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The crucial metric you're not tracking

The crucial metric you're not tracking Chad Little

Ask an online marketer what their return conversion rate is. The common response is, "My what?"

So I'll ask: What is your return conversion rate? Forty percent? Ten percent?

This metric, when tracked and truly understood, has the potential to shift the culture of a company. It's a simple measurement that tells about your customer service and speaks volumes about brand awareness and product offering. It's one of the more important statistics in online marketing. Yet most marketers aren't aware of what it is.

A return conversion occurs when a prospect visits your site, leaves without converting and ultimately returns to the site to convert. Return conversions include new prospects who leave and return, as well as existing customers who return to purchase again. (For marketers who use Google Analytics, you can easily pull this data as "new vs. returning" under the visitors tab.)

Let's look at a hypothetical example: Jane visits your online pet supply store in September and purchases a new bed for Bruno, her chihuahua. In October she returns and buys Bruno his Halloween costume. This is a return conversion.

Bob also visits your site in September. As he browses your training products, his mutt Daisy (appropriately enough) eats through his computer's power cord. In October, with his computer fixed, Bob returns to your website and buys the lot of your pet training inventory. This is also a return conversion.

So why is your return conversion rate important and how can it shift a company's culture? Let's first examine how most companies function in today's market:

1.   Plug money into Google
2:   Convert 2.15 percent of the traffic referred from Google
3.   Rinse and repeat: Back to Google! Go get another new customer!

Most of the energy in online marketing today is spent driving new customers. Converting a customer on the first visit is the most expensive -- and rare -- event in ecommerce. If it wasn't, the average site conversion rate wouldn't hover around 2 percent, would it? The more likely scenario is that customers come to your site, look around, leave your site, check their email, comparison shop, update their fantasy sports teams, mull the purchase over a little more and then convert. It's with these customers that your greatest opportunity lies.

The discussion about return conversions goes beyond tactics, tools and data. At the heart is a fundamental shift in thinking; a shift that takes an organization from focusing on the "new" to focusing on existing customers and prospects. This isn't to say it's not important to have marketing programs that drive traffic. I agree it's necessary; however, I argue that the majority of the market is fixated on this "new, new, new" mentality -- we've lost sight of the impact return customers have.

Take a look at Zappos. (I know, everyone's writing about them, but their success is directly tied to this.) MarketingSherpa published a study on why Zappos is one of the biggest successes online. When the company started, it spent a massive amount on advertisements, including sports stadium signage! Today, it's hard to fathom seeing a Zappos ad while watching Monday Night Football, and in the end the blitz didn't create enough conversions or positive metrics to justify the campaign. Now what marketer hasn't spent big bucks on a campaign only to see no lift in sales or metrics? Obviously Zappos needed to make a change, and what the company did next went beyond simply revising its marketing strategy.

Zappos chose to make customer retention one of its most important initiatives. It became part of the culture! The retailer provided free overnight shipping, free return shipping, changed its inventory systems and locations -- all to ensure that once it acquired a new customer, it wouldn't lose that customer.

Every day, 75 percent of purchases on Zappos.com come from returning customers. That doesn't take into account first time conversions from customers who may have previously visited Zappos. If we had access to that information, I would say it's safe to assume the company's return conversion rate is more than 80 percent. Add that to new prospects who visit the website daily, and it makes perfect sense that Zappos grew sales by $798 million in seven years. It's food for thought, at a minimum.

So where do you start?

The most important thing you can do is start tracking your return conversions! You can't improve what you aren't tracking and before long, everyone will be talking about you, rather than Zappos.

Chad Little is CEO of Fetchback.

Chad is considered one of the early, leading forces in the Internet arena with strong capital raising and M&A experience. His ongoing responsibilities include the definition of the company’s business strategy, cultivating business...

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to leave comments.

Commenter: Doug Schumacher

2008, October 28

np charles ;)

And thx for the 'Loyalty' tab info.

Commenter: chad little

2008, October 28

Doug not david -- sorry bout that!!! :-D
too much going on at the same time.

Commenter: chad little

2008, October 28

Hi David, Thanks for the note. Glad you enjoyed the article.

I'm not aware of a way, in Google Analytics, to view return visitor data to the depth you described as far as time goes between site visits.

What Google Analytics does allow is for you to view the number of site visitors that visited your site ‘X' amount of times during a period of time; you can view this under the "Loyalty” tab. For example, you can tell that 32 out of 100 site visitors in a given week came to your site 5 times.

Commenter: Ann Betts

2008, October 28

FetchBack has recently published a White Paper about Return Conversion Rates; it expands on the topics presented in this article.

If you would like a copy, email: [email protected] and one will be sent over to you!

Commenter: Doug Schumacher

2008, October 28

Excellent article, Chad. I couldn't agree more that good marketing programs can't just drop people off at the front door.

On Google Analytics, do you know if you can tell the average amount of time between their first visit and their first return visit? Or maybe the average number of return visits per user?