In new Barclays television ads airing in the UK, members of the public offer snippets of practical advice to help citizens of the internet when they are online. The most recent features a woman suggesting that shoppers should place items in their basket, but not checkout and instead wait for a coupon to arrive. It is, in effect, advising cart abandonment as a way of shopping.
E-tailers, marketers and e-commerce professionals have long debated whether recovery incentives actually work. So, we were very interested when a client came to us who had employed cart recovery services from another provider. Part of their strategy included a 15 percent coupon in their recovery email. The campaign produced a lot of recoveries and generated a massive 26.2 percent sales uplift. Surely it was the coupon generating loads of extra sales, right?
With permission, we let the existing program run for several weeks to get a baseline (the “15% Incentive” line in the chart below). Then we removed the coupon and continued for a further period (the “No incentive” line). The sales uplift immediately plummeted from 26.2 percent to 6.4 percent. Had we made a horrific mistake? Well, here’s what happened:
The most obvious insight is that the recovery numbers were all much bigger originally. The sales uplift and recovered rate were both boosted by the 15 percent incentive, so they fell to six and four percent respectively when we removed it.
Interestingly, the value purchased hardly changed. It increased from $79,620 to $80,184 – a difference of just $564. Customers were still buying at the same rate.
Clearly, when we stopped the incentive, a lot of people were buying through the normal checkout process instead of getting diverted into abandonment recovery. This shows in two numbers:
- Immediate Purchase Rate (Purchased Value / Carted Value), which rose by 10 percent when we stopped the incentive
- Percent Abandoned (Number of Carts Abandoned / Number Carted), which fell by about 9 percent
Even better, our client had been allocating about $3,000 per month to the incentive, without increasing the value of sales at all.
What was happening? Here’s our theory:
- Price was never much of an issue with our client’s shoppers. But nobody likes to pay more than they have to, so when our client put a 15 percent coupon on the cart abandonment email, they changed the behavior of a lot of people. Shoppers who would have bought immediately were diverted (“cannibalized” in marketing jargon) into becoming delayed buyers.
- Instead of just putting products in the cart and buying, these shoppers left, waited until they got a cart abandonment email, then returned to the site and copied the coupon from the email – a much more complicated process!
- It’s well known that simplifying the checkout process improves sales (here are some great tips), so complicating it will reduce sales.
- Essentially, some of the would-be savers tried to save 15 percent, found it was all too much trouble, and dropped out. Maybe the recovery email went to the spam folder, or maybe the coupons expired before they got around to using them and they left in a huff. The precise reason doesn’t really matter. What does matter is that the added complexity seems to have significantly reduced sales, cancelling out any beneficial effect from the offer.
The take away is to be careful with incentives. Whenever you introduce a powerful reason to buy in a particular way, some of your clients will switch to it. But if your new way is complicated, some of those clients will drop out, and you may actually lose some sales in the end.