A conversion is the exact moment when a person who is just browsing becomes an actual paying customer by buying something. So, it's no surprise that commerce brands look at conversions alone as their golden metric for success. More paying customers = more income, right?
But the reality is, conversions are just one piece of a much larger picture. The Checkout Power Trio was developed as a framework brands can use to understand the relationship between three important metrics: Conversions (the completion of purchase), Average Order Value (how much a customer spends in one order), and customer Lifetime Value (how much a customer spends over time). Looking at these three things together can help brands increase their profits, get products to customers faster, and reduce the overall cost of running their business.
In this article, we'll explain each of these factors one by one. We'll show how brands optimize for each factor and give examples of how you can leverage the 'Checkout Power Trio' to boost revenue and create a better shopping experience for your brand.
The Next Generation of Checkout is Here
Before we dive into the Power Trio, it’s important to understand the journey of how checkout has evolved over time. Checkout has now entered its 3rd generation, and brands now have more control than ever before over their checkout experience.
In previous generations, checkout was offered by large legacy platforms as a one-size-fits-all commerce solution – that was the 2nd generation of checkout. Within this model, all the components of your checkout were locked together in immovable blocks that made up a standard checkout experience across all channels. This 2nd generation focused exclusively on optimizing for conversion through a single checkout experience. 2nd generation checkout allowed brands a quick, no-code way to set up their online storefronts and begin selling, but left little room for customization.
Now, enter the 3rd generation of checkout – and the dawn of the tailored commerce age. This newest generation allows brands to escape the constraints of their out-of-the-box legacy platform, and build custom checkout flows that deliver a seamless buying experience to their customers, no matter where they are.
So what’s the deal with the Power Trio, and how can you apply this framework to your checkout flows to enhance efficiency and profitability for your business? Let’s take a look.
The Checkout Power Trio – a brand cannot thrive on conversions alone
Today’s customers are now buying in more places, with more unique payment methods than ever before. As digital commerce matures, a more comprehensive framework is required to understand key performance metrics in a more holistic way.
The Checkout Power Trio combines three core revenue-driving metrics that can be optimized within your checkout flows to positively impact your brand’s profits. The 3 main Trio metrics are:
- Average Order Value
- Lifetime Value
Now, with a gen3 tailored solution like Bold Checkout, brands can build their own unique checkout flows that allow them to optimize for all three of the Power Trio metrics simultaneously rather than focusing on conversion alone.
Every business, product, and customer base is different. Gen3 checkout solutions allow brands to build completely tailored checkout flows that deliver seamless experiences to their customers across multiple digital channels. Now, whether your customers are coming from email, social, or paid media, you can deliver them a frictionless checkout experience that maximizes your profits and their satisfaction.
Turning up the dial on profits
Think of each of the Power Trio metrics as a dial that you can adjust depending on your unique business needs. Through testing and iteration of tailored checkout flows, brands can ensure that they’re optimizing for the right metrics to create the ultimate experience for their customers. And because every brand is different, they have the flexibility to optimize for the right blend of metrics for them to maximize revenue without sacrificing their customer’s experience.
Let’s take a look at some real life examples of how brands are leveraging the Checkout Power Trio to drive profitability.
Power Trio Profit Dial #1 : Conversion
The first of our Trio metrics is conversion, and it’s the one that most brands are most familiar with. Conversion rate is defined as the percentage of site visitors who make a purchase. For example, if your monthly site traffic is 100,000 visitors, and 20,000 of those visitors complete their checkout, your conversion rate is 20%.
Here are some things to consider when optimizing for conversions in your checkout flows:
- Simplify your Checkout: Make the buying process straightforward, with the fewest steps possible to get your customer to complete their purchase.
- Transparent Pricing: Be upfront with all costs. Checkouts that display transparent pricing, with pre-calculated shipping and taxes help build trust with your customers.
- Offer Multiple Payment Options: Provide a smorgasbord of payment choices. Customers should be able to easily choose their preferred payment methods right from their checkout.
- Trust Signals: Show them it's safe, like a crosswalk in a school zone. Security badges, customer reviews, and guarantees can do the trick.
- Retargeting and Abandoned Cart Emails: If customers abandon their carts, ping them like a Facebook reminder. A nudge or a tempting discount can make them return.
The key to all of these optimizations is to eliminate as much friction as possible in the buying process. When brands build checkout flows that remove unnecessary steps, offer flexible payment options, and allow for options like guest checkout, customers are less likely to abandon their carts mid-purchase, leading to a higher converting checkout experience.
Let’s take a look at a checkout flow that has been optimized for conversions directly from a social feed.
Power Trio Profit Dial #2: AOV (Size matters)
Order size that is. The second metric in our Trio/, Average Order Value (AOV), is the average amount a customer spends per transaction. By boosting AOV, businesses can increase revenue without needing to attract additional customers.
