"How to Use Funnels to Win at E-Commerce" | Shoptimized

Your business lives or dies on your ability to acquire and keep customers.

If you want to grow your business, bring in more sales, make bigger profits and become number one in your market, you need to keep this one immutable law of business growth in mind:

“He (or she) who is able and willing to spend the most to acquire a new customer, wins.”

In other words, the person who wins in business is the one who is able to go out there and get the most customers.

It’s not the store that has the best products or the biggest selection or even fanciest design. It’s not even who’s the best at marketing. It’s all to do with who can acquire the most customers.

Let’s say that your store’s conversion rate is 2.2% and your competitor’s is 20% better at 2.64%.

How much of that 20% differential are they willing to give away to acquire customers faster than you and steal your market share? Can they afford to bid 10% more on Facebook ads or spend 10% more on Pinterest ads and still be making 10% more than you?

Damn right, but it doesn’t matter where they get their customers from, the point is they have more cash to outbid and outmaneuver you at every turn.

But what would happen if you suddenly increased your conversion rate by 30, 40 or even 50%?

Now let me explain, increasing your profit-per-visitor can have an exponential effect on your business’s profits and how much wealth you’re able to extract from it.  Just a small uplift in your profit-per-visitor can result in a huge up-swing in your overall profitability.

Here’s the thing, when you double your profit-per-visitor, all your costs don’t double with it:

  • Your variable costs do of course double. This includes all costs that scale in proportion to the number of units sold, including the cost of goods sold, the costs of direct labor, distribution, and your customer support.
  • But your ad costs remain exactly the same.
  • And your fixed costs/overheads stay the same.

What happens is your overall profit increases disproportionately.  Sometimes dramatically.  

A conversion rate increase has a disproportionate impact on your profits.

Here’s the thing, when it comes to e-commerce, the market dominator gets the biggest slice of the pie whilst everyone else fights over the scraps.  And for you to be three times more profitable than your competitors, it doesn’t mean you have to be three times better than them.  You only have to be marginally better.

So how can you do this?  How do you get to the point where you can acquire the most customers?

Well, first you need to understand, that since commerce began back in ancient Greece, there have only ever been and always will be three ways to grow a business:

Sell more things, to more people, more often.

So to be able to outspend your competitors and acquire more customers who you can sell more things too, more often—you need to either increase your profit-per-visitor or profit-per-customer.

In other words, you need to increase the value of each and every person that comes through your website.  Because if you have the highest value visitors and customers, you can spend the most to acquire a new one.

And the easiest way to do this is something only a handful of store owners understand—a funnel-based approach to e-commerce.

Here’s the thing, traditional e-commerce storefronts convert at 1-2% on average,  but funnels tend to convert significantly higher.  This means that you get a better ROI on every advertising dollar you spend right from the get-go.  Plus you have more money to plough back into acquiring new customers, helping your business grow.

Not only that, but sales funnels massively help increase your store’s average order value.  Now, you may be thinking, “I have an upsell app that does that.”  But the thing is, they rely on people saying “yes” to the suggested upsells and cross-sells pre-purchase.  This means that the take-up rate is typically low in comparison to post-purchase upsells.

Funnels do all the upselling post-purchase so you’re never at risk of losing the entire sale by annoying people with pop-ups triggering left, right and centre.

Here’s how it works:

Taking someone through an optimized funnel like this is like walking into Ikea.  You go there to buy a new desk or whatever, and you come out with a shopping cart full of things you never knew you needed, including the obligatory tea light candles!

How Upsells Can Make or Break Your E-Commerce Business

Just in case you’re not familiar with the concept of upselling, the obvious example that almost everyone has experienced is McDonald’s…

“Do you want fries and a coke with that?”

Here’s the thing, McDonald’s make nearly all their profit on the upsells, believe it or not, they don’t actually make any money on the burgers. They’re sold as a loss-leader to get people into the restaurants. If it wasn’t for the fries and the Coke, they wouldn’t be in business.

And it’s the same thing for e-commerce, your front-end offer might only break even or even make a slight loss to get a new customer in the door.  This might be because you’re offering a loss-leader like a free + shipping offer or it might simply be because your paid traffic clicks are expensive.

