Abandonment rate

In marketing, abandonment rate is a term associated with the use of virtual shopping carts. Also known as "shopping cart abandonment". Although shoppers in brick and mortar stores rarely abandon their carts, abandonment of virtual shopping carts is quite common. Marketers can count how many of the shopping carts used in a specified period result in completed sales versus how many are abandoned. The abandonment rate is the ratio of the number of abandoned shopping carts to the number of initiated transactions[1] or to the number of completed transactions.[2] The typical shopping cart abandonment rate for online retailers varies between 60% and 80%, with an average of 67.91%.[3]

Causes

There are various reasons behind the high cart abandonment rate. In general, these reasons can be categorized as different risks that affect the user's decision to ultimately complete the purchase. Below are reasons that were identified in an empirical study.[4]

  • Complicated checkout process.
  • Hidden prices that come out at the time of checkout like taxes or high shipping charge.
  • Tough or lengthy registration process. No option to check out without signing up.
  • Limited payment options.
  • Decision to purchase from a land-based store (as opposed to online)
  • Entertainment value (e.g. placing items for fun or because of boredom)
  • Utilization as a research and organization tool
  • Desire to wait for a lower/sale price
  • Privacy/security concerns
  • Non-delivery fear (e.g. product is lost in delivery)
  • Difference in product description versus actual product

Another problem is that people have too many passwords. A MasterCard and University of Oxford study in 2017 showed about a third of purchases were not made because the person could not remember a password.[5]

Implications

As a result, there are some implications that can be applied to online retails.

  • Organizational use of cart
    • Users often abandonment not because of dissatisfaction but as an organizational method. Even abandoned carts serve as a source of useful information for both consumers and retailers. Retailers can collect interest info of shopper's and use that information to better present purchases and improve throughput in the future.
  • Entertainment Value
    • Consumers who use carts for fun or to alleviate boredom may still spread positive words about the online retailer and their experience, despite not completing the purchase.
  • Concerns about price and overall cost
    • Concerns about cost may not necessarily equate a lost sale, but rather an opportunity to make the sale in the future by offering a discount reminder whenever possible. A flat shipping rate may also positively influence the throughput versus a variable rate. Users will be more inclined to purchase more in one sitting as they no longer fear the need to pay excessive shipping.

Purpose

Abandonment rate as a marketing metric which helps marketers to understand website user behavior. Specifically, abandonment rate is defined as "the percentage of shopping carts that are abandoned" prior to the completion of the purchase.[1] This information is generally not used on a facility reservation report.

Construction

As an example, an online comics retailer found that of the 25,000 customers who loaded items into their electronic baskets, only 5,000 actually purchased:

  • Purchases not completed = purchases initiated less purchases completed = 25,000 − 5,000 = 20,000.
  • Abandonment rate = Not completed / Customer Initiation = 20,000 / 25,000 = 80% abandonment rate.[1]

References

  1. 1 2 3 Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0-13-705829-2. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language in Marketing Project.
  2. ↑ American Marketing Association Dictionary. "Archived copy". Archived from the original on 2012-11-21. Retrieved 2012-11-29. . Retrieved 2012-11-29. The Marketing Accountability Standards Board (MASB) endorses this definition as part of its ongoing Common Language in Marketing Project.
  3. ↑ Baymard Institute. http://baymard.com/lists/cart-abandonment-rate Retrieved 2014-03-11.
  4. ↑ Kukar-Kinney, Monika; Close, Angeline G. (2010-04-01). "The determinants of consumers' online shopping cart abandonment". Journal of the Academy of Marketing Science. 38 (2): 240–250. doi:10.1007/s11747-009-0141-5. ISSN 0092-0703.
  5. ↑ Johnson, Tim (June 16, 2017). "Forgot your password? You have too many and stores are losing business over it". Kansas City Star. Retrieved July 13, 2017.
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