Selling Pyramid

Marketing for a web-shop is unthinkable without the Internet, albeit Internet can exist without shops. This illustrates the interdependencies revealing: The Internet is the basis for all further services, as for example e-commerce. Visitors are a necessary condition for the success of a web-shop. Without an appropriate stream of visitors coming from the Internet there are no successful conversions to the buyers of a good. This necessary condition is far away from being sufficient. Many hurdles are standing in the way from contact to selling.

The qualification of the user takes place in consecutive stages as the ascent onto a pyramid - a relationship pyramid. Between the levels of the pyramid are relatively stable relations, being measured and quantified as conversion rates.

With relatively fixed conversion rates the attracted surfer develops from visitor over shop visitor and to buyer and hopefully to regular customer.

The starting point is the often cited community where the prospects are collected. At this stage one has not much information about the surfer, usually not even an e-mail address. You only know that some or a bunch of anonymous users have visited the web presence. Of this population, the surfers are gradually better qualified and pulled up on the relationship pyramid.

In the language of communication experts a message will be positive regarded, if the relationship structure is intact. This is defining the first task in marketing. The message is picked up quickly, if only a few images of the recipient must be revised – that means his expectations are met. The customer comes from his life environment in the Internet and expects some rules of communication. This is a simple request. You listen to his needs and will respond to him, take him seriously, reward his attention, you are hospitable and offer him something. The success formula for dealing with a new prospect is: Don’t disturb him experiencing the Internet, but promote the interactive communication. The surfers expect entertainment and the Internet is the basis for multilateral Entertainment. In the words of Internet language you offer valuable content on your site.

With interactions you increase the attractiveness of the presence so that the prospect divulges more informations about his personal needs. Have the first surfers acted anonymously and possibly used an alias to communicate they will disclose their identity on the next stage when they got themselves better information. Better is the information for him, when it is personalized and tailored to its needs. This can include special offers from his area of interest or discussion to its targeted questions.

The first hurdle is to take when the surfers have to be pulled from the general information of the site to the web shop. According to the experience being covered by general surveys only 30 to 40 percent of site-visitors want to buy something, the others are only looking for information. In various studies and empirical values the conversion rates from the first to the second stage of the pyramid fluctuate around the average of third.

How many buyers actually fill the shopping cart and proceed to payment - to check out? This is significantly different and depending on the usability of the shop. Ultimately technical criteria are not decisive, but the simple question whether the shop can deliver what he promises in advertising. Are the goods available in the shop at all; how many steps does the buyer need to go through the shop, must he register; does he find his basket, etc. A positive implementation of the requirements needs personnel and development effort. According to these circumstances, a conversion rate from the shop to the basket will only be achieved with less than half of the interested parties. For the model we will consider an average value of 40 percent.

Selling Pyramid
Twelve out of one hundred customers have now filled the cart with goods and stand at the check out - these are the “near buyer”. This brings us to the crucial point, which is directly linked to the risk management. Does the customer agree with the offered payment methods? The risk assessments of the partners involved are in opposite directions. Would the seller offer the possibility of transferring the money after the receipt of the invoice, he would have a comparatively high level of acceptance, but also a high risk.

Many shops differentiate in payment offerings between new customers and regular customers. While unknown buyers are asked to pay in advance, the regular customer may be allowed to transfer the money after receiving the invoice. The visitor inclined to buy get at this stage more information, which affect its readiness, such as transport costs, the availability, terms and conditions or the right of return and much more. This varies greatly from shop to shop and applies might diminish the acceptance of the buyer. The result is a fairly wide margin in the conversion rate from customers to a really successful conclusion at the check out. For this example let's take an average of 25 percent.

As a result we achieve with the values collected a conversion rate of the entire process of 3 percent, from first contact with a prospective customer to a successful conclusion. About 97 percent of the visitors click back into the Internet. This is a low yield, but it reflects the realities.

The initial purchase may be motivated with different methods. The imagination knows no boundaries as long as the aim is not lost out of sight. Since different preferences of the members can attest, you should reward several variants offer first buyer discounts, coupons, referral bonuses, etc. The level of expenditure is measured by the value of the buyer. This value is roughly estimated as the turnover of a regular customers multiplied by his-earned rate of profit. An important measure is the conversion rate. It decides on the total amount of sensible spending. Each seller has to bring in at this point his own experience with the effects and contributions of incentives. Finally the gross margin for each product varies from one industry to another. Only the success alone justifies the marketing expenses. And the success is determined by the conversion of visitors to buyers.

The same considerations apply to all qualified levels of the relationship pyramid, even if it is divided and differentiated, for example: the visitor inclined to buy, the visitor inclined to buy with good credit rating, the first buyer, the second buyer and the regular customer. Between each stage there are fixed conversion rates, the size of which one keeps controlling with statistics. How many levels ever are defined, it is clear that a large number of interested visitors have to be pulled to the bottom of the seller pyramid, to achieve regular customers at the top.

But a buyer will not automatically become a regular customer. He wants to be maintained, wants its interests in good hands, expecting his problems being solved quickly. He needs a personal communication, an individual response, a listener and an agent for its interests in the company. Although customer care appears costly, it is unevenly easier as to carry new surfers up the pyramid. This fact is well known in the Old Economy as well as on the Internet. On the Internet it is but obvious and predictable, because the interaction opens a short communication to the surfers and customers. The statistics and experience allow the comparison between acquiring new customers and providing good customer care for each company. The conversion rate of visitors to buyer visualizes the effectiveness of marketing.

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