Your funnel only becomes profitable when a percentage of people take you up on your upsell offer. And like I said earlier, only a handful of savvy store owners understand this mindset.  This means that on face value, your competition will likely have no idea how you’re making it work unless they bother to become a customer and go through every step of your funnel.

But just like the McDonald’s example the upsell offer has to make sense in the prospect’s mind and complement their purchase.  Otherwise, your take-up rate will be too low and the funnel won’t be profitable.  So, if they buy a tactical LED torch, for example, the first upsell could be a 40% discount off a second torch and then the second upsell could be a carry case for the torch.

The Dopamine Rush

Why are optimized funnels like these so much more effective than traditional e-commerce storefronts? Well, because they capitalize on the dopamine hit that someone gets when they just bought something.  The upsells are perfectly timed to take advantage of these “feel good” chemicals.

This timing gives you the very best shot you’ll ever get at harnessing that high and your new customer being more open to making additional purchases at the click of a button.  They don’t have to go through the hassle of entering their card details and shipping information all over again, they simply just have to say “yes” by clicking a button.

And the best part is if you have a product that lends itself to recurring billing/subscription payments, the “dopamine window” makes upselling to these types of continuity offers the easiest it will ever be.

Think about it, to get a customer this far, they’ve built up enough trust in you and your business to make the initial purchase so it’s the perfect time to ask for the upsell.

And if they say no, you have nothing to lose at this point because you’ve already secured the initial purchase, so offering a down-sell makes perfect sense too.  This is your “last chance saloon”…

Hight Converting Upsells

A good upsell should convert at 20% or more all day long.

So what makes a good upsell?

You may assume that a complementary product would perform best but in e-commerce “supersizing” the offer tends to convert like crazy.

Trudog.com offers multiple bottles of their spray as their first upsell. From our testing, this tends to outperform a complementary product as the first upsell.

Trudog.com heavily incentivizes their largest bundle with a significant discount and free shipping.

Cross-sells

People often say “upselling” when they actually mean cross-selling. Upselling is when someone wants a 42 inch TV and you persuade them to spend more on the 50 inch, for example.

Cross-selling is when you get them to buy something that complements or enhances their original purchase, like the wall bracket, DVD player or extended warranty on the TV.

But it can also be something that creates a “set.” The example below shows
a matching mug to go with a T-shirt that was just purchased.

Cross-selling a matching item can boost your average order value significantly.

Downsells

The most effective down-sells also need to make sense to your customer. Remember this is only shown to them if they refuse the cross-sell/upsell.

Here are some ideas for an effective down-sell:

  • A further discount on the upsell they just refused.
  • Offer something else entirely, but make sure it’s a product that still complements their front-end purchase.
  • Free shipping on the upsell offer.
  • $1 trial to your continuity program (if you have one).

Just be mindful of not harassing your customers by making them feel they’re stuck in an infinite loop of offers, you might leave a bitter taste that prevents them from making future purchases.

Offering a further discount or free shipping on the upsell that they just refused
can tip the balance and win the sale.

Order Bumps

These are placed on the checkout page so they are actually seen before any upsells/cross-sells or down-sells.  This means your visitors see them before the front-end purchase is secured so you need to be careful about not overcomplicating your order bump offer as you may end up sacrificing the entire sale if it’s a turn-off.

The most effective order bumps are very simple offers like getting a second of the same item for a generous discount or an extended warranty for just a few dollars more.

UberTorch’s order bump offers a lifetime warranty for just $13.50

But what about my store?

Using sales funnels is a key strategy for specific promotions but I still recommend keeping your store because it will likely be getting organic traffic and sales from social networking sites as well as your existing customers.

Finding a landing page for a sales funnel is a needle in a haystack for organic traffic, but a store with hundreds of product pages is much easier to find and more credible.

The other thing is that a lot of 3rd party funnel platforms are expensive and integrating with your Shopify order management is complex.  But there is a simple solution that works seamlessly…

How to Set Up Your First Sales Funnel

The perfect Shopify app for easily creating these powerful funnels is Funnel Buildr.  It’s great value, robust, easy to use and will transform your business.

A multi-step optimized funnel can boost your average order value by 60% or more and that’s just on their first purchase.  When you factor in the repeat purchases and lifetime value, your sales and profits go off-the-chart.