The ROI of Remarketing for E-Commerce Brands

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1 The ROI of Remarketing for E-Commerce Brands Any small investment (and small effort) that can generate an extra 10% in e-commerce revenues is clearly important to every e-commerce executive. This report examines our original research and shows how retail companies can use the hybris Conversion solution to analyze incremental revenue and A/B tests. We show you how to build a remarketing strategy that employs best practices to help generate up to 10% more revenue on your Web site. Increase E-Commerce Revenues Up to 10% with Remarketing Best Practices In conducting our research, we consolidated A/B test results for 80 e-commerce sites to measure the incremental revenue generated by real-time remarketing for shopping cart abandoners. Our team analyzed 12 months of data from the 2013 calendar year and more than 38 million transactions representing more than $3 billion in e-commerce transactions, and making it one of the largest A/B tests ever conducted in e-commerce. We measured incremental the overall lift in revenues to fall between 1.9% and 9%. Much of the analysis that makes up this report examines what retail companies are doing differently to achieve this 9% lift. Our study measures the financial impact of implementing remarketing for e-commerce brands. This report outlines the best practices required to maximize conversions and measures the increase in e-commerce revenues that brands are experiencing. On average, when visiting an e-commerce site, 97% of visitors don t purchase anything representing a huge missed opportunity for brands and retailers. Our remarketing solutions trigger real-time marketing campaigns that are coordinated across and retargeted advertising, and pushed to mobile. 1

2 Methodology Throughout 2013, we analyzed transactions on 80 Web sites running the hybris Conversion solution. The data sample of 38 million transactions represents more than $3 billion in e-commerce traffic, of which $2.5 billion are abandoned transactions, and $500 million are completed sales. Data was analyzed using A/B testing to measure lift over a control group where no treatment was applied. The campaign and control groups were treated identically, using a random function to allocate visitors to each group. The test achieved a statistical confidence level of 99.9%. This methodology helps paint a true picture of the incremental revenue measured. By using a control group, all the effects of other marketing, merchandising, and competitors activities can be excluded from any calculation of lift. The Challenge In 2013, on average, only 2.6% of visitors to e-commerce sites made a purchase, meaning that 97.4% left without buying. While this is a widely understood aspect of e-commerce, it doesn t mean that e-commerce sites should accept the status quo. While some of the arriving traffic will simply bounce off the site (the 2013 average was 40%), this still leaves a majority of the visitors showing enough interest to click onto a second page, and then leave without purchasing. It s worth understanding this in more detail, because not all visitors are equal. Case in point: when visitors don t buy, the number one reason cited (32%) is that they are not ready (see Figure 1). Yet there is buying intent for the majority, with 52% considering a potential future purchase. Given the reasons driving abandonment, it s clear that remarketing has an important role in keeping the idea of a purchase alive with visitors after they leave the site. Remarketing s role can be seen when we consider where each visitor is on their unique purchase journey. Figure 2 shows that while 2.6% of visitors may purchase, only 0.25% of first-time visitors will convert. But if you can get them back to the site, they are nine times more likely to purchase. If they get as far as the shopping cart, they are 72 times more likely to purchase compared with a first-time visitor. If they abandon their shopping cart more than once in a 28-day period, these serial abandoners are then 192 times more likely to make a purchase than a first-time visitor. What e-commerce sites should conclude from this data is intuitively obvious: the more times you can get visitors back to the site, and the deeper into the funnel they go, statistically the odds of securing a conversion goes up exponentially. This explains why remarketing works so well. Remarketing nudges potential customers and brings them back to the Web site deep into the product pages or straight back to their shopping carts. Not surprisingly, this conversion approach is very cost-effective in fact, remarketing has the highest ROI in e-commerce, often paying for itself in a matter of weeks. This is illustrated in the e-tailing Group s survey of 147 senior e-commerce executives conducted in mid2012 (see Figure 3). Figure 1: Reasons for Not Completing a Purchase 4% On a mobile device 20% Researching possible purchase 28,5% Just browsing without a purchase in mind 14% Researching before purchase in store 14,5% Price was too high 32% Not yet ready to buy timing objection Source: SeeWhy 2013 to Source: hybris Conversion Research,

