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The Value of Trust: Average Order Value by Audience

Posted November 21st, 2011 by Andrew Goodman

Back when Overture (previously GoTo.com, later became Yahoo Search Marketing) was preparing its prospectus for an initial public offering, the company spoke often of the paid clicks (to which by now we’ve become so accustomed) as “paid introductions.” It was a good choice of language.

 

With the recent growth in and precision of the remarketing technique, it’s fairly easy to observe different characteristics observed by different audiences of prospects and/or returning visitors. One striking one is average order size.

For a long time, consumers have exhibited a certain pattern when it comes to e-commerce. Even to this day, they prefer to get involved with businesses they know, and they prefer to get to know that business by trying a small order first. That’s what makes it so challenging for businesses who specialize solely in high-ticket, high-consideration items to get their marketing strategies figured out. You have to deal with a lot of zeroes, a lot of bounces, and a lot of rejection (notwithstanding the potential for more sophisticated analysis and better strategy).

Looking at one client’s remarketing conversion stats for the past 60 days, I see the following average order sizes:

  • Reached the first page of checkout in the past four months, but did not purchase: $80.
  • Had already purchased something in the past six months: $140

[Exact values disguised to protect confidentiality. Proportions accurate. Statistical significance of these numbers: extremely high (based on a large dataset).]

Those who had simply stumbled on the site and not made it into the funnel in the past six months rarely clicked or bought anything in response to remarketing.

Takeaways:

  • Trust is difficult to build. Permission-based assets are also costly and difficult to build. They are also often worth building.
  • Attribution remains an art. Email, Facebook, and remarketing audiences are all assets that cost your company money to build via a variety of channels… including other media and great customer service. In the great “demand generation” vs. “demand harvesting” debate, it’s still important to be fair to the part that does the “demand generation.”
  • But the demand harvesting channels truly do cost very little. Short of annoying your loyal customers to death… for a marketer, these channels are awesome for ROI (even if it isn’t “real” ROI).
  • You can grow a lot more than you think just by delighting the customers you do have, and earning their trust and support.
  • But you have to build that base from somewhere. Lifetime value should be factored into the equation when you consider the worth of “paid introductions.” LTV isn’t a copout or an excuse.
  • (Then again, businesses that have virtually no potential for repeat orders or ongoing business are dealing with significantly more challenging business models, with very little margin for error.)


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