U10 Business Brief

ML Adv. Unit 10 Doing Business Online

Business Brief

Ever since Jeff Bezos set up amazon.com, the world's largest bookseller, the Internet has opened up a massive consumer market for e-tailers (online retailers). The experts advise building e-business into any business plan, although smaller retailers are still nervous about e-tailing, as they often see it as a risk. Online shoppers have the idea that delivery should be immediate, apart from being extremely convenient, so if companies don't deliver until a week later, they won't get returning customers.

On an e-commerce site customers may browse stock, select items to fill a shopping basket or cart and then go to a virtual checkout to pay for goods. The main difference between this and a brochure site that simply displays products and company information is interactivity. When a customer is making choices on the website, this requires a more sophisticated website. Many ISPs (Internet Service Providers) have packages that can enable small businesses to host a website.

Web metrics are the numbers that tell managers what is happening in their site. Success on the web essentially means getting people to do what you want when they visit the site. This is called the target action, which is usually buying something or filling in a form. Another important consideration is whether the site's design makes it easy for people to engage in the target action. Ease of navigation is one of common complaints people have about web design.

The key performance indicator in e-business is the conversion rate: the percentage of visitors who engage in the target action, which can either be the percentage of visitors who submit a form or who buy online. The average conversion rate is 2 per cent, whereas Amazon are said to have the highest rate at about 9 per cent. However, these sites have very high brand recognition, which means people already know what the site is selling before they visit.

The most important area in online shopping is the credit-card payment page. Between viewing product pages and completing the target action, the visitor ideally does something: fill in a form and hit the submit button, or submit a credit-card page. People who don't submit are said to have 'abandoned'. Each form therefore has an abandonment rate.

The basic rule for reducing abandonment is to ask fewer questions. The form is primarily for having a record of potential customers so the sales team can contact them. Many companies treat contact forms as an opportunity for market research. They ask questions like 'Where did you find our site?' These types of questions will be a reason for someone to disengage with the site, or click off. Many potential customers will also have second thoughts about buying online when they are asked to enter credit-card information.

When a visitor first arrives on a website, they quickly scan it to see if it has what they are looking for. At this time, they are a scanning visitor. Web designers also talk about the 'eight-second rule', that is, most people will allow no more than eight seconds to review a site before making a decision. Research indicates, however, that 30 seconds is more the norm. In either case, an e-tailer should make sure the core offering of its site can be conveyed in this short time.

Committed visitors are those who read more than one page or spend more than one minute. Getting first-time visitors to stop scanning and start reading requires different design elements from selling. Successful sites will have landing pages to switch visitors from scanning to reading. A company can also analyse its web metrics results to determine the ROI (return on investment) for online advertising. A good rule of thumb is to multiply the conversion rate for visitors coming from each ad by the cost per visitor. That is the cost per acquisition (CPA). Ultimately, a business should ask itself if it can afford to spend that much to attract e-tail consumers and get online sales.