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There’s a difference between a customer who regularly spends hundreds at your store and a customer who buys the cheapest product and then never comes back. As an ecommerce owner, founder, or operator, you want to make sure you’re attracting “higher quality customers” with your marketing investment. You need to track the right metrics to monitor each traffic source for signs of poor customer quality. In most cases, certain traffic sources are of lower quality than others. Knowing what to look for, why this is common, and ensuring close monitoring will help you better optimize your marketing spend.
Related: 10 Ways to Get High-Roller Customers to Spend More with You
What do we mean by “low quality”?
This can often include an excessive number of order cancellations, lower order values, subscription cancellations, and higher product return rates — pretty much the customer actions we want to avoid. These actions can adversely affect the profitability of your business. Let’s say you expect your customers to spend an average of between $60 and $100 per order on your website. An average order value of less than $30 from a source is a sign of poor traffic quality. Conversely, if your product return rates are significantly higher from one source to another, that could be another sign.
A common source that is considered “inferior” is incentives for traffic – essentially incentivizing the customer in return for buying from your store. These incentives are often Amazon gift cards, points, or in-game currency. You will find that the overwhelming majority of customers will buy your product purely for the incentive, not because they are actually interested in your product and your value propositions. These customers are likely to purchase the cheapest product on your site and then return for a full refund once their incentive is received.
In this example, your average order value has decreased and the number of order cancellations has increased. To add insanity to the madness, you pay to handle that traffic. This underscores the importance of understanding how each traffic source contributes to your bottom line.
Why are some traffic sources “lower quality”?
There can be myriad reasons why a customer engages in substandard behaviors. Lower disposable income is often one of them. There are traffic sources that cater to younger demographics—students and young professionals, for example. TikTok and Snapchat ads are known for attracting younger audiences. Conversely, some sources may be biased towards older markets – that could be bonds or fixed income securities. These customers are more cost conscious and may spend less on your website due to their limited disposable income constraints.
You also need to consider the customer journey and the influences on their decision making. Customers on Black Friday or similar holidays may only come to your site to get a deal, so your repeat purchase rate may not be as high due to this seasonality. Traffic sources that provide customers with limited information—notable pop-up ads or other similar forms of advertising—can lead to higher bounce rates on your site because customer expectations may be different.
The message in your advertising material and text can also influence purchasing behavior. If your message is primarily about discounting your brand or talking about cost savings, you may inadvertently attract more cost-conscious customers to your store. This in turn can lead to lower order values. Still, these types of customers can be worth your marketing investment. You need to understand how much you pay for these orders and what you get in return.
Related Topics: 5 Marketing Tips for Conscious Consumers
How do we monitor the quality?
Which metrics you should track depends on what is most important to you. If you’re looking to expand your subscription program, early cancellations are a key metric. If you want to improve the return on your advertising spend, low order values and order cancellations would be detrimental. You must be asking yourself, “What shouldn’t my customers do?” These are the metrics you should be monitoring.
It’s important to track these metrics for each traffic source. Attribution tools like TripleWhale, Northbeam, or Rockerbox can help identify which traffic sources are generating the most value for your investment.
Tactics to improve traffic quality
Reprioritizing your marketing spend is a good start to improving traffic quality. If you have one source that is more profitable than another, you may want to invest your time in scaling the more profitable channel. Reducing traffic sources that are considered unprofitable or business-damaging due to low-quality orders should also be an important consideration, especially when you can’t lower your cost investments for every customer you acquire.
Bundling and upselling strategies can help improve your order value by giving the customer additional opportunities to spend more. Focusing on educating customers before purchasing the product can also help reduce your order cancellations as expectations are better managed. However, these can only “improve” your key figures. You need to add safeguards to prevent fraudulent or low-quality orders from being processed in the first place. Manually reviewing risky orders, limiting order quantities, collecting proof of delivery, displaying clear policies on your website, being vigilant during peak shopping periods, using verification software, and creating a blacklist are some common tactics.
You need to approach new traffic source tests methodically. It’s good industry practice to start with a more limited test—say, spending $1,000 or less—to ensure optimal traffic quality before scaling further. This will help you avoid large investments in traffic sources that may not be the best for your business and avoid the costly mistakes many entrepreneurs have made before you.
Related: 6 reasons why attracting the right online traffic is your top priority
