What You Don't Know Can Shut You Down

What You Don't Know Can Shut You Down

by Kim Wingate

Here's an enlightening exercise: the next time you hear about another e-tailer who is in trouble or struggling to stay afloat, visit their Web site. How long does it take to load? How well does it drive a sale? Based on your experience with the site, what would you guess the site's conversion ratio to be?

The sad truth is that many of these struggling companies may not even know what their conversion ratio is. The percentage of buyers to visitors is likely the single most important metric in e-commerce. Improving conversion ratios is often the easiest, most cost-effective way to increase sales. Yet many companies neglect this powerful source of sales, preferring instead to focus on other things.

How many layoffs could be avoided if these failing sites increased their conversion ratios? Only they could say for sure. But let's suppose a site is currently only converting 1% of their visitors into customers. Bringing this ratio up to just 2% would double sales. Would these sites have to lay off people, or close their doors altogether, if they were able to double sales without spending an additional dime?

Take the case of one two-year old dot-com on the verge of failure. They laid off nearly 40% of their workforce as they failed to reach their sales targets. They then brought in a consultant to help improve what remained of their business.

The consultant discovered that these site managers had no idea how many visitors they were converting. How could they? The shocking reality was that they had no site activity reporting tools at all! No one in their company had any idea what was going on out on their site. For over two years, this so-called "e-commerce company" was literally flying blind!

This company may have had all the business they needed to survive. There may have been thousands of prospects hitting the site just waiting to be converted into customers. These site managers had no way to know whether their site was actually doing a good job of selling. Nor could they determine what changes needed to be made to increase sales. Some very simple site tweaks may have been able to actually save this company. But without the key metrics, they had no way to know - and this lack of knowledge cost a lot of people their jobs.

So, how do you keep from repeating this company's mistakes? It's not that difficult - it's just a matter of focus:

- You must have a keen understanding of what is happening on your site.

- You must focus on conversion ratios as a key business metric.

- Improving these ratios needs to be a primary goal and an ongoing effort.

This company cannot likely be saved at this point. But, its failure can provide us with many valuable lessons.

ABOUT THE AUTHOR:

Kim Wingate, founder of AvidSurfer, is the publisher of Web business case studies, reports, and manuals. A real-world case study showing how a six hours of "tweaks" at one dot-com yielded $13,500 per day in additional sales is FREE for a limited time! http://www.avidsurfer.com/default.asp?src=artn