Analysis: Promotions Make Big Impact on Abandoned Shopping Carts

Analyzing abandoned shopping cart data from one of our customers last week made me sit up and take notice: Optimizations to their remarketing campaign and the introduction of a promotional discount for the first time caused their recovery rate to jump from 18% to 46%.

Wow. Clearly promotions can make a big impact.

There’s lots of academic research which shows that while promotions have limited affect on long-term sales, they enable marketers to grab market share by incentivizing consumers to stock up on their product at the expense of a competitor’s share.

But while analyzing this data, I wondered whether promotions work altogether differently in remarketing, compared with a promotion made at the point of sale.

A point-of-sale promotion encourages the customer to add a promoted item to their shopping cart and checkout. A remarketing promotion encourages a shopping cart abandoner to come back to the site and buy the items they abandoned. The difference here is, of course, that the abandoner has already considered—and rejected—your value proposition and decided not to buy.

A portion of your abandoners, of course, are still considering and have decided not to buy yet, but as we know from multiple studies, ecommerce leads go cold very fast. The latest study from MIT shows that 90% of ecommerce leads go cold in just one hour.

So perhaps promotions have a very different role to play when looking at shopping cart abandoners. Promotions are your chance to achieve two goals, when customers have already decided not to purchase from you:

1)      Get the customer interested again

2)      Recover the lost sale

Why Promotions Work So Well in Remarketing Emails

So what role exactly do promotions have as part of a remarketing campaign?

Uniquely, remarketing promotions give the ecommerce merchant the opportunity to change the value proposition after the initial one has already been rejected. In this way, certain types of promotions work more effectively than others. In order to understand this, though, we need to go back to the causes of abandonment in the first place.

Reasons Why Visitors Abandon Their Shopping Carts

The two biggest causes of shopping cart abandonment are:

1)      Price, in particular the cost of shipping and handling

2)      Timing, such as, the customer is not yet ready to buy

Price-based promotions can address the price objection directly. ‘Free shipping’ promotions also work really well, because the cost of shipping and handling is one of the most significant causes of shopping cart abandonment. But neither of these promotions addresses the timing issue directly.

Creating a Compelling Event

If a visitor is not yet ready to buy, then promotions can still have a significant impact by creating a time-based compelling event, in effect pulling the sale forward. The compelling event changes the value proposition by making the offer time-limited; they have to act now in order to get the sweeter deal.

As a rule, ‘Free shipping if you buy within the next 24 hours,’ will work better than a straight free shipping offer with an unlimited time period. So making the offer time-limited is important. It’s not as easy to do, in a shopping cart abandonment remarketing email, because we don’t know when the email will be opened after it is sent. The best practice to address this is to generate a one-time promotion code at the point of abandonment, which is time limited, allowing a few days for conversion after the promotional email is delivered.

When To Use Promotions, in a Multi-stage Remarketing Campaign

When a shopping cart abandoner receives a remarketing email, the majority are highly engaged with your brand. From earlier research and analysis, a real-time shopping cart recovery email will achieve very high open and clickthrough rates, two to three times higher than you would get from all of your other email marketing efforts. After all, they’ve just left your site having almost made a purchase, and now you are contacting them specifically about the purchase they almost made. But as a rule, your campaign shouldn’t make an immediate promotion.

Here’s what a typical starter campaign might look like:

First step

Your first contact should be in real time (i.e., immediately following the abandon) and should use a service tone, and no promotion. ‘Can we help?’ is a good starting point.

Second step

Assuming the abandoner doesn’t come back and buy immediately, you might follow this email with a second 23 hours after their abandonment so that it’s waiting in their mailbox before they come online the next day.

Third step

Assuming the abandoner hasn’t purchased, then 6 days and 23 hours after each visitor originally abandoned their shopping cart, you should send a promotional email to sweeten the deal and hopefully get them to come back and buy.

This outline campaign is a starting position only, and to do this, of course, you need automation. While trigger campaigns like this are set up in advance and executed automatically every time a visitor abandons their shopping cart, you should not ‘set it and forget it.’ As we showed earlier, tuning your campaign can have a dramatic impact on performance.

Training the Customer

When offering promotions in remarketing emails, you need to take care to avoid training customers to expect a discount. For example, if every time a visitor abandons a shopping cart they get an immediate promotional offer, they will learn very quickly that abandoning pays. This can cause your shopping cart abandonment rate to rise and erode margin. This is particularly important for ecommerce merchants for whom there is a strong element of repeat purchase.

There are several techniques you can use to do this in addition to leaving the promotion to the last step of a remarketing campaign sequence. I plan to cover these in a future blog.

If you’d like to learn more about which promotions work best in remarketing campaigns, you may be interested in a Conversion Academy webcast, “Promotion Strategies for Abandoned Shopping Carts,” on Thursday, April 14, 2011, at 12:00 p.m. Eastern time. For more details or to register, visit https://www1.gotomeeting.com/register/898672944.