’s visitors.
Custom Segments are built by clicking on the red +New Segment button at the top of the Segments menu.
Google has created a few buckets for quickly creating groups of visitors – which they refer to as cohorts – based on some data buckets they’ve identified as critical to identifying which of your visitors matter.
The first, Demographics, only works if you’ve enabled Demographic & Interest reporting, and may be limited due to efforts by Google to keep visitor data anonymous. The rest are based on data points that are part of standard Google Analytics collection processes.
If none of those accomplish what you need, you can create your own. These fully customized segments are built in one of two ways: as a conditional filter, or a conditional filter involving steps.
Both feature a full menu of Dimensions and Metrics you can filter on, and a set of rules you can select.
The sequences menu adds an additional layer of filtering, by allowing you to select visitors who have completed certain actions in a series of steps.
If you had an Ad Group called “Health Plans” driving traffic to your website so they could comparison shop and pick a plan, and your Goal 2 designation was “Request Quote” and your Goal 3 designation was “Sign Up”, you could create a segment to see which of your visitors:
- Came in through Health Plans
- Completed a quote request
- Did not finish signing up
You can use this step-driven segment to see which landing pages are driving interest but not enough to complete the process. Not only does this provide you the ability to query your data for these specific conditions, but it also allows you to build an Audience from this Segment to remarket to people who didn’t finish the process and encourage them to return and complete their signup.
Use the power of Advanced Segments to expand the questions you’re asking and paint a more complete picture of your visitors.
Not just “what pages did they visit?” or “where did my users come from?” but questions like:
- What age group of visitors are more likely to complete Goals on my site?
- Do mobile or tablet visitors bounce more often than desktop visitors?
- Did first-time visitors convert more before or after the big website facelift?
Bonus tip: If you find that segments you’ve created or downloaded from other sources just aren’t fitting, you can (and should) clean house at least every 6 months to reduce clutter that can cost you time.
Double bonus: Check out this list of 16 Segment ideas put together by Josh Braaten at Search Engine Watch. There are direct links to instantly add each one to your Google Analytics account immediately, and there’s some created by GA heavyweights like Angie Shottmuller, Aviansh Kaushik, Thom Craver, and Anna Lewis.
Goals: Define What Success Means
If your site isn’t driven by eCommerce, you should be using Goals to measure successful interactions. If your site is driven by ecommerce, you can still use Goals to create fast views of other aspects of your site that drive conversions.
Like the name suggests, Goals exist as a means for you to outline specific goals you want users to achieve on your site.
Quick Facts About Goals
- You can only have 20 Goals per View.
- Goals cannot be deleted once created, only edited or paused.
- Goals can be imported from the Solutions Gallery or shared via link.
- Values can be assigned to Goals based on a static value or the value of an Event.
Once you’ve configured one or more Goals, you will have data about visitors who complete them as “conversions” in the third column cluster of many of your reports.
In fact, Goals are used as the primary method of showing conversions in many of the built-in reports:
They’re the first metric choice when creating an Experiment for A/B testing of pages:
And as with most data collection features, setting up Goals unlocks an entire set of reports. Goal reporting is the very first set of options underneath the Conversions banner in your left navigation.
The wide use of Goals as a conversion metric across Google Analytics reporting makes it easy for you to ask and answer the question: Are my visitors accomplishing the tasks I want them to when they visit my website?
Consider the following actions as good candidates for setting up as a Goal:
- A visitor filled out a lead form or email signup form and went to a thank you or confirmation page.
- A visitor completed a purchase and ended up on a receipt page. (Yes, even when using Ecommerce.)
- Visitors performed an action on my site that triggered an Event that could result in a lead or sale like “Clicked a telephone link to call our Sales department”
- For people tracking apps: Someone who vieas a wed at least 3 screens, because that’s the minimum number of screens it takes to show someone their first ad.
So How Do We Set Up Goals?
To get started with Goals, go to the Admin area of your account and click on Goals under the View you wish to use for tracking conversions.
When you select New Goal from the menu, you’re given a choice of a set of templates, or a custom option.
These templates are based on common use cases for Goals, and the list you get may differ from the one seen above based on assumptions Google has made about your site content.
Selecting a template or custom will move you to step two, Goal description, where you name your goal and pick one of four possible types of Goal measurement.
The four types of Goal definitions seen above work as follows:
- Destination: choose a URL, such as a receipt page or form signup page that indicates a visitor has completed an action on your site that has value to you.
- Duration: Select a length of time in hours, minutes and seconds. Visitors who stay on site over this time threshold are counted as completing this Goal.
- Pages/Screens per session: Set a number. Visitors who visit more than this number of pages or view more than this number of screens in a mobile app are counted as completing this Goal.
- Event: This detailed Goal option allows you specify a category, action, label, and/or value of an Event. Visitors who match the criteria outlined here will count as completing this Goal.
The two biggest use cases for Goals leverage the Destination & Events type options.
Destination is the obvious choice for lead generation tracking or any type of signup that takes a visitor to a “thank you” or confirmation page. If you are asking people for any type of information and sending them to a new page afterwards, put that page URL in on step 3 of the Goal creation page.
And again, even if you’re using Ecommerce to measure your transactions on your site, it’s a good idea to set a Goal for people who hit the purchase confirmation page.
For starters, it provides a way for you to debug Ecommerce if your unique transaction and Goal completion count are way out of sync with one another.
Goals are also the default conversion metric used in commonly used reports like Landing Pages and All Traffic, so using your purchase confirmation page as a Goal will give you a faster view into conversion success when navigating your reports.
The other major use case for Goals is tracking an Event as a conversion.
Every aspect of your Event data is up for grabs when creating Goals! Let’s say you have a single email signup form with two checkboxes, one for a “deals” list, and one for an “events” list. No matter what the visitor picks, they are taken to the same confirmation page. That means Destination would be a poor choice to see if more people sign up for your deals or events list.
However, if you track those checkbox options as Events, you could set up one Goal for visitors who sign up and agree to be added to your “deals” mailing list…
And a separate Goal for tracking users that sign up for your “events” mailing list…
Allowing you to quickly compare the performance of the two signup types in your reports that show Goal activity.
Once you’ve set up Goals, you should test them (even if you use the Verify tool before creating it) by completing the conditions you set up in your goal and watching it appear in the Real Time reports.
Remember: Goals are limited to 20 per View and cannot be deleted once created. However, there are two more ways you can avoid missteps with the limitations of Goals besides just launch testing them –
Verify your Goals before you create them:
Create a new View to house experimental or atypical Goals:
Goals are super simple to set up, bake into all of your standard reporting automatically, and allow you to start measuring for conversions.
With the addition of Events tracking, you can have detailed, nuanced Goals based on activities visitors are completing on your site.
Always test your Goals before you roll them out.
