Wipe Out Shopping Cart Abandonment (Entrepreneur.com)

Wipe Out Shopping Cart Abandonment

These tips will help you turn clicks into cash.

By Eddie Davis | August 07, 2009

URL: http://www.entrepreneur.com/ebusiness/buildingawebsite/article202928.html

Imagine you owned a store where half your customers left their purchases on the checkout counter. That, in effect, is happening all too often to online merchants. Potential customers go shopping on their site, like what they see, and put merchandise in the shopping cart. But somewhere during the checkout process, they "abandon" their cart and depart the site, sometimes never to return.

What went wrong? As an online merchant, knowing the answers can make a big difference in how well you convert a customer's clicks into an actual sale.

Studies have demonstrated that the single biggest cause of cart abandonment is an unexpectedly high transaction cost--typically a high shipping cost--that is only revealed at checkout. A customer believes a transaction is going to be about $75, steps up to the virtual counter, arranges payment, only to learn that the actual total is $100. We shouldn't be surprised if that shopper "walks off" in a huff. Indeed, shopping cart abandonment is often a sign of deeper troubles for the merchant. It's not just an indicator of a lost sale, but also of a troubled relationship. If customers have a sense of being baited and switched, their overall confidence in the merchant gets undermined.

The problem is aggravated by the high variability of shipping costs. During a recent online shopping excursion for a stationary bicycle, I found that shipping fees ranged from "free" to $150. That's a huge difference. And yet in many cases, the total "out-the-door" cost wasn't apparent until deep in the checkout process.

What can merchants do? First of all, you should keep shipping costs in line with customer expectations. A small, lightweight item like a pair of socks, a garden trowel or camera battery shouldn't cost $17 to ship. And adding one of these items to an existing purchase shouldn't cost $17 more. Some merchants have taken the mystery out of checkout by offering free shipping across their product lines. But if you can't afford that, at least give shoppers an early, clear indication of the actual cost. And while this might sound obvious, the same advice also applies to good news: Tell customers about special discounts, coupons and other incentives up front, not at checkout. The guiding principle: When it comes to payment, online shoppers don't like surprises.

Security and comparison shopping
Cart abandonment happens for other reasons as well. Sometimes customers are uneasy about handing over their personal information, including credit card numbers, to an unknown merchant. You can remove that concern by offering multiple options for electronic payment, including services that allow payment without disclosing financial information to the merchant.

Some customers don't click on the purchase button because, at the last minute, they want to assure themselves they are getting the best possible deal. The temptation is understandable. E-commerce has matured since its early days, and customers are the beneficiaries. More sites are competing for their business, and customers can use "shopping engines" to compare price and merchant reputations at a glance. The obvious advice: Keep your prices competitive and your service exemplary so that new customers keep coming back. In looking for the ultimate bargain, some customers depart to seek out discount coupons. If your competition is trumping you with this tactic, perhaps you should follow suit.

Sometimes, the barrier to purchase is not cost, but an unanswered question. "How long do I have for a return?" "Can I see the manual?" "Do you have it in green?" "Can I include a Valentine's card?" No merchant can anticipate every question, nor will every customer locate every snippet of information on your site. So don't hide behind your website. Provide a telephone number, an e-mail address, or both--and respond to queries promptly and personally, taking the time to hear the actual question.

Finally, some shoppers abandon their carts simply because they cannot figure out how the checkout process works. If your customers are hunting for the "purchase" button, it's time for a site redesign--preferably with something simpler.

I don't want to paint too grim a picture. Most people who enter checkout hit the purchase button. Your goal with these measures is simply to increase that percentage. Moreover, an abandoned cart is not the same as abandoned hope--a surprising number of shoppers will return and make a purchase later on. You should welcome them back like lost friends. Keep their merchandise in their cart. Offer them discounts. If they do make a purchase, take extra care to make sure they are happy. In other words, you'll make the most sales when everything clicks.

Eddie Davis is the senior director of merchant services at PayPal and is responsible for providing PayPal's payment processing services to thousands of small and medium-sized online retailers. Davis joined PayPal in 2005 with a background in merchant sales and acquisitions.

These tips will help you turn clicks into cash.

By Eddie Davis | August 07, 2009

URL: http://www.entrepreneur.com/ebusiness/buildingawebsite/article202928.html

Imagine you owned a store where half your customers left their purchases on the checkout counter. That, in effect, is happening all too often to online merchants. Potential customers go shopping on their site, like what they see, and put merchandise in the shopping cart. But somewhere during the checkout process, they "abandon" their cart and depart the site, sometimes never to return.

