This article originally appeared on the Forbes Technology Council
Here we go again—just as we dig into summer, the busy back-to-school and holiday shopping seasons are taking flight. And while last year, brands and consumers were significantly focused on inventory and supply chain disruptions, this year promises to start strong. Back-to-school sales are expected to be 18.3% higher than in 2019. Currently, consumer spending is shifting back to pre-pandemic levels, despite inflation.
For brands and online retailers, the season is an opportunity to hone in on product performance—to zero in on the best-sellers and understand how they drive revenue compared to other inventory. At the Outdoor Retailer Summer show in June, I had the opportunity to chat with many brand leaders about the upcoming season. I found something remarkable: Many are ignoring their rate of conversion. This is problematic because conversion rates are an important step in forecasting, identifying product bottlenecks and calculating ROIs. So in the sprint of back-to-school, the issue seemed appropriate to address!
Tapping Into Consumer Intelligence
All of this really starts and ends with buyers and their opinions published in reviews. Consumers trust reviews, and they buy based on feedback from buyers. Four issues are important to a shopper when purchasing: star average, volume, comments and recency. Keep in mind that 57% of consumers don’t trust a review older than four months and that star averages play a pivotal role in converting browsers. Many online shoppers will scan a product page for the star rating first, and if it hits the sweet spot between 4 and 4.5 stars, they will consider adding it to their cart. Now, let’s look at how to calculate it correctly.
Measuring The Rate Of Conversion
Online ROI is measured by the rate of conversion, which is the ratio of the number of shoppers visiting a site divided by the number of purchases.
Now, with star averages playing such a pivotal role in ROIs, it’s logical to assume that you’d want to look at the full gamut of reviews about your products in the marketplace. However, most brands measure online ROI solely from their own website instead of from all of their major online retail partners. By aggregating product reviews from all online sources, you get the true picture of how consumers are rating your products. Now you can accurately measure across the market by vertical and product.
The average rate of conversion across the internet is 2.35%, so this serves as the benchmark. By looking at star averages, things become apparent with a simple equation: The lower the star average, the lower the rate of conversion. Add in low volume and high recency, and your return on investment could be as little as 1%.
The opposite is true with a product that has a high star rating, substantial volume and recent reviews. In fact, the rate of conversion can be as much as eight times higher at 8%. There is a bonus, as well. With higher star ratings, more reviews are generated, creating additional momentum for high-performing products.
Inflation is now a fact, and it’s not under control. Consumer spending constitutes an enormous portion of the economy, and back-to-school and the upcoming holiday season can be translated into the basics: “My children are excited to go back to school and after the pandemic, we are buying to encourage that.” The same goes for the holidays. It’s personal.
And they will shop for the best price—cost has now moved to the top of the list regarding issues consumers are concerned about.
Our company measures online consumer issues, and price is rising rapidly to the top. This means consumers will go to the channel offering the best price for the product they want. Some will go online to do all of their shopping; however, most consumers will do all of their research online, and when they walk through the front door of a brick-and-mortar store, they will know their stuff, and that means review volume, star average, recency and the issues that concern them by way of text.
Rate of conversion hits all channels, and it will do you well to know how to measure it correctly.