Events: Track The Actions That Drive Your Business
Events are something of a Swiss Army knife within the Google Analytics tool box.
If you can detect an action like a click, form submission, or mouse movements such as scrolling, then you can send it as an event to Google Analytics.
Implementing Event tracking allows you to track many previously untrackable aspects of your website, like:
- video plays/pauses
- file downloads
- checking filter boxes
And any other interaction that doesn’t result in a new pageview.
It also opens up a set of reports within Google Analytics. Anna Lewis created a helpful 101 introduction to these reports over at Search Engine Watch if you need more help on how these built-in reports work.
Quick Facts About Events
- 4 parts are used for Event tracking: Category, Action, Label, and Value. Label and Value are optional parts.
- Goals and Segments can be created using Event data.
- Events can be implemented without coding through Google Tag Manager.
- Bounce rate is reduced by default when using Events.
- GA can only track 500 events per session.
By default, the only activity that Google logs on your site has to do directly with visits and pageviews. It can track where a visitor came from, where a visitor is located, what device they used, how many pages they visited, which pages, and how much time was spent.
This is fantastic information that can be turned into Goals and Segments that allow you to slice your data into meaningful pieces.
See that pop up window? You can track the checkbox that says “do not show me this again” the “no thanks” button and the “pick a charity button” (as well as the X and if a user clicks outside the modal window to close it) by using Events tracking.
Events go beyond the standard visitor data to help you answer detailed questions about user behavior:
- Did people watch my video?
- Events can log flash & video events such as play, pause, and time watched.
- At what point are people abandoning my form?
- Event tracking can be used to show completed vs abandoned forms, which fields were filled out, and which were skipped.
- Are people using the share buttons?
- You can use Events to track these, capturing the share type, the social platform, and other details.
- Is the popup/modal window effective at driving more interaction or sales?
- Events can track non-pageload or AJAX clicks to show you who clicked the “yes” button and who clicked to close your pop up.
- Do people who use search filters spend more money?
- Log search filter use as an Event and create Segments from the filter data you capture to separate your Ecommerce data. (Hint: Category as “Filter”; Action as the Filter group, e.g. “shoe size”; Label as the specific filter clicked, e.g. “9.5” or “8”.)
- Do people who download my free ebook also fill out the form?
- Track file downloads as Events; then create a Goal for your form’s thank you page. Use custom Segments to show you which portion of your visitors downloaded and then converted, and which didn’t. (COMBO MOVE!)
How Do We Set Up Events?
Before you can start building reports on that information, you have to capture it.
There are many methods you can use to implement Event tracking on your website. They’re about as varied as your site itself, because it involves implementing new code.
Implementation can be handled in a number of ways:
- Google Tag Manager (easy; find out how)
- WordPress plugin (easy)
- Manual one-time link tagging (easy; generate tags for classic GA)
Bottom line: there are a lot of different methods for tracking Events, and it’s up to you and your site development team to figure out which one will be the best fit for your site.
But before you roll out a single line of code, you should think about one of the most critical set up concerns of Events:
- What are we tracking?
- Why are we tracking it?
- How do we set up the labels so they will be meaningful in our reports?
See, the code isn’t actually that hard to implement. But good organization of how you’ll structure the information hierarchy so it’s useful could be challenging.
By default you get 3 labeling buckets:
Treat these as you would matryoshka dolls, keep the big ideas that hold the most small details on the outside, in Category. Think of this as the most generic noun that applies to your event.
- Outbound Links
It doesn’t necessarily have to be that broad, for example, if you know you’re going to have a limited number of files for download, you might choose whitepaper, ebook, and custom report as your top level Category values.
Next comes the Action data point, which should encompass the action that was done on your site, such as:
- call (as in click to call… because you DO have your phone numbers wrapped in tel: links… right?)
- play / pause (for video)
And of course, like with Category, Action doesn’t have to be fully generic, and it doesn’t even have to be an action! If you have an action that has three distinct tiers of information, you could structure it more like this:
By structuring your labels that way you could compare social channels at the Action level, and use the Label level for the specific social actions.
Or, you could flip that organization on it’s head, like this:
This way, the social actions are all treated as as the Action, and the Label becomes either the platform, such as Twitter or Pinterest, or you could get really specific with your Labels and call out which page was liked, or which account was tweeted at, etc.
So far so good. The important thing is to make sure you pick one Category/Action schema and stick to it.
Labels are the last tier of, well, labeling your Events. This is where the granular, specific information goes. Say you had a form that allowed people to pick their favorite color as part of a poll to determine your new product line.
At the Category level, you could see that 50 people interacted with your poll, the total number of interactions with your Event called Poll.
At the Action level, you could see that 15 people “cancelled” or abandoned your form, and 35 people submitted a form.
At the Label level, you would be able to see which specific poll options were the most popular. (We now know it’s Orange by a landslide!)
But you won’t be able to have any kind of meaningful insights or reports if you aren’t consistent with your labels. Take the time, sit down, and come up with the following details before you roll out Events tracking:
- What are we tracking?
- What are the highest level things? aka what do we use as Categories?
- What are the actions or second-tier things we need to track? aka what are our Actions?
- What are the small details we want to capture? aka what are the Labels?
Now if you discover a hierarchy you set up isn’t working out the way you’d like it to, then by all means change it, but make sure you make these types of changes consistently, so you don’t end up with a mix of conflicting data points.
It will be worth the work for all the ways you’ll be able to leverage your data. And don’t be afraid to discontinue Event tags that are no longer useful, like temporary ones used to detect on-site errors after a feature change. Rogue, orphaned, or mistakenly collected data will only slow you down.
Events are a versatile and powerful way to add interaction data to your reports. You can build Goals based on Event data to treat on page interactions as conversions. You can build Segments around them to answer questions like “do users who experience errors still convert?” or “which pages are my social sharing buttons being used on most?”.
But like all powerful tools that let you add data, you have to have consistency and firm idea of what questions you intend to answer with the data, or you risk collecting junk data. Stay diligent with your naming conventions!
Bonus: Check out this in-depth guide by Anna Lewis on events, their uses, and how to implement them. (It’s a little dated, as the code examples still reference Classic GA, but still valuable for the methods and use cases outlined.)
Double bonus: Jim Gianogilo created a slick jQuery based method of measuring form input that can help you track which fields users are avoiding, or at what point users are abandoning forms.
Pulling It All Together
Create Events that log meaningful activities on your site so you can discover the detailed impact those actions have on your ability to drive sales, referrals, and traffic.
Register activities like page visits or Events as Goals to monitor the actions your business considers conversions.
Use Segments that leverage your Goals, Events, user demographic and visitor behavioral data to do deep queries on your data.
All of these are easily accessible ways to add critical depth to your data, and allow you to ask detailed questions about who your visitors are, what they’re doing on your site, how they interact, when they take the actions that improve your business, and start making more educated assumptions about why they behave in certain ways.