What went wrong? As an online merchant, knowing the answers can make a big difference in how well you convert a customer's clicks into an actual sale.

Studies have demonstrated that the single biggest cause of cart abandonment is an unexpectedly high transaction cost--typically a high shipping cost--that is only revealed at checkout. A customer believes a transaction is going to be about $75, steps up to the virtual counter, arranges payment, only to learn that the actual total is $100. We shouldn't be surprised if that shopper "walks off" in a huff. Indeed, shopping cart abandonment is often a sign of deeper troubles for the merchant. It's not just an indicator of a lost sale, but also of a troubled relationship. If customers have a sense of being baited and switched, their overall confidence in the merchant gets undermined.

The problem is aggravated by the high variability of shipping costs. During a recent online shopping excursion for a stationary bicycle, I found that shipping fees ranged from "free" to $150. That's a huge difference. And yet in many cases, the total "out-the-door" cost wasn't apparent until deep in the checkout process.

What can merchants do? First of all, you should keep shipping costs in line with customer expectations. A small, lightweight item like a pair of socks, a garden trowel or camera battery shouldn't cost $17 to ship. And adding one of these items to an existing purchase shouldn't cost $17 more. Some merchants have taken the mystery out of checkout by offering free shipping across their product lines. But if you can't afford that, at least give shoppers an early, clear indication of the actual cost. And while this might sound obvious, the same advice also applies to good news: Tell customers about special discounts, coupons and other incentives up front, not at checkout. The guiding principle: When it comes to payment, online shoppers don't like surprises.

Security and comparison shopping
Cart abandonment happens for other reasons as well. Sometimes customers are uneasy about handing over their personal information, including credit card numbers, to an unknown merchant. You can remove that concern by offering multiple options for electronic payment, including services that allow payment without disclosing financial information to the merchant.

Some customers don't click on the purchase button because, at the last minute, they want to assure themselves they are getting the best possible deal. The temptation is understandable. E-commerce has matured since its early days, and customers are the beneficiaries. More sites are competing for their business, and customers can use "shopping engines" to compare price and merchant reputations at a glance. The obvious advice: Keep your prices competitive and your service exemplary so that new customers keep coming back. In looking for the ultimate bargain, some customers depart to seek out discount coupons. If your competition is trumping you with this tactic, perhaps you should follow suit.

Sometimes, the barrier to purchase is not cost, but an unanswered question. "How long do I have for a return?" "Can I see the manual?" "Do you have it in green?" "Can I include a Valentine's card?" No merchant can anticipate every question, nor will every customer locate every snippet of information on your site. So don't hide behind your website. Provide a telephone number, an e-mail address, or both--and respond to queries promptly and personally, taking the time to hear the actual question.

Finally, some shoppers abandon their carts simply because they cannot figure out how the checkout process works. If your customers are hunting for the "purchase" button, it's time for a site redesign--preferably with something simpler.

I don't want to paint too grim a picture. Most people who enter checkout hit the purchase button. Your goal with these measures is simply to increase that percentage. Moreover, an abandoned cart is not the same as abandoned hope--a surprising number of shoppers will return and make a purchase later on. You should welcome them back like lost friends. Keep their merchandise in their cart. Offer them discounts. If they do make a purchase, take extra care to make sure they are happy. In other words, you'll make the most sales when everything clicks.

Eddie Davis is the senior director of merchant services at PayPal and is responsible for providing PayPal's payment processing services to thousands of small and medium-sized online retailers. Davis joined PayPal in 2005 with a background in merchant sales and acquisitions.

4 Ways to Gain Customer Loyalty (Entrepreneur.com)

4 Ways to Gain Customer Loyalty

Stand out on the cheap with superior customer service.

By Ray Silverstein | August 10, 2009

URL: http://www.entrepreneur.com/management/leadership/leadershipcolumnistraysilverstein/article202956.html

I recently dined at a very old, very famous restaurant in Chicago. I’ve been pondering the subject of customer service ever since.

This restaurant--let’s call it The Old Gray Mare--was once the gold standard of American seafood restaurants. It was celebrated for its outstanding menu, classic decor and responsive service. When you made a reservation there, you could count on having an exceptional evening.