Imagine a checkout flow where, at the point of purchase, the customer is presented with relevant add-ons, upgrades, or bundle deals. Perhaps they've added a pair of shoes to their cart, and are then shown matching accessories, or given a special deal on a two-pair bundle. These strategies can effectively boost the AOV, increasing revenue from each transaction.
Here are some things to consider when optimizing for AOV in your checkout flows:
- Utilize Upsells and Cross-sells: a classic technique that can increase average order value significantly. For example, if a customer is buying a camera, you might suggest they also buy a camera bag or additional lenses.
- Offer Volume Discounts: Offering tiered pricing or volume discounts can incentivize customers to purchase more in a single order. This strategy is particularly effective if your products are often purchased in bulk or are consumable. For instance, a brand that sells coffee might offer a 10% discount if the customer purchases three bags instead of just one.
- Offer Product Bundles: Similar to cross-selling, product bundles can also help increase average order value. Bundles give customers the perception of a deal, as the total price of a bundle is often less than the sum of the individual items' prices. Bundling also allows you to sell more products in a single transaction.
- Free Shipping Thresholds: Offer free shipping, but only for orders that exceed a certain amount. This can incentivize customers to add more items to their cart in order to reach the threshold and qualify for free shipping. Be sure to set the free shipping threshold slightly above your current average order value.
- Loyalty Programs: Implementing a customer loyalty program can also boost your average order value. Rewarding frequent buyers with points or discounts can encourage them to spend more with each purchase. The perceived value of earning points or getting closer to a reward can often justify a larger purchase.
Remember that these strategies should be used to genuinely add value to the customer's purchase. The key to successful upselling, cross-selling, or bundling is to ensure that the additional items truly enhance the primary product and meet the customer's needs.
Below example of a checkout flow optimized to increase AOV by offering bundled products mentioned in a blog.
Power Trio Profit Dial #3: LTV - You attracted them, now keep them coming back
The third part of the Trio is the Customer Lifetime Value (LTV), which is a prediction of the total profit a business can expect from a customer throughout the life of their relationship. An optimized checkout process that encourages repeat business can significantly boost LTV.
Imagine a checkout flow that offers a loyalty program sign-up at the point of purchase. This not only incentivizes repeat business, increasing LTV, but also allows businesses to gather customer data for personalized offers and recommendations in the future.
Here are some things to consider when optimizing for LTV in your checkout flows:
- Improve Customer Service: High-quality customer service can significantly increase customer satisfaction, which in turn increases customer lifetime value. Make sure you have multiple channels for customer support (email, phone, live chat, etc.), answer queries promptly, and resolve issues effectively. The goal is to make each customer feel valued and heard.
- Loyalty Programs: Implement a loyalty program that rewards repeat customers. This can encourage customers to continue shopping with you rather than turning to competitors. Rewards can include discounts, free shipping, exclusive products, or early access to new releases.
- Personalization: Use customer data to personalize the shopping experience. This can mean recommending products based on past purchases, sending personalized emails, or providing tailored content. Personalization can make customers feel more connected to your brand, increasing their likelihood of repeat purchases.
- Subscription Services: For appropriate products or services, consider offering a subscription model. This can not only ensure regular revenue but also increase the lifetime value of a customer. It can be particularly effective for consumable products or products that people buy regularly.
- Post-Purchase Follow-ups: After a purchase, send follow-up communications to keep your brand at the top of the customer's mind. These can include thank you emails, requests for reviews, or personalized recommendations for future purchases. You can also provide helpful content related to their purchase, such as how-to guides or tips for getting the most from the product. This can increase customer satisfaction and lead to repeat purchases.
Remember, it’s cheaper to retain existing customers than to acquire new ones. Strategies that focus on increasing customer LTV can be an effective way to improve the profitability of your brand.
Below is an example of a checkout flow that is optimized to increase LTV through using a post-purchase email upsell.
Tailored checkout flows + The Power Trio, a match made in heaven
If tailored checkout flows are the highway that gets your customers to your product, then the Checkout Power Trio is the Ferrari that will get them there faster. Tailored checkout flows allow for brands to sell anywhere from a single unified checkout. Optimizing for the Checkout Power Trio ensures that you’re boosting profitability while delivering an amazing experience to your customers.
By applying the Checkout Power Trio framework to your checkout flows, your brand has the potential to drive more revenue, unlock more efficiency, and build stronger, more profitable relationships with their customers. This is the power of the 3rd generation checkout - a tailored, dynamic, and highly effective approach to driving ecommerce success.
Moreover, the Power Trio empowers businesses to continuously optimize their checkout flows with A/B testing and real-time adaptability. Bold gives brands access to a library of pre-built, optimized checkout flows, that help businesses can decrease time to market and upgrade their checkout without replatforming.
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