Bonus recommendation: Head over to Avinash Kaushik’s blog, Occam’s Razor, for tons of extremely insightful, detailed examples of ways to look at your Google Analytics data in a more meaningful way.
Not only does he provide a smarter way to approach your data, but he regularly posts links to reports, Segments, and other goodies you can plug into your Analytics account to jumpstart your adventures in measurement. (It doesn’t get much cooler than that… if you’re a data nerd, anyway.)
The post Google Analytics 102: How To Set Up Goals, Segments & Events in Google Analytics appeared first on ConversionXL.
Offering free shipping will improve your conversion rate. Guaranteed! But, it also can kill your profit margins if you’re not careful.
So, how do you make free shipping profitable?
In this article, I’ll review four simple tests that any e-commerce store owner can run to maximize profits on a free shipping offer. If you do this right, you can see 15-30% improvement in net profit (not just conversion). The steps are:
- Establish a Baseline: Compare conversion with and without a free shipping offer.
- Create Thresholds: Increase the minimum order value required for free shipping, and test the improvement in margin.
- Set Restrictions: See what kind of improvement you’ll get by offering free shipping only on select products where it is profitable.
- Enact Price Increases: Increase all your product prices to compensate for the loss you take on free shipping, and see how your profit compares.
We’ll use real data from an e-commerce site that ran these experiments. To maintain client confidentiality, I’ve drafted some sample screenshots using a generic logo rather than the company specific page. The tests and data, though, are real.
Let’s dive in!
Why You Should Offer Free Shipping
Adding free shipping to e-commerce sites is a surefire way to improve your conversion rate. Do a quick search on “Free Shipping Conversion Rate” and you’ll find plenty of case studies:
- Red Door found that adding a free shipping threshold to NuFACE increased orders by 90%
- 2 Big Feet did a similar experiment on their own and increased orders by 50%
- ComScore found that Free Shipping Day increased sales by 16%
Any e-commerce owner is going to be thrilled to raise orders/sales by this much. However, unless repeat purchases drive a large portion of your sales, offering free shipping may not be profitable. It’s not worth offering free shipping unless you can make the offer profitable.
Many store owners have tried free shipping in the past, gotten burned by low profit margins, and simply refuse to do any further testing. This is a common objection, and I want to review how you can overcome this to truly maximize your site.
How to Set Up Your Tests
Before you do any type of A/B testing, you have to be clear on what you are optimizing for. In e-commerce this is particularly important, as there are tradeoffs between optimizing for net margin versus optimizing for lifetime value.
For the tests below, I strongly recommend optimizing for net profit per visitor. While both Visual Website Optimizer and Optimizely make optimizing for revenue easy, optimizing for net profit per visitor is more difficult because you need to actually track what products are purchased in order to understand your margins on each product.
To optimize for net profit, you should create two different site versions and do a split URL test rather than a standard A/B test using CSS overrides. This will make the net profit calculations much easier.
Here’s what I mean:
You could do a “hack” and do a simple CSS override where you change the prices on the front-end, but not on the back-end. But, that’s kind of a bad customer experience, so it’s much better (at least I think) to create two separate site versions.
OK, now the actual tests:
1. Establish Your Baseline
Before even worrying about whether you can make free shipping profitable, you need to test how much making the offer will lift your conversion rate in the first place. If offering free shipping won’t raise conversion, why go through all the trouble?
First, you should A/B test your conversion rate with and without the free shipping offer. Here’s an example test:
Test Header – Free Shipping Added
This test is easy to implement visually. You simply need to make a free shipping offer in the header. But, to be able to offer this, I’d recommend coding up two different versions of the site so that you can more easily track which orders you offer shipping on and which you don’t.
Here are the results:
- Conversion Improvement: +26%
- Average Order Value: +5%
- Net Margin/Order: -32%
Total Improvement in Profit = (1.26) * (1.05) * (0.68) = -10%
This is what I label your “baseline improvement” in conversion. It shows you how much “potential” you have to boost conversion rate/profit. Looking at the numbers above, we know we have a big opportunity. A 26% lift in conversion is huge! Now, it’s just a matter of running a few more tests to see if we can get profits up at the same time.
(Boosting conversion at the expense of profit may not be a bad thing if you are looking to optimize toward customer LTV. For example, if repeat business is a large portion of your sales, it’s worth taking a lower upfront profit to get new customers, and maybe you could even dynamically offer free shipping depending on whether someone is an existing or new customer. But, to keep things simple, we’ll assume that net profit is the goal.)
Here’s what you do next:
2. Shipping Thresholds
The most obvious way for you to save your margins while offering free shipping is to raise your threshold. This “forces” customers to spend more to get free shipping and helps to raise your margins.
For example, this store originally offered free shipping on orders over $100, but what if you offered:
- Free shipping over $125
- Free shipping over $150
Setting up an experiment for this is simple. Just change out the header values and edit the code to change the price at which free shipping is offered. Here are screenshots to illustrate this:
Test Headers – A and B
Free Shipping Over $125 – A
Free Shipping Over $150 – B
Here are the results:
Version A – $125
- Conversion Improvement: +20%
- Average Order Value: +10%
- Net Margin/Order: -13%
Total Improvement in Net Profit/Visitor = 15%
Version B – $150
- Conversion Improvement: +8%
- Average Order Value: +8%
- Net Margin/Order: -5%
Total Improvement in Net Profit/Visitor = 11%
Yes! Adding thresholds beats the original Free Shipping Over $100, with a lower threshold actually performing better on net profit and conversion improvement.
This type of “tipping point” is common when testing thresholds. If you ask customers to make too high an investment, you scare them away; too low and you don’t have enough margin. The name of the game is to figure out the exact price at which to offer free shipping in order to get your best threshold.
You can imagine limitless possibilities here for prices, but I strongly recommend keeping things simple. Offers like “Free Shipping Over $105!” tend to confuse consumers as it’s not a standard price.
At this point, you could stop testing and use Free Shipping Over $125 as the winner. But, with a “test everything” attitude, there still are two other things you should try in order to get your highest total profit:
3. Restricted Shipping
A third easy way for you to make free shipping offers work for you is to offer them only on products where you know the shipping cost is low. Here’s an example:
Restriction – Shoes Only
This type of offer is “safe” because you know you can afford to make this type of offer long-term. It’s also easy to implement. Again, simply a visual change in the header, and then some coding in the cart to be sure you’re offering free shipping only on orders with shoes.
Here are the results:
- Conversion Improvement: +8%
- Average Order Value: +2%
- Net Margin/Order: -2%
Total Improvement in Net Margin = 8%
A restriction worked better than the original free shipping offer in this case simply because it didn’t cut into margin. But, it stinks when compared with the threshold. It’s also interesting to note that in this test, sales of shoes compared with the other product lines remained flat.
