By Marko Luhtala, RapidCampaign
According to IMRG, the UK’s online retail association, there has been a general downward trend in average basket values over the past few years, with their IMRG Capgemini index recording a drop of 9% in average online spend from 2010 to 2013 — from £86 in 2010 to £78 in 2013.
However, the 2014 average basket values appear to have broken this trend with a rise in average value to £81.What might be causing this trend?
E-Commerce is going through the same change process we saw in brick-and-mortar stores over the past decade. Competition in the online space is fierce, and a better offer is only ever a click away. In order to get the customer to make a purchase you have to offer something more than a static presentation. An idle display is simply not enough to catch the wavering, and extremely short, attention span of the customer.
Advertisement
Online retailers must optimize and fine-tune the customer journey through their websites and online stores.
Online promotions are proving invaluable in this respect as an extremely effective way of engaging customers and enriching their purchase journey from top of the funnel, all the way to the checkout page. Promotions entice customers by showcasing specific products to buy, as well as encouraging interaction by offering incentives for opt-ins and click-throughs. And importantly, they reward customers by giving discounts and added value on actual purchases.
We have seen first-hand the power of promotions in not only activating the customer to make a purchase, but also encouraging them to spend more. At first this sounds counter-intuitive, but research shows that 28% of UK consumers say they actually spend more when a promotion is involved.
We humans are hard wired to want the better deal now, rather than the even-better deal later. We are not good at long-term vision, no matter how much we try to convince ourselves to the contrary. This is especially true in retail where hyperbolic discount strategies and the scarcity principle subconsciously urge consumers to buy products based on time-limited or volume-limited offers.
E-Commerce has exacerbated the effects of these foundations by bringing retail to the mobile devices in everyone’s hands. As we know, a purchase is only a click or two away; no need to rush to the store to get that last-minute bargain, just “click” and it’s yours.
In actuality, the technology has removed the limitations that drive promotion-driven spending, but the human brain still works on a logic than essentially hunter-gatherer. To extend the early hominid metaphor, we still believe that we should eat the easy-to-get berries now rather than wait for the big kill later when everyone will eat well and for longer.
Basically, we still think that we must act fast to take advantage of what is being offered to us right now. As a result, consumers buy more products via promotions than they would otherwise, and thus we see a rise in average basket values.
A Finnish national with extensive international sales and marketing experience, Marko Luhtala is the CEO and founder of RapidCampaign, an online promotion tool for retailers. Prior to this, Marko was Vice President of Retail at Nokia Europe. Luhtala has 20 years of management experience in the technology industry having held several senior positions at Nokia in Asia, Europe and the Middle-East. He is a frequent speaker and trainer in the area of mobile and digital marketing.