3 Given the reasons driving abandonment, it s clear that remarketing has an important role in keeping the idea of a purchase alive with visitors after they leave the site. Remarketing s role can be seen when we consider where each visitor is on their unique purchase journey. Figure 2 shows that while 2.6% of visitors may purchase, only 0.25% of first-time visitors will convert. But if you can get them back to the site, they are nine times more likely to purchase. If they get as far as the shopping cart, they are 72 times more likely to purchase compared with a first-time visitor. If they abandon their shopping cart more than once in a 28-day period, these serial abandoners are then 192 times more likely to make a purchase than a first-time visitor. What e-commerce sites should conclude from this data is intuitively obvious: the more times you can get visitors back to the site, and the deeper into the funnel they go, statistically the odds of securing a conversion goes up exponentially. This explains why remarketing works so well. Remarketing nudges potential customers and brings them back to the Web site deep into the product pages or straight back to their shopping carts. Figure 2: Probability of conversion (PURCHASE) 0.25% 2.25% 18% 48% marketing marketing marketing marketing 9x 72x 192x Not surprisingly, this conversion approach is very costeffective in fact, remarketing has the highest ROI in e-commerce, often paying for itself in a matter of weeks. This is illustrated in the e-tailing Group s survey (RH: Customer Experience Escalation: Making the Right Choices in a Connected World 11th Annual Merchant Survey) of 147 senior e-commerce executives conducted in mid-2012 (see Figure 3). Figure 3: Success of E-Commerce Personalization Tactics Given the array of personalization tactics available to you, how would you discribe the success of each tactic from an ROI perspective? Triggered shopping cart abandonment s Retargeting Personalized product recommendations on the product page Personalized product recommendations via Personalized recommendations in the shopping cart Recently viewed product Long-term customer lifecycle personalization Home page personalized based on past browse and buy behaviour Longer-term customer lifecycle onsite personalization Source:The e-tailing group, April 26, 2012 Top 2 - very/somewhat successful 3

4 Research Results Research into the incremental revenue for E-Commerce sites generated by remarketing for shopping cart abandoners was based on an A/B test (see the Methodology section) to ensure that only the incremental effects of the remarketing campaigns were measured. Figure 4 depicts the results, which shows companies implementing our remarketing best practices to a lesser and greater extent. Incremental revenues ranged from 1.9% to 9%. This means that a business generating $100 million annually without remarketing would generate revenues of $102 million to $109 million annually once remarketing had been implemented. A business generating $250 million annually, and implementing remarketing best practices, would see incremental revenues of $23 million annually. This is consistent with our other research where businesses in the $500 million range can expect to generate up to $50 million in incremental revenues with a best practices approach. The average lift of 5.14% represents significant revenues for not much extra effort. For example, Brand A, one of the brands in the study, generated $160 million online in Its remarketing program resulted in a 6.34% lift in e-commerce revenues. In 2013, this represented $10.1 million in incremental revenues. Brand A s ROI was well over 100 times the cost of the system, and paid for itself in a matter of days. From 2% to 9.04% is a significant disparity in results, which brings into question the factors that led to such a wide range. Analysis of top and bottom performers suggests that it had less to do with the industry vertical (though there are minor variations) and more to do with the brand and the way that the remarketing program was implemented. Hot brands, with well-implemented remarketing programs that extend the brand s values, can generate exceptional returns. The next section looks at the best practices that drive the best remarketing returns. Figure 4: Percentage Increase in E-Commerce Revenues Using hybris Marketing Conversion 10.00% 9.00% 9.04% 8.00% 7.00% 6.00% 5.00% 5.14% 4.00% 3.00% 2.00% 1.90% 1.00% 0.00% Laggards Average Leaders 4

5 Remarketing Best Practices hybris Conversion powers remarketing for more than 4,000 brands and retailers globally. Our researchers use the experience gained, and the data flowing through our servers, to understand the drivers of performance. In addition, we conduct primary consumer research to understand online buyer behavior and attitudes to purchasing online and across a range of devices. Best Practice: Timing When you trigger remarketing campaigns is critical. It should come as no surprise that real-time, one-to-one campaigns work better than batch campaigns sent 24 hours or more later. you can see the impact of real-time remarketing in Figure 5. The red area shows what happens when an e-commerce visitor abandons their shopping cart if no remarketing campaign is sent. In the days after the abandonment, the probability of securing a conversion declines rapidly, with a small incremental surge at 7 and 14 days. The majority of the action is all over within a few hours of the abandonment. The blue area shows the lift that is achieved in terms of numbers of conversions when real-time remarketing is turned on. Three-quarters of the recoveries will happen before the end of the first day (and because this is measured using a control group, we know that these are incremental). This illustrates conclusively that triggering real-time, oneto-one remarketing is the only way to go. The figure also illustrates why best practice is to send a sequence of s that are send-time optimized. Send-time optimized s leverage data you have about the individual to ensure that you are sending your to the individual We analyze the consumer data, develop, test, and document key insights, and then create best practices of researchbased patterns of deployment proven to increase revenues. The following summarizes common and ad campaign best practices that we found among the highest-performing e-commerce sites in the remarketing study. at the most relevant time. In the case of remarketing, these timings are the time elapsed after the visitor originally abandoned his or her shopping cart. The best practice method for triggering send-time optimized s is to monitor site activity continuously, and when the customer doesn t return to purchase after 23 hours, to trigger a second . This ensures that your is never out of step with your customer. So, as depicted in Figure 6, the optimal timings are stepped as follows: > Step 1: REMIND - Real-time initiated > Step 2: REASSURE - automatically triggered +23 hours after the individual abandoned the site > Step 3: PRESSURE - automatically triggered 6 days and 23 hours after the individual abandoned the site While these may be the optimal timings based on mass consumer behavior, it doesn t mean that you shouldn t test alternate send times, especially if you sell to business buyers or atypical consumers. Figure 5: Conversion Impact of Real-Time Remarketing) Figure 6: Example of Send-Time Optimized s REMIND Immediate REASSURE 23 hours % incremental recovery Lift Control Recovery PROMOTE 6 days and 23 hours The ROI of Remarketing for e-commerce Brands 5