Restrictions generally work best when you have one type of product that dominates your sales and has low shipping cost. For example, if most customers are coming to your site to buy shoes, then of course offering free shipping on shoes is going to appeal to a large number of your customers. If, on the other hand, you have a variety of products, then you shouldn’t expect a huge improvement from offering shipping only on one product.
Once you’ve reached this point, you’ve got one test left:
4. Test Higher Product Prices
The last “trick” in your bag is to try combining higher product prices with an offer of free shipping.
Generally, increasing prices will lower conversion, but the key here is the total combined net effect of the price increase with the conversion decrease.
Enough theory, here’s an example:
Test – Higher Prices and Free Shipping
The store increased prices on all items in the test version with free shipping by ~10%. (The higher prices were to offset the shipping costs.) Note that you absolutely must design two different versions of your site to truly implement this test. It’s much easier to create two different versions of the site and test them against each other in a split URL test than to do a “hack” with standard A/B testing software.
Here are the results:
- Conversion Improvement: +18%
- Average Order Value: +15%
- Net Margin/Order: -5%
Total Net Improvement = (1.18) * (1.15) * (.95) = 26% Improvement in Net Margin
Doing a simple price increase across the board decreased conversion rate improvement but raised average order value and net margin per order enough to make up for this. This test crushed the previous baseline and showed a 26% improvement in net margin. Winner!
Will this work for you? It depends on how competitive your niche is:
- Unique, Non-Competitive Niche: You likely can combine free shipping with a price improvement and see a total net improvement in margin. This is because customers aren’t “price shopping” and you have some leverage with your product.
- Commodity/Competitive Niches: If you’re selling used laptops, car parts, etc., then this strategy may not work as well for you, although it’s still worth testing. Consumers aren’t always rational when making a purchase. And, if your competitors are not offering free shipping, it’s worth trying it out.
Again, because price testing requires a bit of coding work, it’s best to leave these tests to the end. But with results like this, it’s well worth the effort.
Don’t stop at free shipping alone! Once you’ve determined how much free shipping lifts your conversion rate, try adjusting your thresholds, using restrictions, and increasing your prices to squeeze some additional profits from your free shipping offer. See if you can find the ideal combination of higher conversion rate and profits that give you a profit boost and new additional acquired customers.
CLZ Alwin here. One year ago, in October 2013, we introduced “Update Plans”, our subscription system for getting updates of your desktop software. And I am proud to announce that at this moment, after 12 months:
Over 50 thousand (!!) CLZ customers have an active Update Plan!
Thank you all for your loyalty!
To celebrate the success of Update Plans, I am going to do something I rarely do:
I am going give you an exclusive insight into our long term “roadmap” for the desktop programs.
- Reminder: What is an Update Plan?
- The Past: one year of continuous improvements!
- The Present: over 50 thousand active Update Plans!
- The Future: our Long Term Roadmap.
Reminder: What is an Update Plan?
- Our Win/Mac software is “pay once and use forever” software.
- Every new license purchased includes a free 1-year Update Plan.
- An Update Plan is a subscription for getting software updates.
- When your Update Plan expires, your software stays fully functional.
- Update Plans can be renewed or extended from your my.clz.com page,
for US $2.50/month (auto-recurring) or US $24.95/year (pre-paid).
The Past: one year of continuous improvements!
We introduced the Update Plan system to free our programmers from the chains of the “yearly major upgrade” schedule, allowing them to work on all programs more continuously. Whereas in the old system, they worked on one program at a time, resulting in one paid major upgrade per program each year, then nothing for the rest of the year.
And looking back at the past year, the new system is clearly working:
The Update Plan system has resulted in a continuous flow of nice updates for all programs, Windows and Mac, including big features (like the new User Defined Fields system) and many improvements to existing functionality (e.g. the improved Edit Lists screen and the nicer Preview templates in Add Auto).
For a reminder of all updates that were released for your program(s), take a look at our Updates Pages:
- Movie Collector : Windows / Mac OS X
- Book Collector : Windows / Mac OS X
- Music Collector : Windows / Mac OS X
- Comic Collector : Windows / Mac OS X
- Game Collector : Windows
The Present: over 50 thousand active Update Plans!
One year into the new Update Plan system, over 50 thousand Collectorz.com customers have an active Update Plan, meaning that they are able to install all new versions that we release for their software.
As you can read in the next topic (“The Long Term Roadmap”), we’ve got a lot of cool stuff coming, so make sure you have a valid, non-expired, Update Plan.
Log in to your My.CLZ.com account now to check and renew where needed.
Update Plans cost US $2.50 per month (when paid monthly).
Volume discounts apply when pre-paying for a longer period.
These are your options:
- Click here to pre-pay for a fixed period
(one-time payment, stops automatically)
- 3 months for US $6.95 (discount: US $0.45)
- 6 months for US $12.95 (discount: US $2)
- 1 year for US $24.95 (discount: US $5) »» most popular
- 2 years for US $44.95 (discount: US $15)
- 3 years for US $64.95 (discount: US $25)
- 4 years for US $79.95 (discount: US $40)
- Click here to start monthly payments
(Automatic monthly credit card payments)
- US $2.50 per month (cancel anytime)
The Future: our Long Term Roadmap:
If you’ve been with us for a while, you may know that we rarely provide a long-term roadmap of what we will be working on, mainly to allow us complete freedom to change our planning, change our priorities, etc…
But today, I am giving you a rare insight in our long-term “to-do” list, an overview of the main things we’re planning to work on in the next year or so. However, no promises, no ETAs, we may still change our minds
The BIG stuff:
- Fully automatic 1-button two-way CLZ Cloud syncing (like in FineDiner),
making the sync much faster and better able to handle large databases.
- Syncing of more data to the CLZ Cloud and mobile apps,
like User Defined Fields, Loan info, tracks for music, etc…
- Mac OS X: A faster database format: maybe even compatible with Windows.
- Submit to Core for Movies, v2.0.
- Submit to Core for Games.
and the rest:
- Direct editing of First and Last Names of Artists/Authors/Actors in the Edit screen grids.
- A better Field Selection screen (for Columns, Sort and Folder Fields).
- A tool to remove “orphan images”.
- A better Loan Manager screen.
- Better support for using Movie/Book Collector as Seen It / Read It trackers.
- More improvements for the Tools / Edit List screen.
- Webcam barcode scanning.
- Share collection list or items to Facebook, Twitter, Instagram.
- Better manuals and FAQs.
- Comics: auto-download current values.
- Games: import from Steam.
- … and lots more …
BTW: the above list is about the desktop software only. Of course there will also be many updates for Connect and the iOS/Android apps. In fact, BIG Connect news is coming up next week, watch your inbox!
Talk to you next month!
When you’re working on a big project by yourself, you’ve got to have a system to keep your sanity.
