In 2005, an online guide entitled “30 Success Factors in Digital Communication” was published. The booklet was a trade fair give-away and was quickly distributed. Today, a good six years later, I discovered an exciting graphic there by chance, the meaning of which was not so clear to me in 2005.
Today the neck hairs resist me with one or the other sentence, which I wrote at that time. But a graphic caught my eye – and (only) today its meaning became really clear to me:
The diagram shows the relationship between customer value and cost of sales as factors in the customer life cycle (simplified) to illustrate that maximum customer value is a result of good customer development.
The reward for this work is profit – in the sense of an optimal exploitation of loyal customers with the advantage of low distribution costs.
The short version for all quick readers: Conversion is the core process in e-commerce. The long version explained in three points is called:
Profit comes from customer value
E-commerce converts customer value into profit. Every step on the loyalty ladder is a conversion. More conversion = more profit.
Everything is a funnel
Each individual part of the core process (e.g. winning new customers) can be represented as a product of several micro-conversions (and therefore has a value).
Everything is based on motivation
The efficiency of each process is the result of the user motivation, represented as motivation process, which correlates with the funnel.
The bottom line is that everything is conversion. Every business model consists of the art of winning, retaining and exploiting customers. The transition between each step is a conversion.
What does that mean in concrete terms?
Conversion is the core process in e-commerce
The purpose of a company is maximum profit – and in e-commerce this is the result of a clearly defined core process. This process is called Visitor > Action > Conversion and aims to develop and exploit each individual customer as efficiently as possible at maximum value.
Conversion means every single step in the customer loyalty ladder.
If we describe conversion as the transition from one state to another (e.g. from visitor to buyer, from one-time orderer to regular customer, from Facebook fan to active referrer, and and and) then every step in the customer life cycle is a conversion. The most important states are
New customer: from first visitor to first orderer
Customer: from first orderer to regular customer
Fan: from regular customer to brand ambassador, community member, referrer
The same laws apply at every step
Those who know the individual elements of our framework “The 7 Levels of Conversion” will quickly understand that the factors trust, relevance, orientation, stimulation, safety, comfort and evaluation play a central role in every step:
Relevance: Do offers, products, general conditions fit for further events (or am I constantly bombarded with irrelevant stuff by e-mail?)?
Trust: Can I trust the provider even more in the future (based on my previous experience)? (or did the initial order take longer than actually expected…)
Orientation: Do I recognize clearly what is expected of me? Where do I click? (or do I have to dig my way through the pages with difficulty during every communication?)
Stimulation: Does the offer meet my (emotional) expectations? Can it inspire me? (or do I only see more boring things?)
The 3 pillars of e-commerce success
#1 Efficient customer acquisition
Successful e-commerce primarily consists of efficient processes for customer acquisition. Efficiency consists in achieving the highest possible reach at the lowest possible cost. A high conversion rate is the key to success.
#2 Value-oriented relationship building
The development of customers into a valuable relationship is the most important prerequisite for exploitation. Without a relationship (and the necessary opt-in for communication), the retailer is doomed to react.
If he has the permission, relevance, authenticity and control are the success factors for building a value-oriented relationship. Here, too, the art lies in maximum efficiency, which prioritises the conversion of valuable relationships higher than the other relationships.
#3 Effective exploitation
Mail order consists of perfectly timed chains of impulses. Over the past 10 years, Amazon has shown how a business model based on many customers and positive relationships can be optimally exploited by expanding its product ranges. Without customers and a functioning relationship with them, however, this tactic is wertols (I am curious to see how one or the other shoe retailer will cope with the Amazon strategy).
If you look beyond the landing page plate edge, you will quickly see that conversion optimization is more than just some new hype, a fancy tool or a weakness for a new topic. Conversion Optimization is the core of successful business models, the goal of countless disciplines that have to interlock seamlessly (instead of constantly claiming or even condemning the topic).