A Practical Revenue Optimization Guide for E-Commerce Brands

Your profitability increases when you optimize for revenue in your store. 

However, it’s not a standardized, one-size-fits-all process that you can follow while optimizing revenue. Revenue optimization depends on various things, including marketing channels, pricing, acquisition, retention,  and expansion models in your e-commerce store.  

To optimize properly, you need to know the areas where you want to improve. This article will help you identify revenue optimization opportunities and use the necessary marketing strategies and business tactics to strengthen revenue inflow. 

Before diving deeper, let’s skim through the basics so we all are on the same page. 

What is revenue optimization? 

Revenue optimization is a way to earn more money from selling products or services. It includes strategies and actions that help a business maximize its sales revenue. 

When optimizing e-commerce revenue, you have ways to optimize for aspects that are slightly under your control, like product availability, shipping, and the experience of your customers. Some aspects are beyond your control, like market trends and the economy. This article will focus on the former aspects where you can apply revenue optimization strategies to increase total sales. 

It will involve increasing average order value, reducing cart abandonment, and several other methods. However, the strategies you’ll pick come later. First, you must research and analyze your data to understand what areas need optimization to drive sales revenue. 

Identifying opportunities to optimize revenue

A few broad areas contribute straight to revenue. To increase sales revenue, look for optimization opportunities in acquisition, retention, expansion, and pricing. 

Acquisition and retention

Website performance and marketing inputs are crucial to acquiring new customers. Your e-commerce store is the face that greets shoppers and helps them find what they need. Ensure this interface is optimized for engagement and conversions. 

You need to have a responsive mobile site as well.  Around 285 million people in the US will prefer shopping on their smartphones by 2025. Ensure you follow the best search engine optimization practices, marketing strategies, and required personalization to encourage shoppers to make purchases. 

However, it’s not a direct fix. You would need to study your channels and understand what’s working and what isn’t. 

Evaluate your business's customer acquisition costs (CAC). However, CAC considers one-time purchases and subscriptions equal. It’s better to consider your customers' lifetime value while stating what strategies work best for you.  

If you’re new to this, CAC means the total amount you spend to attract and close a paying customer. It includes everything from marketing to personnel to software or hardware expenses. On the other hand, lifetime value is the total amount a customer spends with you throughout their journey with your brand. 

You’ll need to control the CAC to optimize customer acquisition while ensuring you have the maximum lifetime value. This is research at a broad level. 

You’ll start analyzing your acquisition funnel when you go a step deeper. 

Here are some standard stages of an e-commerce acquisition funnel and the KPIs you need to look into: 

• Awareness.  Pageviews, reach, new users
• Consideration.  Returning users, visits to comparison pages, view of customer reviews
• Conversion. Add to the cart the conversion rate from checkout to purchase, recovery of abandoned carts
• Post-purchase. Revenue from referrals, repeat purchases, and revenue from repeat customers.

Analyzing these metrics in-depth will help you understand potential leakages in shoppers' acquisition and retention journeys. Leverage the strategies in the subsequent section to avoid these leakages and optimize for increased revenue acquisition and retention. 

Expansion 

Anything a customer spends over and above the initial purchase price contributes to revenue expansion, increasing the customer's lifetime value. Here, brands leverage upsell and cross-sell opportunities while guiding customers through their post-purchase journey. 

For example, a customer may receive product recommendations for computer peripherals such as a mouse, keyboard, or speakers after purchasing a computer. If the customer buys these items, your store's revenue expands.

These upsell and cross-sell opportunities let brands increase customers' lifetime value (LTV). The higher the LTV, the higher the return on investment from CAC. 

Pricing

Pricing plays a significant role in e-commerce revenue optimization. You'll be tagged as costly if you offer rates slightly above the mark. Conversely, if you offer rates lower than the standard ballpark, you’ll be seen as cheap. 

You don’t need to be any of those. Instead, you need adjectives like “value for money” from the different products and services you sell on your website. It’s advisable to refer to the ballpark values of products in your market so you can adjust their pricing intelligently. 

Some websites use dynamic pricing (like airline fares) that increases or decreases based on demand. However, if your product is simply good to have and not a must-have, avoid dynamic pricing. 