Most of the big projects we work on — starting a blog, creating a product, publishing a series of podcast episodes, etc — have tons of moving pieces and there’s no one but ourselves to manage things.
And it’s so easy to start leaking sanity as things start slipping through your fingers.
So what we need is a system to help us manage these projects, and that’s exactly what today’s episode is about.
So click play and let’s get into the things we’ve learned (and we all need to understand) about mini projects, sprints, course management, measuring success and the best way to set goals. Enjoy!
Some Important Parts
- How do you stay sane, keep your whits about you when all around is chaos and insanity and things slipping through your fingers?
- What systems could she use to get a better handle on things?
- 28: setting a hard deadline, vs vaguely working towards a goal.
- 31: our “sprints” and “themes”, how we manage large projects over time. Switching contexts, focusing and actually getting shit done.
- 37: “Course management,” also known as “chase’s surprisingly prescient golf rant.”
- When you set out to create a project…
- What are the mini-projects that make up this project? Take inventory of what the essential ongoing work is so that when it’s done it has the impact you intend for it to have.
- Decide how you measure the success of that thing. Rate based goals are much more effective than one large goal at the end of the project. I.e., it’s better to measure DAILY than MONTHLY because you can have more control over the smaller and more immediate units of measurement.
- So, how are you going to measure the success of that project?
- 43: How to write down your desired outcome on these projects.
- When something sits on your task list for a long time, it’s probably due to ambiguity of the item itself.
- 45: the ViNO method of writing tasks.
- 48: CEO vs worker bee modes.
- 51: Seth Godin and defining the critical path.
- 54: Waterfall vs agile and how this could be the most important bit in your project management.
- 60: Tools and apps to use.
Ask Your Question
Ask your question and we’ll answer it on the air. We’d love to hear your voice on the show.
Darius Kazemi, Tiny Subversions – XOXO Festival (2014) – YouTube — “Most people are lucky if they finish a couple side projects in a year. Last year, Darius Kazemi released 72, averaging one every five days.”
YouTube’s HTML5 Opt-in — “You can request that the HTML5 player be used if your browser doesn’t use it by default.”
Portland Doughnuts, Standing Out & Dealing with Tragedy with Chase Reeves — “If you’re looking for some energy boost, listening to this episode should do it for you!”
Digital Photo Mentor – Learn Photography | Take Pictures — Darlene asked us the question today. Here’s her photography site.
Vanity vs. Actionable Metrics: Are you tracking the right stats in your business? — “What metrics and stats should you actually be tracking and which don’t mean jack squat?”
CEO vs. Worker Bee: The Two Modes of Productivity — “The distinction between these two modes, dubbed CEO and Worker Bee by our very own Chase Reeves, is an important mental barrier to create, especially for a solo bootstrapping founder.”
Critical path method – Wikipedia — “The essential technique for using CPM is to construct a model of the project that includes the following…”
You Made It Weird #210: Josh Ruben « Nerdist — THE. BEST. EVER. I’ve never laughed this hard or this long at a podcast episode.
Asana – task and collaboration app — “Asana puts conversations & tasks together, so you can get more done with less effort.”
If you had to choose, what’s one project management tip you love? Let us know in the comments. See if we can collect a bit of a list here.
In June of 2013, I was introduced to Nir Eyal through Ryan Hoover. Nir had been blogging a lot about psychology and analyzing what makes a highly engaging product. Nir eventually published a book on that topic: Hooked – How to Build Habit-Forming Products. Hooked is a guide to building habit-forming technology, written for product managers, designers, marketers, and startup founders.
In this episode we get into how you can design your products, especially the initial experience, to create traction. We also get into my addiction to iTunes.
Note from Justin
This interview is a smaller segment of a full-interview with Nir, available on Product People Club. Go to productpeople.club, and sign up for the waiting list. Screenshots are up now!
Music: Lethal Force by Striker, visit them at striker-metal.com
Note from Dan: This is a detailed guest post from website valuation expert, Jock Purtle. I’ve had lots of chats with Jock around the question of what is my website worth. In this post we wanted to delve right into the detail of how to value a site and how to sell it for as much as possible. I hope you like it. Over to Jock.
Each year we produce a valuation report on all the public Internet business sales that looks at what businesses sold for in the last 12 months. Dan happened to mention it in a forum thread a while ago. He had this question:
I proceeded to then ask him the reasoning behind the question, specifically and he came back with this:
“If you invested your life in building an asset wouldn’t you want to track it’s value? People value their houses they check their bank accounts and their stock prices. Doesn’t it make sense to track the value of your business?”
The end outcome over some emails, back and forth was that it is a little more complex than just throwing out a multiple or rule of thumb. While valuations aren’t straightforward because value is subjective, you can apply certain generalizations to valuation based on a few facts. That is what we will be discussing today.
What makes websites valuable?
The main reason your website has value is because a willing buyer looks at it as a way to make a return on investment. That’s it.
You might be thinking to yourself that your website has lot’s of potential, but that’s flawed thinking. Buyers look for their money back in the quickest time possible and will pay a higher or lower amount for a website based on the risk they perceive in getting their money back.
What is also flawed thinking is that the money you’ve invested in your website adds extra value. Some website owners make the mistake of thinking that because they invested $15,000 into the making of the website, $10,000 for the domain name, $50,000 value from the websites traffic then it should be worth an extra $75,000. Which is incorrect. All assets (domain, design, traffic, list) combine to generate profit. It is the profit that gets valued, not the assets.
How website buyers perceive value?
Buyers are usually willing to pay a multiple of the earnings of a business to acquire it. A quick example: a website making $200,000 a year may be valued at a 1x multiple, to be sold at the same 200k. If the multiple offered is 2x, the website will be sold at $400,000.
This multiple is usually determined by the amount of risk involved, so the higher the risk your site holds and the lower the multiple.
So how do buyers perceive the value of a website? To answer that, let’s consider those factors that would make your site a less risky investment:
- Solid, consistent earnings
- Increasing growth
- Automated systems in place
- Multiple revenue streams
- Diverse traffic sources
- A unique selling proposition (USP)
- Market leadership and branding
Traditional Valuation Methodology
Traditional valuation methodology can be simplified down into three types pf methods. They are:
- Earnings multiple – what we’ve just seen. A buyer applies a multiple, usually in the range of 1-3 and multiplies it by the annual profits. If you are working with monthly statistics, the multiple can be in the range of 12-36. Counter wise this can also be a multiple of revenue (total sales) for larger fast growing businesses. However for the average Internet business valued under $5 million, this is generally not used.
- Comparable sales – The buyer may decide to find data on sites similar to yours that have sold in the past. This method is not necessarily accurate, but it creates a clear range within which your website should be sold.
- Asset valuation – some sellers, or buyers, prefer to look at a website’s value in terms of the assets tied to it. Assets can be traffic, quality of this traffic, a huge mailing list, a premium domain name, a recognizable brand name, or any other thing that can be leveraged to make bigger profits and achieve a quicker return on investment for the buyer. This is usually applied by strategic buyers for sites that are making little to no profit.