6 Best Practice: Staying in Step Another big part of real-time, one-to-one marketing is about staying in step with customers. This is especially critical for remarketing because some customers will return to purchase even if you do nothing. That has very significant implications for remarketing if you are not monitoring in real time customers returning to purchase. For example, if you set up a batch transfer to move data from your e-commerce system each night into your engine, some abandoners would return to purchase before your gets sent, but you wouldn t know about it. Getting out of step with customers has profound implications on the trust that visitors have in your brand. By sending out-of-step messages, you risk looking irrelevant to your customers, or annoying them to the point of unsubscribing. To summarize, if you are sending s in batch (that is, NOT in real time), do not: > Use promotions > Send more than one (being out of step once is bad enough) > Personalize the Best practice remarketing campaigns are triggered as a sequence of real-time s triggered at the optimal moment for each individual visitor. This helps ensure that your campaign is always in step with customers who are making purchases. Set Up Exclusion Segments However, your shopping cart campaign does not work in a vacuum because of the other campaigns that you will be running to your subscriber list. For example, an online retailer with two different types of campaigns makes the mistake of sending a 15% offer (in a shopping cart recovery ) and a 20% bulk mailing offer to the same customer on the same day. The net impact of mailing different promotions on the same day is that the customer is confused and doesn t do anything, perhaps anticipating an even better offer the next day. To avoid this problem, you can set up an exclusion group in your engine, which allows you to exclude triggered campaigns when you are selecting lists for bulk promotions. When done well, remarketing delivers great service, providing potential customers with a direct link back to their cart, and an easy way to find the product they had selected again. Gentle Reinforcement In the shopping cart recovery depicted in Figure 7, Lancome does a great job of reinforcing the brand message with a gentle nudge back to the shopping cart. Also note how the absence of promotional offers or buy now type messaging reinforces the perception that the is personal to the recipient ( Natalie ), and how the prominently features one of the products in her cart. Also note how there are no prices shown, which can remind visitors why they abandoned in the first place. By making the abandoned product the hero of the , the effect is to shift the tone towards service and away from sales, because Natalie is already interested in this product. Equally important, the use of product details such as a product description, review score, number of reviews, and even a testimonial or product review all deliver relevant content that personalizes the and delivers value to the recipient. Figure 7: Personalized with Gentle Reinforcment of Marketing Message Best Practice: Tone and Character (One-to-One, On Brand) Remarketing can be creepy if done badly. Earlier we concluded that the single largest reason why consumers do not purchase is because they are not yet ready to buy. If your visitor is feeling positive towards your brand, and considering a purchase, you should tread carefully to reinforce all of your positive brand values, and not be too aggressive. Think about your remarketing campaign as a sequence of gentle nudges that provide great service and extend your brand s values. 6

7 Best Practice: Target All Visitors remarketing can only reach visitors where you have an address and implied or explicit consent. Capturing more addresses on your site is a critical component of any remarketing optimization in fact, there s a straight relationship: the more addresses you capture for remarketing purposes, the more revenue you recover. We have optimized many sites for capture. While this does take a little effort, the outcome is highly lucrative since it translates directly to revenue. In some cases, optimizing capture can result in a 5.1% increase in the number of shopping cart abandonment s being sent, and a 5.1% increase in recovered revenues. Check that you are capturing addresses from the following sources: > Returning visitors > Returning subscribers > In-session subscribers > Login with Facebook, Google, and other social media sites > As part of the checkout process It s also worth considering using a lightbox overlay or popup window to prompt new visitors to subscribe or when they leave having added items to their shopping cart. Coordinate and Retargeted Ad Campaigns While it is important to capture additional addresses, the majority of visitors will remain unidentified. This is where retargeted advertising steps in, as shown in Figure 8. Figure 8: Identified Visitor Unidentified Visitor AD Cart Remarketing Browse Remarketing Cost Remarketing nudges potential customers and brings them back to your Web site deep into the product pages or straight back to their shopping carts. 7