This time around, it was anything but. Thank goodness I had a lively dining companion; otherwise the evening would have been a total disaster. The decor was outdated, the food was average and the wait service was slow and unresponsive. The Old Gray Mare--she ain’t what she used to be.

This is a perfect example of what not to do in business. Don’t take your customer or market position for granted. Don’t let your service capabilities slide. Don’t coast on your reputation while allowing your brand to deteriorate. Inevitably, it will catch up with you.

Evaluate Your Business
What is your customer experience like? Are you “wowing” key customers with personalized service? With so much business occurring online, wows aren’t easy to come by these days. To make your company top of mind, you must find ways to build vibrant personal customer relationships, even in the digital age.

It’s not enough to provide decent service--that’s expected. Poor service certainly will get you noticed--but with negative results. Case in point: you won’t find me at The Old Gray Mare ever again.

Your brand is only as good as your last touch with the customer. While small businesses don’t have the marketing dollars to create major brand awareness, they do have the ability to craft a brand in their target market by providing service excellence. That’s how you achieve top of mind. That’s how you earn last look on proposals.

4 Ways to Gain Customer Loyalty

1. Ensure you have the right people. If you’ve been tolerating an unenthusiastic service representative, get them out of that role ASAP. They’re hurting your business. Remember, there is plenty of talent to choose from right now.
2. Offer a customer service refresher course. Get your employees focused on your customers. Put incentives in place and recognize above-and-beyond service.
3. Review your workflow. Look at your processes from your customers’ point of view. Are you inconveniencing customers because of systems limitations?
4. Listen to customer complaints. Fix problems fast and bend over backwards to make things right. Customers can do you a huge favor when they offer valid, eye-opening feedback, even if it’s not what you want to hear.

The current business environment is difficult, but now is the time to enhance your customer relationships. When things improve, you’ll reap the harvest. Providing great customer service is not expensive, in fact, it’s cheaper since it spares you the labor of making corrections, issuing credits, mending fences, etc. But, most importantly, you’ll keep your customers coming back.

We are always eager to land new business, but now’s the time to focus on retaining existing customers, too.

Ray Silverstein is the president of PRO: President’s Resource Organization,a network of advisory boards for small business owners. He recently took his own advice and expanded his business to include The PRO Alliance, the peer group experience, minus the peer group. Silverstein is also the author of The Best Secrets of Great Small Businesses.

Small-Business Stimulus Loans Off to Slow Start (NYT)

Small-Business Stimulus Loans Off to Slow Start

By ROBB MANDELBAUM

Small-business owners hoping for some assistance of the sort given to the nation’s biggest banks applauded when the Small Business Administration unveiled a lending program in May.

Washington officials and some lenders predicted that the program, providing emergency bridge loans as part of the economic stimulus package, would save jobs and provide a lifeline for vulnerable businesses. Many in the banking industry expected it to be fully subscribed in months.

But the program is off to a slow start, and many banks, including some of the largest, appear reluctant to take part.

With $255 million, the program is prepared to make about 10,000 loans of up to $35,000 each. As of Monday, the agency reported that only 1,127 loans, totaling $36.8 million, had been extended.

While the agency maintains that the program is on track, some in the banking industry say the banks are moving slowly because they have little incentive. “There’s not a lot of profit motive in a $35,000 loan stretched over six years,” said Paul Merski, chief economist for the Independent Community Bankers of America, a trade association.

Bob Seiwert, of the Center for Commercial Lending and Business Banking at the American Bankers Association, says “stringent underwriting standards” will require as much work as larger loans, making these even less economical.

Alex Cooper, a counselor at the Pima Community College Small Business Development Center in Tucson, says he has helped nearly 30 clients apply for the loans. None has received one.

“It’s a disappointment,” said Mr. Cooper. “I thought the banks would be more interested in the community and try to help small businesses.”

Under the program, known as America’s Recovery Capital, a business owner applies to a bank for a loan and, if approved, can use the proceeds to retire existing debt. The borrower pays no interest on the new loan.

Instead, the Small Business Administration pays the bank two percentage points over the prime rate. After a one-year deferral, the borrower repays the loan over five years. The agency will repay the lender in case of default.

At the current rate, the program could have loans available through September 2010, when it is set to expire. “We like the fact, actually, that they will be spread out over time,” said Karen G. Mills, head of the Small Business Administration. “We have no doubt that we will make 10,000 loans.”

Not surprisingly, small-business owners are less pleased with the slow pace. Among the frustrated applicants is Mark Rusin, a client of Mr. Cooper’s whose restaurant business has fallen precipitously in the last year.