More on valuation methods
A traditional business valuer is going to use a discounted cashflow method, which is a future earnings calculation. However because there is such a high level of good will in Internet businesses, the generally accepted methodology is a multiple of earnings.
Remember these facts when it comes to site valuation:
- A valuation is really just an opinion; so different buyers may not have the same opinion about a particular site.
- Your site’s real value will only materialize once it’s sold
- Sellers are usually at fault for overvaluing their website
- There’s no perfect or correct valuation model that applies to all websites
- In valuing a site, you are combining subjective and objective tasks
- Higher quality stats (such as proof of traffic, income) are more likely to result in higher website valuations
Let’s take a further look at the earnings multiple methods, which is the most common method. This approach usually assumes that your website has been in existence for at least two years, since we apply a multiple to the average yearly earnings (earnings being profit not revenue).
How’s that? Since website buyers pay a multiple of the yearly profit (1-3) the same can be done for monthly profit. For instance, a website making $60,000 in profit per year may be sold at 2.5X, which is $150,000.
It’s vital to note that all along, we’ve made references only to the PROFITS, not sales (revenue). It’s the net profit that counts here and it’s easy to calculate it: the total earnings minus expenses. You need to account for the cost of doing business, website maintenance fees, taxes, depreciation, interest and all other expenses incurred. Deduct all of those and you have your net profit.
The multiple to be applied usually varies based on supply of sites for sale and their demand (as you would expect), market sentiment, where you place your listing (marketplace) and even the buyers’ mood! Generally, you should expect a 1-1.5x multiple if your website isn’t very well established, while your established counterparts should expect a 1.5-3x multiple.
Why online automated valuation tools can’t be trusted
The first thing you might type into Google is something like “what is my website worth” when selling. What you will get, is a whole lot of free website valuation tools. If you use something like www.mywebsiteworth.com and type in google.com you get an arbitrary value of $1,000,000,000 (1 billion) dollars. Now we all know this to be way off the mark. So we might then type into Google “what factors determine a websites value” and when we collate all the information we are going to get a long list of different things to look for when valuing a website. Things like domain age, page rank, google rankings etc.
But what these articles fail to identify is the single most important factor in valuing a website and that is the future maintainable earnings of the site.
What needs to be understood is that the assets of the business are only indicators of future maintainable earnings and do not add any extra value to the site. This will be explained more in detail below.
Take for instance what the following tools estimate the value of Google.com:
- Sitevaluecheck.com – $700
- Digsitevalue.org – $1.3B
- Worthofweb.com – $78.6B
- Dnscoop.com – $2.2B
These automation are poor indicators of value. Google’s current worth is $375 Billion dollars.
Why One Company Is Worth More Than Another?
Let’s take the example of company A and company B and dive into why they have different values.
|Trends||Flat||Room for growth|
|Largest customer list||No||Yes|
|Traffic||Heavily reliant on seo||Multiple source|
|Income source||1 Source||3 Sources|
|Complex to operate||Yes||No|
|Low barrier to entry||Yes||No|
|Business Level||Mature||Growth stage|
|Owner help after sale||No||Yes|
|Quality and diverse links||No||Yes|
|Repeat and direct traffic||No||Yes|
|Solid page rank||No||Yes|
|High levels of traffic||No||Yes|
|Partnerships and JV's||No||Yes|
|Solid sales presentation||No||Yes|
|Final sale price||$100,000||$435,000|
What we can see is that by having different value criteria for the same type of company with similar revenues, we get a totally different valuation.
The Not So Good News
Using the example above, let’s say you have a large advertising website with 3,000 pages of unique content, great search rankings for high value keywords and a really brandable domain name. The site earns a net $100,000 per year from banner ads and we use the above valuation of $100,000 based on similar site sales.
- Yearly Revenue x Multiplier = Sites Valuation
- $100,000 x 1 years = $100,000
But the seller thinks the site is worth more because of the good domain, all the unique content and the great rankings.
They calculates that to start the site from scratch it would cost:
- Content – $55,000
- Domain – $8,000
- Top Google Rankings – $25,000
- Total – $88,000
So they think that the real selling price should be:
$100,000 + $88,000 = $188,000
However here is the bad news: $188,000 isn’t the real value. The assets of the business (content, rankings, domain) add no more value than what has already been calculated.
The assets of the business form the structure for its revenue generating capabilities. It is important to understand this principle when valuing your site. Even though it might have for example, cost you 100k to get the site up and running it is no more valuable then what a potential buyer can see the site making in the future.
Why You Can’t Sell Potential
As a website broker that provides a free valuation service, we get a lot of valuation requests and what we see a lot is half finished projects with “lot’s of potential” where the owner has started an online business, got some traction and then dropped the ball.
In both these scenarios, there is very little to no value in the assets because the site is not producing income. A buyer is going to pose the question “if there is so much opportunity why haven’t you gone and taken advantage of it yourself?”.
Don’t be offended when someone values your business at zero if it meets the above criteria.
What has the market been paying for online businesses?
There are two different metrics that the market has been taking into account when buying online businesses. The first metric is the business model (e.g. ecommerce store vs. software business) and the second is the price point or total valuation of a business (e.g. sale price of $200,000 versus $3 million)
For more details check out our:
Price by business model
Price by price point
Summarizing this data, we can see that different business models are selling for different prices. We have a lot of buyers on our database at the moments that are seeking ecommerce stores.
How can I increase the value of my website?
If you are wondering if there’s anything you can do to get more money the answer is a resounding “Yes”! If you are not desperate for a sale, it may be a wise thing to hold on to your website for a little while longer while you improve it’s value.
There are a few the key things you should do to get your website ready for sale, but let’s first take a peek at the variables and questions a buyer will ask during due diligence that can alter a site’s value.
- Is the income stable?
- Is the income diversified?
- What is the cost to profits ratio?
- Are the finances clean?
- Is there growth in income?
- How much traffic?
- Multiple traffic sources?
- Quality of traffic?
- Is there a large reliance on SEO?
- Email list
- Contracts with suppliers
- Premium domain name
- Premium quality content
- What is the age of the website?
- Unbroken whois history?
- Technical know-how required to operate it
- A positive growth trend
- Strong brand
- Unique selling proposition
- Automated processes
- After-sale support
Other ways to increase value
Setting up some type of seller financing arrangement can help you get more money for your website.
- Performance goals – you agree that the buyer will make payments on certain milestones being achieved.
- Support – offering to give them after-sale support
- Part ownership – if you as the seller still want a stake of the website, the website can be perceived by the buyer to be of higher value
- Financing – an incentive, the seller offers to finance the purchase
No competition – including a clause in the sale agreement that rules out you competing in the same market in the future
What Do Buyers Look Like?
