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.)
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:
|Abandoned value per month||£10,000.00||£10,000.00||£10,000.00|
|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.