Mr. Rusin bought a franchise location of Uno Chicago Grill north of Tucson in April 2007 for $3.2 million. He dropped the franchise agreement because of fees and restyled the restaurant as the Loop Taste of Chicago.

Then came the recession. As the snowbirds left for points north this spring, sales tumbled. June revenue was $72,000, down 28 percent from a year earlier. “I’m bleeding out to the tune of 10 grand a month right now,” Mr. Rusin said. One of the new loans, he said, would see him through the next couple of months.

Part of the problem for borrowers like Mr. Rusin may be that Congress restricted loan eligibility to companies that are simultaneously struggling yet viable. That means the business must face an “immediate financial hardship,” meaning a 20 percent reduction in a critical operating number, such as revenue.

But the company, which has to have been in business at least two years, also has to have shown positive cash flow, if not an actual profit, in one of the last two years. It also must do a two-year cash-flow projection to show it can repay all its obligations.

The effort required to verify all of this probably explains why those banks that are participating in the program are lending primarily to existing clients. “From a financial perspective, it really is a loan that makes sense for an existing customer,” Mr. Merski said. “You’re not going to have to put out a lot of resources to do a very costly underwriting. You know the business.”

Mr. Rusin was fortunate in that the lender holding a first position on his commercial mortgage, M & I Bank of Milwaukee, is participating in the program. He hoped to use the loan to pay his vendors. But soon after he submitted his application, Mr. Rusin said, the bank told him he could use the loan only to pay down the earlier debt owed to the bank.

M & I ultimately denied Mr. Rusin’s application. The bank, he says, told him that was because his business had failed to show a profit in either of the previous two years, despite the more forgiving guidelines of the program.

M & I Bank declined to comment on this, citing privacy laws and its corporate policy.

“The guidelines are just that, a guideline,” said Mike Stamler of the Small Business Administration. The agency and the banks, he says, have the flexibility to deny an applicant that meets the guidelines — or approve one that does not, as long as the loan is deemed “reasonable.”

It would appear that banks like M & I are using that flexibility more to deny than to approve loans. For example, Wells Fargo, one of the largest Small Business Administration lenders, has received 700 to 800 completed applications, said Tom Burke, the senior vice president overseeing small-business loans at Wells Fargo, but has approved only “several dozen.” (As of Monday, the agency said it had in turn blessed only three of them.)

“What we’re seeing,” Mr. Burke said, “is a lot of people who are incredibly leveraged, and it’s very difficult for them to pay back their existing debt, much less take a new one.”

Mr. Seiwert of the American Bankers Association and Mr. Merski of the independent bankers group say banks are lending conservatively because they fear the agency will renege on its guarantee.

“While the loan is 100 percent guaranteed, it’s only 100 percent guaranteed if you follow all of the underwriting guidelines, and some of those guidelines are very fuzzy,” Mr. Seiwert said. “If you miss one, you put your whole loan at risk.”

Ms. Mills of the small-business agency acknowledged that there had been tension over guarantees but said that issue had largely been resolved. The agency, she added, honors its guarantee in “95 percent of the cases, and we’re fairly quick about our turnaround as well.”

The leaders of the small-business committees in Congress do not criticize the banks. Mary L. Landrieu, Democrat of Louisiana and chairwoman of the Senate committee, said through a spokeswoman that she understood their reluctance to lend to struggling firms.

Nydia M. Velázquez, Democrat of New York and chairwoman of the House committee, accused the small-business agency of failing to establish the program within the 15 days that Congress demanded and of failing to reach out to banks. But Ms. Velázquez, who has claimed some credit for inserting the lending provision into the stimulus bill, said through a spokesman that she expected additional lenders to participate “as they learn more about the program’s incentives.”

Ms. Mills of the agency agrees that more banks will sign up. But she defends the time spent establishing the program. The new loans “have a much higher risk profile than what the S.B.A. usually does,” she said. “So we have taken great care to be good stewards of the taxpayers’ money.”

Mr. Rusin, for his part, remains optimistic. He persuaded one of his lenders to defer payments on a loan, saving himself more than $50,000 in the short term. Even before getting the deferral, Mr. Rusin insisted that once construction near his restaurant was out of the way and the recession was over, “I should be in pretty good shape here.”

As if on cue, a couple finishing an early dinner headed toward the door. “You’ve done a wonderful job here,” the man said. “It was the taste of Chicago.”