The challenge in e-commerce today is how to turn site visits into value. While value traditionally has been measured in sales revenue and conversion rates, research shows these don't capture the full opportunity. Anita Balchandani, Head of UK Retail at OC&C Strategy Consultants, and Jose Cantera, Managing Director at Accenture Digital, share their insights on how companies should be using site monetisation to succeed.
E-commerce is a highly competitive and complex business and many companies often focus on figuring out ways to cut costs and improve margins. Media publishing offers an alternative to shift away from the limitations of the existing business model and diversify into a new revenue stream with little costs attached.
When Accenture in Spain conducted a recent study of e-commerce sites, the analysis estimated that landing pages are seeing a 25% bounce rate, product pages have an effectiveness rate of 20% and there's a 60% abandonment rate at checkout.1 "Overall, these sites have only a 2% conversion rate," reveals Jose Cantera, Accenture Digital's Managing Director.
Online retailers in the UK have been reluctant to embrace on-site advertising, missing out on an estimated £1 billion worth of advertising revenues as a result.
— Anita Balchandani, Head of UK Retail, OC&C Strategy Consultants
So what about those 98% of site visitors who don't convert? Good question. Anita Balchandani, Head of UK Retail at OC&C Strategy Consultants explains, "With an estimated 7.5 billion page views a month, British online retailers receive more than double the number of page views of UK news websites. Yet in contrast to their counterparts in the US, online retailers in the UK have been reluctant to embrace on-site advertising, missing out on an estimated £1 billion worth of advertising revenues as a result. There are several reasons for this: uncertainty about what it takes to deliver on-site advertising technologically; concern that ads may divert traffic away from the page by disrupting the customer experience; and the overall impact on brand perception. But our research shows that if on-site advertising is addressed strategically, these fears are unfounded. The size of the opportunity should be enough to make those technological and brand challenges worth tackling."
There seems to be a disconnect between retailer concerns and consumer preferences. In the OC&C study, only 3% of consumers selected "No ads" among their top three most important factors in purchase criteria, compared to 56% naming "Value for money" and 44% naming "Low prices".
Research shows that consumers view digital ads quite pragmatically, seeing them as a source of new information — especially those ads that are relevant, timely, not intrusive and present a concrete benefit, such as a discount or a new product that the consumer wasn't aware of. A French user explains, "If I'm looking for a flight for a holiday and an ad suggests a hotel that I didn't know about, that's useful. What's not useful is showing me stuff that I'm not interested in." The research also found that consumers generally don't object to targeting; in fact, they appreciate receiving relevant content. They are highly sensitive to intrusions though, including ads that interrupt, get in their way or are too pushy. 2
"Consumers don't mind ads if they can get lower prices," Jose affirms. "We saw a French retailer reaching more than 50% higher qRPM as a result of showing a third-party ad on top of their own results on the search results page, while the conversion rate for their products remained unchanged."
Site monetisation allows e-commerce players to lower their prices, meeting the needs of their customers while also helping them remain profitable.
— Jose Cantera, Managing Director, Accenture Digital
According to Jose, the gains far outweigh the feared negative impacts. "Site monetisation allows e-commerce players to lower their prices, meeting the needs of their customers while also helping them remain profitable," he observes. "The impact on profit margins for retailers can be huge, especially in less mature markets. On average we estimated an uplift of up to 20% could be achieved among Spanish retailers, and some categories could achieve even higher results through on-site advertising."
None of these are new concepts, and retailers have no trouble putting them into practice offline. Anita says, "While retailers have long-standing practices to work with suppliers to unlock trade marketing opportunities in the physical world, most in the UK are far from pursuing digital avenues to partner with their suppliers. The reasons for this are numerous, but the three primary ones appear to be a lack of understanding of the scale of the opportunity, lack of knowledge of how to best execute this technologically and — most crucially — unclear accountabilities, resulting in ineffective teaming across buying and digital teams."
What should companies do to get their own on-site monetisation strategy off the ground? Anita advocates these six key steps:
- Assign a team drawing from media sales and ad ops, and empower them to make a difference.
- Run a test to size the opportunity for your business.
- Partner with a third-party ad tech provider, or develop in-house.
- Plan your approach and align your strategic objectives.
- Calibrate your offering: set up rules and regulations, run A/B tests and gain alignment with suppliers and internal teams.
- Launch, test and iterate your media strategy.
Following these recommendations will help e-commerce players not only increase their profits but also build stronger relationships with their users by giving them what they want from an e-commerce experience -- advice at the point of need.
1 E-commerce internal study by Accenture Spain, 2014.
2 "Advertising user research, US and Europe", Google User Experience Research, June 2014.