Below are a few ways to identify if you can use pricing changes to optimize your revenue. 

• Competitor analysis. Look at what your competitors are charging and what customer persona is purchasing these products for them. However, there might be a difference in the values that you and your competitors deliver. This will just be basic research. 
• Packaging and bundling. How you bundle your products matters. See if you can create different bundles of products based on shoppers' demographics. For example, you could sell grooming kits instead of a trimmer as a Father’s Day gift. 

When you have identified optimization opportunities, here are a few pricing strategies you can use: 

• Dynamic. Fluctuates based on demand.
• Cost-plus. Marking up a fixed percentage over costs.
• Competition-based.  Depends on how much competitors are charging.
• Value-based. It’s based on the estimated value of the product or service. 
• Price skimming.  A product is launched at a higher price point than the price. Drops as consumers become more familiar. 
• Penetration pricing.  A product or service is offered lower to capture the market. Later, the price increases. 

How to improve sales revenue in e-commerce

Below are the strategies that would help you improve revenue in e-commerce. 

Perform conversion rate optimization (CRO)

Conversion rate optimization improves your website's ability to get visitors to take the required action. This action can be a simple newsletter sign-up or purchasing a product. The goal can be to turn customers into leads, engaged prospects, or customers. 

It helps you get value from customers already on your website and convert them into paying customers.  

When you’re looking to optimize for conversions, you should keep an eye on: 

• Conversion rate
• Bounce rate
• Add to cart events
• Add to wishlist events
• Checkout events
• Final product purchases

There are multiple ways you can do CRO to optimize for e-commerce revenue. For example: 

• Improve the checkout process. You can do multiple things, like adding more payment options to speed up checkout, delivering social proof to create FOMO, and presenting various payment plans. 
• Use customer reviews and testimonials. Use user-generated content to show your products' true value. This will deliver credibility to shoppers and make them feel confident about purchasing. 
• Implement urgency and scarcity tactics. Scarcity and urgency are powerful motivators when it comes to persuading shoppers to purchase. They create FOMO and help people move forward with purchasing. Many businesses automate this with the help of tools like FOMO. 
• Personalize shoppers’ experience. Send push notifications based on shoppers’ previous purchases or deliver personalized recommendations based on their activity on your e-commerce store. 

Instead of doing things manually, automate these optimizations through software. For example, Fomo helps deliver social proof via push notifications while creating fear of missing out for the shopper.

The push notification can be based on real-time events in your shop, such as “Alicia purchased Rockersei shoes at $10. The sale ends in 3 hours.” 

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Increase website speed and load time

A fast-loading website ensures that users quickly access content efficiently. If the load time is high, people may leave and look for other alternatives. This impacts your brand’s reputation and leads to losing potential customers. Even a second delay can reduce conversion by 7%.

Conversely, a fast website will improve user experience by providing quick access to information. 

There are a few techniques you can apply to improve website speed: 

• Optimizing images. Large images slow a website down. You can compress or resize images without compromising quality to improve load times. Tools like TinyPNG or Canva Pro will help you optimize images for file size. 
• Minimizing CSS, JavaScript, and HTML. Removing unnecessary JavaScript or CSS elements will help you further improve load times. 
• Using content delivery networks (CDNs). CDNs reduce the distance data travels to reach the user. They store copies of your website’s content on several servers located worldwide.
• Making server-side improvements. Upgrade to a faster hosting service or optimize server configurations to improve website speed. 

Walmart observed a 2% increase in conversions for every 1-second improvement in page load time. Similarly, Amazon conducted an experiment in 2006, finding that every 100 milliseconds cost 1% of their revenue. If they had run the experiment today, it would have cost them nearly $3.8 billion. 

Improve user interface (UI) and user experience (UX) design

UI is how a website looks, and UX is how it feels and works for the people using it. A good UI/UX encourages visitors to become customers by making shopping easier and more enjoyable. 

When the experience is enjoyable, customers are more likely to stay on the website and make more purchases. You can ensure such an experience by keeping the design simple, consistent, responsive, and accessible. These are fundamental principles of a good UI/UX design. 

