E-commerce providers have a problem: they lose a significant percentage (some cite 75%) of customers that have made it to checkout. It’s shocking. A huge, stare-me-in-the-face, gaping opportunity that’s been acknowledged for a long time. Plenty of ancillary businesses recognize it and offer solutions, which beget another problem - what I’ll call “checkout option creep.” Merchants are so focused on keeping those mercurial customers, and converting the many more that never make it to checkout, that they’ll layer on new conversion device after new conversion device in an effort to keep folks going through the purchase process. A Bill Me Later option here, a HackerSafe security badge there, a PayByCheck choice, Paypal, ad infinitum. When I worked in e-commerce we consciously avoided such vendor creep but a certain amount of it pays off and it’s worth keeping an ear to the ground if you’re in web sales.
On Tuesday the Wall Street Journal covered (alas, subscription still required) a Mountain View, CA based startup called TrialPay that is partnering with online merchants to deliver what I think of as affinity sales. Instead of purchasing a merchant’s product directly, TrialPay allows a customer to make a side purchase and receive the merchant’s product for free. Considering a purchase of the WinZip file encryption software? If you sign up for a trial of Rhapsody’s music subscription service brokered by TrialPay, the WinZip software is free. It’s an interesting advertising intermediary play, and one that seemingly works for merchants that have a low-ish product cost matched with advertisers that have a high lifetime customer value. In other words, it’s worth it for Rhapsody to pay WinZip $x for the acquired customer, an amount which WinZip deems worth delivering its software to a customer for free, because Rhapsody knows that a new trial subscriber to its service has a net present value of $(x+y).
Digging under the hood, I’m even more impressed by TrialPay’s demographic segmentation options. I’ve oversimplified with the above WinZip/Rhapsody example in that Rhapsody recognizes that acquired customers represent a range of values to the company based on the acquisition source, the customer’s profile (age, income, etc), and other metrics. Not only is Rhapsody gauging the likelihood that a customer converts from a trial member into a paying member, but the company is gauging the likely length of membership, word of mouth advertising potential, and more. As advertisers join the inevitable march towards cost per acquisition (CPA) payments (vs. cost per click or impression), it’s worth noting that TrialPay has taken the concept a step further and allows advertisers to pay under a tiered structure according to perceived value of an acquired customer. It is, in the words of TrialPay, “evolved CPA advertising,” a natural next step for measured marketing.
Pending continued success (TrialPay claims “annual revenue of more than $10 million,” surely a run rate and not a trailing figure, but no small feat for a company that’s a year and a half old), I’d expect to see a third party service that matches TrialPay offers with product/service seekers. While perhaps dilutive to the company’s value proposition, it’s a win for consumers and nothing an evolved CPA advertising model can’t handle.
UPDATE: No surprise, but a list of TrialPay offers has already been pulled together here.
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If you’re interested in e-commerce conversion analysis (and who isn’t?), the following are good resources:
1) Get Elastic’s white paper entitled, “The E-Commerce Checkout Report,” which statistically covers checkout tactics used at the top 100 e-tailers with some interesting takeaways: eg., displaying cart contents during the checkout process actual decreases conversions.
2) Practical eCommerce - a comprehensive industry coverage competitor to well-known Internet Retailer; start with “Tools to Boost Conversion.”
3) Forrester’s, “The Checkout Tools that Boost eBusiness: Why Paypal, Bill Me Later, and Google Checkout Work” - a $279.00 report from January of this year.
Photo Credit: Shopping cart safety #3, originally uploaded by greefus groinks.
very interesting. $10M must be top line and not net revs.
Almost the opposite of what restaurant.com does.
Surely. Thanks for stopping by, Rob!