Buyers are going to come in the following forms:
- Corporate – This buyer is generally a successful corporate employee that has saved up some cash and is looking to get out of a job and into their own business. They are specifically interested in buying a website because of the freedom that it allows them.
- Baby boomer/retiring – This buyer is looking for a) something to fill their time with and b) most importantly a better asset to get them through retirement. Baby boomers are soon realizing that their few hundred thousand invested or saved is not going to last them long.
- Internet entrepreneur –This buyer either already has an online business and wants to expand or has existing skillset in online business and wants to have there own business.
- Offline business entrepreneur – This buyer has generally either sold their offline business or are looking for a new business to invest in
- Institutional buyer – these companies buy companies for a living and are looking for solid investments to add to their portfolio.
- Strategic buyer – This buyer is generally a competitor, supplier or synergistic buyer that is looking at the acquisition as a bolt-on to their existing business. A small amount of sales happen in this way but when they do the price paid is generally well above market rate.
How To Sell A Website?
Step 1 – Preparing Documentation
The first document that you need to prepare when selling you website is an information memorandum (also known as prospectus or book). This document outlines what your business is, how it operates, how it makes money, where it gets it’s traffic and any frequently asked questions that a prospective buyer will have. There are 3 different sections of information you should have prepared, the general information, legal documentation, as well as the marketing information.
General information consists of the regular information and is usually the first thing potential buyers will be looking at if they are interested in your website. Here is a short list of some of the things you will be expected to have ready:
- Fact summary sheet, gives the most important information about the site all on one page
- Website traffic history
- Programs that the site uses and how to work those specific programs
- Security reports
- Index of every single page
- Media mentions, such as awards or publicity
- List of employees
Marketing information is going to be a big part of the buyer’s decision. The marketing information will show them how you brought your website traffic and also how your overall brand is looked at by the public. Some marketing information you should have ready is:
- Overall marketing strategies used
- Statistics within search engine rankings
- Keyword research completed and keywords that have already been targeted
- Visitor statistics, that includes their demographic information
- Competitor information and research
- Sales history and information regarding your conversion rates
Legal information to provide proof of ownership, transfers, history, and all other legal information your buyer might be interested in. Some of those documents are:
- Expense reports
- Profit reports
- ROI analysis
- Any appraisals
- Any contact regarding the sale
Step 2 – Finding Buyers
Once you have developed your prospectus you will use that to shop your business to buyers. The following places are where you will find prospective buyers of websites:
- Your private network (friends, family, business associates)
- Your competitors or suppliers
- Business for sale classified sites
- A website brokers database
- Searching Google for terms like (websites for sale etc.)
Step 3 – Receive Offers
As you approach buyers they are going to have initial questions about the business. You will need to answer these questions prior to receiving an offer. Generally an offer will come in the form of a letter of intent. This is a document that says that a buyer would like to offer $X price at Y terms for the business and by you accepting that document you allow them an exclusive due diligence period
Step 4 – Closing The Sale
Just because you have an offer on a business or letter of intent does not mean that it is a guarantee of closing. You might run into the following problems closing the sale.
- Your business fails due diligence and the offer is reneged
- The buyers funding falls through
- The buyer makes a counter offer that you don’t accept
If you are successful getting to the final stages of a sale the final stage is providing training to the new buyer. This involves generally a 60-90 day process of walking the new buyer through how to run the business on a day-to-day process.
Can I Just Pay Someone To Do This All For Me?
Yes, there are services out there that assist online business owners sell their business. You are either going to hire a broker or a mergers and acquisitions firm to manage this process. Some services these professionals provide are
- Makes sure that the website is correctly priced.
- Value your company for you
- Find Potential Buyers.
- Educate the buyers about the site and show them all aspects of it.
- Will assist in the price negotiations.
- Assists with completing all of the due diligence involved with the sale.
- Protects the identity of the seller if they don’t want to be revealed.
- Provides post-sale assistance if it is needed.
Online businesses fall into three categories and each category requires a different skillset.
Small (smaller than $100k)
If your site is valued under $100k it is probably making between $50 and $4,000 per month in profit.
Medium (between $100k and $5 million)
If your site is valued between $100k and $5 million it is probably making between $5,000 per month and $200,000 per month ($50k to $2 million yearly net profit).
Our recommendations is digitalexits.com – this is my business so I’m a little biased
Large (greater than five million)
If your site is valued at greater than $5 million, then your business is probably making at least $2 million dollars per year in EBIDTA or net profit. At this time it is best that you engage the services of a middle market mergers and acquisitions company. At this level the multiple you are likely to receive is going to be much higher and the demographic of the buyer is going to have more cash and be a more experienced investor.
Our recommendation in this case is foundersib.com.
What do you think?
Let me know if this post was useful for you. I’d love to know what you think about the topic so please reply in the comments below.
The post What is your website worth and how to sell it for maximum value appeared first on WP Curve.
There are few things that impact a brand’s reputation more than the way it responds to complaints and unhappy customers. Customer service has always been an important part of developing brand loyalty, in fact it was the center of the business model that allowed companies like Nordstrom’s and Zappos to thrive. And now that the internet and social media give individuals their own platform to publish information about their daily lives, it’s becoming even more critical for companies to provide great customer service.
It’s easier than ever for customers to publicly share their experiences, and the way you respond to unhappy customers will determine what they say about you afterward. So what can you do to make sure that you properly respond to an unhappy customer so that you both experience the most pleasant outcome possible? And is there a way you can actually make unhappy customers helpful to your business, so that instead of treating them like a problem – you actually see them as an opportunity?
Yes, there is. Each dissatisfied contact has the potential for becoming your company’s best advertisement, a key referral source, and a stealth undercover operative – if you are willing to listen.
Here are five ways to turn unhappy customers into a valuable resource for your business:
1. Make Your Customer Feel Heard.
All complaints are similarly themed – something was supposed to happen that didn’t. A product doesn’t work, a repairperson doesn’t show up as scheduled, an expectation wasn’t met. In any event, your client was inconvenienced or worse. By the time the problem is severe enough for the customer to contact you, they are undoubtedly upset.
If you respond to an unhappy customer by immediately trying to get to a solution, it can possibly backfire and make the customer even more upset. Being unhappy or angry with a company or product puts the customer in a highly emotional state, so the first thing you should try to do is get them into a more agreeable frame of mind.
Often times an unhappy customer actually cares more about just feeling like they’ve been understood. But if you immediately jump to a resolution, the customer won’t feel like you’ve taken the time to truly hear their problem.
We all like to feel that we’re special, so even if the customer’s complaint is a common one take the time to make them feel heard. You can do this by acknowledging not just the facts of the situation, but also how it made them feel. For example “It must have been frustrating for you to bring home our product only to realize it wasn’t the right model for your needs.”
