customer acquisition – Allen Miller

Increasing Conversion along the mCommerce Customer Journey

Increasing sales on a mobile commerce (mCommerce) platform is often seen as synonymous with driving more traffic through mobile channels—whether through the mobile app, tablet or mobile site. Yet there are other ways for mCommerce startups to increase sales besides increasing app downloads. Chief among these methods is increasing conversion in the customer journey to levels that are on par or better than desktop conversion rates or any other benchmark a company is using.

Typically mCommerce platforms have customer journeys roughly similar to the desktop customer journey. Give or take a few steps depending on the product, industry, stored preferences, member vs. guest, etc. These customer journeys almost always (roughly) look something like this:

When scaled up to thousands if not millions of customers all going through this process, the customer journey in aggregate looks like a funnel. In early stages of the journey, the funnel is broad—there are many customers. Yet by the time the journey is at the “Confirmation” stage the funnel has narrowed, and there are very few customers remaining who actually convert into buyers. An example using Airbnb will help illustrate the concept of the funnel. All numbers are completely made up and used simply for illustrative purposes.

Let’s say there are 100 potentials customers who login to Airbnb’s iPhone app on Friday at noon. Of those 100, let’s say 80 proceed from the Login page to actually browsing the listings of sublets in the destination of their choice. Of those 80 who browse the listings, only 30 actually select a sublet that they are interested in. Of those 30 who select a sublet of interest, only 10 make it to the “Review” page where they review their listings and perhaps add any extra features they want. Of those 10, only 5 actually enter in their payment information. And of the 5 who enter their payment information, only 2 click submit and reach the “Confirmation” page. Thus of the original 100 who logged into the app, only 2 actually purchased, resulting in a final conversion rate of 2%.

There is clearly a big opportunity to increase conversion—particularly if Airbnb’s desktop conversion is higher than 2% or if their competition has superior conversion rates. Startups looking to increase conversion in the customer journey can target 2 different methods:

(1) The first method is to simply make it easier for customers by eliminating steps in the customer journey. A great example of this is how Uber has dealt with payments. By taking a photo of your credit card the first time a customer opens the app and then storing that information, they have effectively eliminated the payment step in the customer journey. Fewer steps in the journey, mean less opportunities to fall out and, ultimately, higher conversion rates.

(2) The second method is to simplify painpoints in the customer journey. In other words, increase the conversion rate of steps in the customer journey where customer fallout is particularly high. So if the conversion rate from “Browse Listings” to “Select Product” at Airbnb is currently 37.5% (30%/80%), focus on increasing that step’s conversion rate to 50% or 60%. This particular step in the journey has been mastered by many of the airlines and hotel companies (SPG and United in particular) with their unique mapping features, simplified browsing/sorting capabilities and sharp focus on UX. As can be imagined, increasing conversion early in the customer journey (when the funnel is still wide), should be prioritized as it has the potential to have the biggest impact on final conversion.

Customer Acquisition Challenges for Location-based Startups

Location-based startups seem to be pretty popular these days. Some of the most successful location based startups (i.e. Foursquare, Shopkick, Yelp, etc.,) have received multiple rounds of funding, achieved nice exits and set a high bar for others to follow. Nonetheless, many location-based start-ups still face a number of challenges when it comes to growth – particularly in the area of customer acquisition. This post seeks to dig a little further into the issue of customer acquisition for location-based apps. Here are some steps startups can take to address challenges they face in acquiring new customers.

Performance Measurement: It’s important to first take a step back and reflect on the existing product and existing customers. Some questions to ask include: Who are the customers? Are there different segments? How are the current customers using the product? Are there differences in the ways various segments use the product? How is the product performing among various customer segments? An understanding of these questions will allow the portfolio company to better target its strategy—whether that is to strengthen its position in a current market or pivot a little and go after a different set of customers.

Product Differentiation: Startups looking to acquire customers should differentiate their product from the competition and make the value-add very clear. That way, from a customer’s perspective, there is a clear reason for switching to the new product. Product differentiation can build customer loyalty and allow the startup to monetize its partnerships with advertisers or other 3^rd party vendors. Mobile represents a huge opportunity to creatively differentiate across a range of platforms. Startups should find unique ways to combine location-based data with mobile platforms to provide users with useful information. Foursquare’s check-in rewards system seems to have championed this strategy.

Personalization/Segmentation: Location-based startups should also focus on personalizing as much as possible when trying to acquire new customers. This means offering a different type of service for different customer segments. LinkedIn has done a great job of this. There is a free service for the 80% of customers who only use the platform a few times a year. Another 15% of the customer segment, who use the product monthly or weekly, pay for a slight business upgrade. The final 5% who use the service daily pay for the most expensive “executive” version—with expanded product features. But personalization should move beyond product lines to also include targeted marketing and sales campaigns so that potential users are finding out about the product through channels that appeal to them most.

Focus on Branding: Location-based startups can also attract customers by building a really strong brand. Brand loyalty seems to be mostly based on three things: differentiation, relevance and emotion. Some examples: Apple has built an incredible brand around the concept of aesthetics and beautiful design. Etsy has built a brand around homemade/vintage goods. Focusing on the above 3 keys to build a really strong brand can, in turn, attract customers.

Customer Service: One way to really attract customers (and to also differentiate from the competition) is to provide strong customer service. This entails providing a high quality service or product experience, showing support for customers during and after the sales process, developing customer loyalty programs and creating a customer service team with a 100% focus on customer satisfaction.