8 When setting up remarketing campaigns, there should be a different campaign that specifically targets browsers who abandon the Web site without creating a cart and another specific campaign set up for cart abandoners. To clarify, abandoners who browse have not gone as far as adding items to their carts and thus have shown less intent, whereas cart abandoners have shown a clear intent and interest in purchasing. Best practice is to coordinate all of your remarketing campaigns under one strategy so that there is no overlap. For example, browse remarketing needs to be integrated with cart remarketing to ensure that users don t get mailed both browse and cart campaigns at the same time. Equally important, retargeted advertising should be coordinated with your remarketing campaigns to ensure that you are maximizing your lift. Figure 8 shows a ballpark cost for each conversion using remarketing from or from advertising. is a one-to-one communication where a direct connection can be made with the visitor, and is consequently dramatically cheaper for securing conversions. For example, average click through rates are 15% for shopping cart recovery s, compared with only 0.3% for retargeted advertising. Because is such an effective medium, best practice is to focus the ad spend on those customers where no address has been captured. This typically results in a 30% increase in recovered revenues compared with running two separate campaigns that do not coordinate. Of course, you should test this in your environment, and specifically for shopping cart abandoners where an address has been captured. Ideally, testing should cover each of these test groups: > Retargeted advertising only > only > and advertising > Control (no treatment) Best Practice: Measuring, Testing, and Tuning In order to achieve incremental revenues through remarketing, brands and retailers need to understand the drivers of performance. The most effective way is to conduct tests, learn, and refine. The basis for any measurement should be a control test where an A/B test is run to measure lift over a control group. The test is split into a campaign group, and a control group (where there is no treatment). By measuring what happens where no campaign is run, the lift delivered by the campaign can be accurately measured. (This was the methodology for this study, as described earlier.) Once you understand baseline performance, you can then begin to test and optimize different campaign variations. Before jumping into A/B testing, it s important to have a clear hypothesis. Your hypothesis should be derived from the analysis of your campaign data. For remarketing campaigns you should use a minimum of one month of data. Your data analysis will show where you should be optimizing, and you can use benchmarks to understand where your campaign is relative to others. For example, our benchmarks for averages are as follows: > Delivery rate benchmark 98% > Unique open rate benchmark 46% > Unique click-through rate benchmark 15% You can use these benchmarks to begin forming your hypothesis. For example, if your current campaign delivery rate is in the region of 98% or higher, but your open rate is at 20% and click rate at 15%, it immediately suggests that there is a potential problem with your subject line or sender persona. So your hypothesis would be that the subject line is not performing satisfactorily, and you d develop alternate subject lines for testing. Testing the subject line can have a big impact on revenues: One subject-line test for an e-commerce brand generated an incremental $750,000 annually. When developing alternative campaigns, it s best to be radical; small incremental tests are much more likely to fail since you may never reach statistical confidence in the results. 97.4% Of shoppers leave retail sites without making a purchase 8

9 Conclusions Shopping cart recovery s, when optimized and following best practices, can deliver significant incremental revenues. As this report shows, this averages 5.14% but can be up to 9% or more. For all retailers, this represents a significant ROI. For medium and larger e-commerce properties, this level of return will result in tens of millions of incremental revenue which otherwise would not be generated by the brand or retailer. Our larger clients achieve this level of incremental revenue using the SAP Conversion Management application. Following the best practices set out in this report can help retailers and brands to achieve these levels of return. While initiating best practices may require a little effort to develop a more strategic approach to remarketing, the rewards can be significant. Because is such an effective medium, best practice is to focus ad spend on customers where no address has been captured. This typically results in a... 30% increase in recovered revenues, compared with running two separate campaigns. About hybris software hybris software, an SAP company, enables digital content and service providers around the world to monetize digital offerings through all channels and customer touchpoints. hybris delivers omni-channel commerce solutions: state-of-the-art master data management and unified commerce processes that give businesses a single view of customers, products, and orders, and customers a single view of the business. It supports various disruptive business models, including freemiums, direct-to-consumer, and subscriptions, for limitless innovation. With built-for-market solutions made for the digital industry, it delivers frictionless commerce on any device. Both principal industry analyst firms rank hybris as a leader in the market. The same software is available on-premise, on-demand and managed hosted, giving merchants of all sizes maximum flexibility. Leaders around the world trust hybris to support their monetization strategies, including AVG Technologies, Ladbrokes, Nest, Entertainment Publications, Houghton Mifflin Harcourt, Checkpoint Software, Handelsblatt, Pearson Bookworld, and Tamedia. For more information, visit Version: June 2015 Subject to change without prior notice hybris hybris is a trademark of the hybris Group. Other brand names are trademarks and registered The ROI trademarks of Remarketing of the respective for companies. E-Commerce Brands 9