Users should find it easier to navigate menus and categories. Keep clear CTAs, like “Buy Now” or “Sign Up,” and let users know what to do next. You might also want to adjust the colors and fonts to suit your brand style. 

You can use various other steps to improve the UI/UX of the website. 

• Ask real users for feedback. It lets you identify areas for improvement from a user’s perspective. 
• A/B test design elements. Compare the performance of two versions of webpages to see what’s working. You can test for different button colors and copy to see what gets more clicks. 

You can use tools like Google Analytics, Hotjar, or Crazy Egg to see how users interact with your website. Leverage eCommerce personalization tools to optimize users' shopping experiences, such as sending them personalized recommendations and offers based on browsing history and preferences. 

Make your store mobile-friendly

More users are on their mobile phones than laptops. If a website is complex to use on a smartphone, it is attributed to a poor user experience. You must make your website design responsive enough to adjust based on screen size. The ideal way is to have a mobile-first website design approach where you design a website for the mobile experience and then adapt it for larger screens. 

Regularly test your website on various devices and look for issues like slow load times or navigation challenges. To identify and fix problems, you can use Google’s mobile-friendly test. 

Amazon and Lenskart are good examples of well-optimized e-commerce websites with a mobile-friendly design.

To improve user experience on mobile, you can also integrate mobile-specific payment options like Amazon Pay or PayPal. This will allow users to pay quickly and securely. 

Use upselling and cross-selling to maximize customers' lifetime value

Upselling encourages customers to purchase more expensive versions of items to increase their overall order value. For example, you can suggest a premium smartphone model with more features than the basic model they’re exploring. 

Cross-selling is different. Here, you suggest complementary or related products to customers. For example, suggest a mouse or software to someone purchasing a laptop.

However, you must make intelligent choices regarding when to suggest upselling and cross-selling. See if upgrades are standard in your industry. It’s advisable to upsell when a customer is exploring various options and the premium option delivers significantly high value. 

On the other hand, go for cross-selling when customers have already decided what they want to purchase. Suggest products that can increase the usability or enjoyment of the main product. Building products together is an excellent option to provide savings and optimize revenue. 

You can automate the delivery of this experience with an e-commerce revenue optimization tool like Relo. Relo predicts your customers' reorder rate. When it crosses a set benchmark, the software reminds them about the product they purchased over email or SMS. These reminders have personalized content, encouraging users to repurchase the product.  

Relo suggests: 

• Cross-selling and upselling opportunities
• Products based on customer behavior
• The success rate of your upselling and cross-selling efforts
• Insights to estimate what your customers need and offer them timely suggestions. 

Reduce cart abandonment

E-commerce cart abandonment occurs when customers add items but leave without purchasing them. They might do it due to unexpected costs, like high shipping charges or a confusing checkout process. Sometimes, there’s a lack of preferred payment options, or the shopper simply doesn’t intend to purchase. 

The e-commerce market loses close to $4 trillion annually due to cart abandonment, which occurs seven times out of ten purchases. 

Although there are less realistic ways to solve purchase intent, you can address the remaining reasons behind cart abandonment through these optimizations. 

• Implement a one-page checkout. It will simplify the checkout process and eliminate any complexities involved. 
• Provide a shipping cost calculator on product pages. This will allow shoppers to see the estimated shipping costs when they’re shopping rather than saving them for later. It will also help them avoid any surprises. 
• Include multiple payment options. Try integrating popular payment options that make it easier for shoppers to purchase. Add buy-now-pay-later (BNPL) options to simplify the payment process. 
• Send abandoned cart notifications. Remind shopper about products in their carts when there’s an exit intent through push notifications. If they’re already gone, you can email them about the same. Go with discounts and offers to encourage them to complete their purchase. 

Until revenue trends upward

Revenue optimization isn’t a one-time process. You need to iterate to make consistent optimizations as you grow your e-commerce store. Use these strategies and tactics to maximize revenue and ensure more profitability. 

It’s easy to understand the psychology behind e-commerce purchases. FOMO plays a fundamental role here.

‍Learn more about how effective FOMO is in marketing.