Whether you are the first line of defense or last in line of escalating concerns, every call or message on social media matters, and the way you handle the conversation from the very beginning can go a long way towards diffusing the situation.
While it’s only natural to get defensive when someone is criticizing your product or service, you can mine the complaint for valuable information, and potentially convert a hostile caller into a loyal devotee.
No one is ever going to be more honest with you than an unhappy customer. It also gives you the opportunity to gain valuable insight into whether any internal processes need to be fixed when dealing with customers so make sure to take detailed notes.
Dominos was often the butt of jokes, with many people complaining that their pizza tasted like cardboard. The company tied with Chuck E. Cheese, coming in last place in a consumer’s taste preference survey done by Brand Keys in 2009.
The company listened to its unhappy customers and responded by changing their pizza recipe. They encouraged consumers as well as food bloggers to try their new pizza and to leave feedback through social media. This type of transparency and willingness to take criticism and do something about it generated goodwill towards the company and a willingness for people to give Dominos another shot.
As CEO Patrick Doyle stated in a documentary created by Dominos to show how they listened to their critics, “You can either use negative comments to get you down, or you can use them to excite you and energize your process of making a better pizza. We did the latter.”
2. Do All That You Can to Delight Your Unhappy Customer.
No question, some problems are more difficult than others to fix – a moving company drops a valued antique, a supplier misses a critical deadline, the cable company drops the biggest game of the year. Sometimes, you can’t undo the problem, but you can always find a way to make it up to the customer. The degree to which you do so will go a long way towards converting your unhappy customer into your most vocal advocate.
Going out of your way to accommodate a customer’s needs makes them feel important, respected and in control. Whenever possible, try to give your customer even more than they asked for. By delivering even the smallest amount above their expectations, you can make them feel like they are your most valued customer.
When a customer’s Christmas package was stolen from their apartment building, the customer service reps at popular on-line retailer Amazon.com didn’t point fingers, they went to work exceeding expectations, delivering a replacement order and waiving the shipping charges. Even though the loss wasn’t Amazon’s fault, they fixed the customer’s problem. The news of their corporate generosity made most major newscasts and generated goodwill and publicity far beyond the costs of the package they replaced.
Converting unhappy customers into valued customers will dramatically impact your repeat business. Everyone knows problems happen, products sometimes break and service providers occasionally fail. It’s how you make up for the inconvenience that makes the difference. You distinguish yourself from your competition by the way you make things right. Customers will come back to your brand over and over again when they know you’ll address any problem that arises.
3. Damage Control – Protect Your Brand from Negative Mentions.
There used be a standard formula that said when someone experienced poor customer service they would tell ten of their friends. That was before the internet, smartphones and social media.
In today’s instant-access, multimedia environment, one unhappy client can reach literally thousands of people, sending their complaint about your company viral. Sadly, negative comments seem to be more contagious than positive ones. You’ve probably seen video clips where customer service personnel aggravated situations by their rudeness; by not listening and not resolving the complaint.
Insensitive lingerie and workout wear retailers may always regret the way they respond to customer’s concerns about style and fit. Just take a look at some of the controversy Lululemon generated after the company’s CEO suggested unhappy consumers were probably just too fat to wear their clothes.
Headlines from around the internet after comments by Lululemon founder Chip Wilson. Image credit: http://nymag.com/thecut/2013/11/lululemons-pants-debacle-takes-fat-shaming-turn.html
As you might imagine, those comments were widely posted on-line. There’s no un-ringing the negative publicity bell.
That’s why it is critical that you use your interactions with unhappy customers as an opportunity to turn them around. Unresolved complaints tend to escalate. They get posted to social media pages and more and more unhappy customers join the conversation. The louder the conversation gets, the more the negative sentiment towards your brand will spread to other people in your target market. By providing good customer service and making customers feel heard you can minimize your negative publicity.
4. Build a Positive Reputation.
On the flip side, an unhappy customer that’s transformed into a delighted one becomes even more loyal than a satisfied customer. In other words, we are even more satisfied when we’ve had a problem and it’s been satisfactorily handled than if we never had the problem to begin with. Better still, when a disgruntled client receives stellar customer service they are more likely to tell their friends, in part, because it casts them in such a positive light.
Nordstrom’s built a reputation for exceedingly excellent service, especially the way they process customer returns. Store managers are given wide discretion on how they implement the company’s generous return strategy – supposedly even accepting tires at one store, a product Nordstrom’s doesn’t carry! The story, one of many, spread like wildfire and helped cultivate the Nordstrom brand of individual attention and superior, over-the-top service.
Zappos is another company that has legendary status when it comes to its customer service. Their devotion to providing quality service and listening to consumers has paid off in dividends. They have a legion of fans who can’t wait to spread the word about how outstanding their services are (free advertising) and 75% of their purchases come from repeat customers!
When you delight your customers by resolving their issues and then exceeding their expectations (see the second tip) your customers will be motivated and excited to share the story. Again, everyone is happy to spread the word about how special and important they are that a company went out of their way to help them. Customers will post their positive experiences to social media which your company can then re-post. There’s nothing like unsolicited, positive, authentic customer testimonials to improve your brand image.
Remember, every initially combative or irate customer contact gives you an opportunity to forge a lasting positive relationship.
5. Seize the Opportunity for Improvement.
Once you conclude your conversation with your now converted, happy customer, your work is not over. Remember those detailed notes you took during your call? Unhappy customers are an invaluable resource for providing honest information about your business, information you need if you want to improve and stand out from your competition.
Each complaint is like having a covert operative working undercover to point out potential problems. The old adage, “where there’s smoke, there’s fire” applies to your business. If one unhappy customer tells you about a problem, how many more have experienced a similar issue and just haven’t called?
By attending to each individual complaint, you can nip potential problems in the bud. Or, if there is a more systemic problem in play, you can address it before it gets any worse. Common customer issues can reveal where your business needs work, and give you direction so that you can continually build a better product or service. By incorporating complaints as feedback for improving your business, you will help even more customers.
Most customers will accept the occasional human or system error. How your company responds to those errors is what distinguishes you from your competitors. It’s easier than ever for customers to publicly share their experiences, and the way you respond to unhappy customers will determine what they say about you afterward.
By truly listening to your unhappy customers you can generate the most pleasant outcome possible. Better yet, you can turn an experience with an unhappy customer into an opportunity to drive profitable change and growth for your business. You now know every complaint is your opportunity to minimize future negative publicity and convert an unhappy customer into a devoted and loyal fan who will spread the word about your superior service.
So the next time you have an unhappy customer on your hands, you can smile and say warmly, “Thank you for reaching out,” and mean it.
About the Author: Josh Brown is part of the marketing team at Soldsie, a social-selling platform that enables retailers to sell their items over social channels like Facebook and Instagram. You can follow Soldsie on Twitter or Facebook.