A few days ago I met someone running an e-commerce website and he gave me a puzzle. Recently his conversion rate dropped and he asked me if I could come up with an explanation.
So I started asking questions.
Did the traffic go down? Maybe due to yet another Google update?
Nope, it’s pretty stable.
Did the traffic shift away from some source to another? Like less Google traffic compensated with Facebook traffic?
No, the traffic sources haven’t changed.
Has the internal click stream changed? Are people distracted or annoyed? Was there a change on the website that keeps visitors from converting? Like a new payment process?
We have changed a few small things but the click stream got better in fact. Once the button to buy an item is clicked we now have less terminations than before.
So once the visitor entered the funnel he now is more likely to complete it?
Yes, pretty much.
So it’s the entering of the funnel that is the problem, right?
So it seems.
Did the items change and become less attractive? Did you raise the prices?
No, we didn’t raise the prices. But you’re pretty close now.
Did you raise the shipping costs maybe?
Yes, we did but that wasn’t the problem.
At this point I was out of my wits I have to admit. So he solved the puzzle for me.
It turns out that not the individual products had changed but the product portfolio. They decided to get rid of low-price items as these didn’t provide enough profit leaving only mid- to high-priced items. As a result the profits per conversion went up but the conversion rate went down as the visitors interested in low-price items were lost. However the overall profits went up as some of those visitors looking for low-price stuff could be attracted to the higher priced items.
I found this puzzle very exciting as it demonstrates the relation between technical performance indicators and business results.