When to use incentives in abandoned cart emails

There's been a lot of debate recently about when you should use incentives - for example free shipping, or a discount voucher, in abandoned cart emails. Some pundits say you should avoid them at all costs, some say that they increase revenue so they're a good thing.

So I wrote a guest blog post for our partners at dotMailer about it. Take a read here, the results may surprise you. (Updated on 18 March 2013 to include a copy of the article, below.)

Mike.

 

At Triggered Messaging, we’re often asked “should we use incentives in abandoned cart emails”?

It’s a great question. Incentives such as free shipping, money off, etc. can definitely help conversions when people abandon their cart.

A recent study, which matches our experience to-date, showed a conversion rate from abandoned cart messages of:

  • 18% without incentive
  • 21% with incentive

So, there’s a measurable but unexciting increase by using an incentive. The standard conversion rate from cart abandonment emails is fairly high, so the extra few percentage points gives only a small additional uplift. Our advice to most clients is not to use incentives. Why?

Consider this scenario:

  • An online retailer is making a gross margin of 20%
  • They are using a series of 3 recovery emails – the first after 30 minutes, second after 24 hours, third after 7 days
  • The final email has an incentive – voucher, discount, free shipping
  • 33% of recovered carts come from the incentivised offer, 67% from the first 2 emails
  • The incentive costs the retailer £5
  • Average Basket Value of £20-£50

Then the maths works out that clients will make more gross profit by not offering an incentive than if they do.

 

Here’s how the maths works out:

  With Incentive Without Incentive on
3rd Email
Abandoned value per month £10,000.00 £10,000.00 £10,000.00
Recovery rate 21.00% 18.00% 21.00%
Recovered Value £2,100.00 £1,800.00 £2,100.00
Gross Margin 20.00% 20.00% 20.00%
Gross Profit before Incentive £420.00 £360.00 £420.00
Average Basket Value £50.00 £20.00 £20.00
Number of Recoveries 42 90 105
Number of Incentivised Recov 42 0 13.986
Incentive Cost per Recovery £5.00 £5.00 £5.00
Monthly cost of Incentives £210.00 £0.00 £69.93
Gross Profit after Incentive £210.00 £360.00 £350.07

Of course, some retailers will have a higher margin or a higher ABV, or a lower incentive cost – in which case, offering an incentive can make sense.

If so, we provide anti-gaming features against serial abandoners too.

As always in marketing, the best advice is to test for your situation. Your mileage may vary.

 

 

abandonment incentives
Posted in Best Practice on December 4, 2012 at 09:14 by Mike Austin  |  Permalink  | 
  • E-mail
  • Facebook
  • Twitter
  • LinkedIn
  • Google+

Add Comment