In this post, we’ll look at how an e-commerce store can increase revenue by increasing the basket size - the number and value of items purchased in a single transaction. We’ll use impact mapping, a key part of the Focus Method, to work out how to do this.
ACME Industries sells widgets via an e-commerce site. Although successful, they have benchmarked their performance against their competitors, and have found that their industry’s average transaction size is 20% higher than ACME’s. Since prices are similar, this must result from customers purchasing more items in a single transaction - larger “basket sizes”.
With this in mind, ACME set out with the goal of increasing their average basket size by 20%, bringing them into line with the industry average.
To increase the average total value of completed transactions on ACME’s site by 20%
Having a quantifiable and measurable goal is a vital first step in improving performance. Knowing the precise objective enables everyone involved - product managers, developers, marketing, sales and business executives - to focus on achieving the desired outcome. In the Focus method, all planning begins with identifying this kind of goal.
Who can help ACME to achieve the goal? And who might be able to hinder that process if their needs are not addressed?
Obviously, ACME’s customers are vital here - increasing basket size is ultimately about changing customer behaviour. But others can help - ACME’s commercial manager and marketing team can help design and promote better product bundles.
For customers, there are several impacts that could help to achieve the goal. Customers could add related products during checkout, see recommended additions on product pages, or buy pre-bundled collections of products. They could also be incentivised to buy larger batches by bulk pricing incentives, or offers of reduced or free shipping for larger transactions.
The commercial manager will need to be able to define product bundles and bulk discounts for purchasing multiples of the same product. In addition, the commercial manager will need the ability to define the threshold for free shipping.
So far, our impact map looks like this:
We’ve defined a goal, identified the actors who can help or hinder us in achieving it, and the impacts that we believe would enable us to achieve the goal. It’s worth taking a moment to reflect on this; by working outwards from the goal, we have ensured that we have a business case for any features that we can imagine. So long as the features are likely to have the desired impact, we can be confident that we’re doing something useful.
For each of our impacts, we can define features which we think might achieve that impact and move us closer to the goal. We can’t be certain about which will be most effective, but we can use our judgement to prioritise, and measure carefully to see how close we are. In a best-case scenario, maybe only one or two features will be needed to achieve the goal of 20% increase in basket size, so this method works very well for keeping budgets under control. There’s no need to spend time and money on extras if we can achieve our primary aim faster and less expensively.
###Customer > Find Related Products
To help customers find related products that they may wish to purchase, we can implement a few features:
• Show product bundles - when browsing the site, show bundles of related products, allowing the customer to purchase the entire bundle, possibly at a reduced price compared to buying the individual items. Example: buying a whole album on iTunes, rather than buying individual tracks.
• Show “often bought with” products - when a customer is viewing a product, make them aware of other products that are often purchased in the same transaction. Amazon has many examples of this - a simple case might be batteries often being purchased with a flashlight.
• Show “people who bought X also bought Y” products - this is subtly different from the feature above, because it covers products purchased at any point rather than products purchased in the same transaction. For example, people who buy books by a certain author may frequently buy other books by that author. Making the customer aware of these products may prompt them to purchase one or more additional books.
Customer > Add related products during checkout
Our first impact makes customers aware of related products when browsing, but we can also up-sell these related products during checkout:
• Show the option to upgrade to a bundle - if the customer is purchasing a product which is part of a bundle, give them the option to upgrade to the bundle. For example, if a customer is purchasing a dining table, give them the option to upgrade to the bundle of the dining table and matching chairs.
• Show related products during checkout - because a “noisy” checkout can actually damage sales, we want to experiment with showing a limited number of related products as possible up-sells. This might include personal recommendations, other products from the same category, or frequently-purchased-together products. Testing which are most effective will be crucial!
Customer > Find personal recommendations
We can also assume that personal recommendations, made at the right moment, might cause customers to increase their basket size. Here the feature is quite simple:
• Show recommendations based on customer purchase history - simply show the customer other things that similar customers have bought, irrespective of the products currently being viewed. This might be limited to purchases that are often “impulse” purchases, below a certain price. As always, measuring and monitoring the results can help to reach the desired performance.
###Customer > Buy in bulk Increasing sales of other products is just one way to increase basket size - we can also encourage customers to buy more of the same product. By offering discounts for buying some products in bulk, we can encourage customers to make larger purchases.
• Show bulk pricing options on product page - make the customer aware of bulk pricing before adding the product to their basket, allowing them to select the quantity to buy
• Show bulk pricing upsell during checkout - if the initial bulk pricing option doesn’t work, we can also upsell bulk pricing during checkout, where customers may be paying more attention to final pricing
Customer > Access free shipping
Free shipping is a great way to encourage customers to buy, but subsidising the cost of shipping doesn’t make sense for small orders. By offering free shipping on larger orders, customers are encouraged to top up their order to qualify for free shipping. The features required are:
• Automatically receive free shipping over a certain order value - if the customer adds goods over a certain value to their basket, automatically apply free shipping to that order
• Notify customer of additional purchase value necessary to receive free shipping - if the customer hasn’t ordered enough to receive free shipping, notify them of this during the checkout process. In combination with up-sells, this may encourage the customer to increase their order value immediately.
Commercial Manager > Promote product bundles
In order for customers to be able to buy product bundles, the Commercial Manager must be able to create them.
• Link related products together - some bundles simply consist of relationships between connected products, without any discount applied. This simpler functionality may be enough to achieve an increase in basket size, so we will give the Commercial Manager an option to create these simple bundles by linking products.
• Create discounts when buying related products - bundles may be more effective when including a discount for buying the entire bundle, so this feature will allow the Commercial Manager to specify a discounted price for purchasing a bundle
Commercial Manager > Promote bulk discounts
Similarly, the Commercial Manager must be able to define the discounts for bulk purchases of some products.
• Create bulk discount pricing options - this feature will allow the Commercial Manager to specify the precise discounting scheme for individual products or groups of products
Commercial Manager > Offer free shipping
For free shipping to work, the Commercial Manager must have the option of setting the order value threshold for free shipping to apply. The ability to vary this threshold means that we can test the most effective values for encouraging larger orders.
• Choose free shipping threshold - the Commercial Manager must be able to set the minimum order value to qualify for free shipping
The final impact map
This map clearly shows the features we have mapped out, with each one being traceable back to the impact, actor and goal that explains why we are implementing it.
The delivery process
Having mapped out a set of options for increasing basket size, the Focus method explains how to go about implementing this in a lean way. Features should be delivered continuously, with each one being released to the public as soon as it is ready. By measuring the results produced, we can prioritise which feature to work on next. If we manage to achieve our goal without implementing all of the features then we can move on to another goal, without the expense of implementing features we don’t need (the next goal could, of course, be to increase basket size further, but it doesn’t have to be).
The process as outlined above is technology-agnostic, and would work just as well on any e-commerce platform, provided that it’s reasonably easy to add or enable features like bulk discounts or free shipping. At Fluxus we work with Drupal as a content management framework, and this enables us to implement features of this kind very quickly. Other similar tools exist, but with a decade of experience in Drupal we’re able to get more value from it than anything else.