[Editor's note: This is a guest post by Magnus Fredin, Vice President Sales Europe of Klarna. In this article Magnus takes a closer look on how online shops can increase their conversion rate by offering the right payment methods.]
Advertising campaigns, tweaking of product prices or displays, or even complete website re-launches are all measures commonly taken by online merchants to increase sales. When thoughtfully applied, these actions are likely to prove effective. However, there are faster and cheaper ways to increase your sales. The number one e-commerce metric is a site’s conversion rate. Increasing the rate of visitors that leave your shop as actual customers will decrease the cost of acquiring customers and boost your sales.
Offering the right payment methods is crucial. If you were to ask online shoppers throughout Europe, they would to a great extent say that invoice after delivery is how they would like to pay for ordered goods. In Germany, Europe’s largest e-commerce market generating 21 billion Euros in 2011, as many as six out of ten consumers would choose this payment method, before all others. However, merchants hesitate to offer invoice because of the potential credit and fraud losses it entails. Meanwhile companies such as Klarna cover these risks. They enable even smaller merchants that do not have the resources for internal invoicing, to offer their customers their preferred method of payment.
- Preferred Payment Methods in Germany – TNS study commissioned by Klarna (2010)
Another basic requirement for a satisfying conversion rate is having an intuitive and simple checkout. According to a study conducted by TNS Germany on behalf of Klarna, apart from feeling uncomfortable disclosing sensitive information (68%), the second most frequent reason for dropping out of a shop is a complicated checkout (60%). So, a rule of thumb regarding the checkout: “as simple as possible, asking only for the most necessary information”. Looking back at the invoice, this underlines its power as a conversion tool. Instead of bank account and credit card numbers, the customer only discloses name, address and birthdate – informations customers know right off the top of their heads. Safe, fast and simple.
Trust is key. Requiring a registration in your online shop is an impediment for the shopper. Registration takes time, and let’s be honest: your potential customer doesn’t only shop at your website. Being the shop that doesn’t require registration and remembering passwords might just give you that head start you need to become the customer’s preferred choice.
Customer data use and protection is a sensitive topic. Being absolutely clear about this will gain your customers’ trust and save you unnecessary trouble. A dedicated page with information about data protection compliance and policy will help you climb a notch on the cautious customer’s list and might save you some customer service errands.
Simplicity and safety aren’t mutually exclusive. Filling in your forms should be as easy as possible for the consumer. Mark the fields where information needs to be entered clearly, e.g. “Street name and number” instead of just “address”. Also, in case customers miss a field, show them exactly where, what needs to be filled in. The easier and more understandable the checkout process, the greater the probability that the visitor becomes a customer; especially during those last steps until the finish line.
Eight tips for an optimal payment process
- Ask only for the most necessary customer information, as easy in the process as possible
- Logical flow: Let customers choose payment method, and then fill in personal information
- Let go of mandatory customer registration
- Explain how you treat consumer data in an understandable way
- Have visible contact information
- Mark information fields clearly
- Show the customer where what information is missing or if the disclosed data is incorrect
About Klarna: Klarna provides a payment service for e-commerce. With Klarna, online merchants can offer their customers the option to pay after the delivery of the goods. Klarna assumes all credit and fraud risk so that sellers will always receive their money.