Five lessons from behavioral economics to decrease shopping cart abandonment

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June 17, 2021
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Five lessons from behavioral economics to decrease shopping cart abandonment

Shopping cart abandonment is both frustrating and expensive for merchants. Frustrating because much of the hard yards of acquiring the customer has worked and costly because all that investment is sunk without any return of revenue.

Neither is it rare – quite the opposite. Research from invesp finds that 65% of shoppers abandon their carts when shopping online.

And it can have an impact that extends far beyond the immediate loss of revenue. Our research suggests that, depending on the reason for the abandonment, more than half of people (53%) can be permanently put off an ecommerce store.

There is a multitude of reasons that people abandon their carts. Many of these are beyond a merchants’ control but others are not. And the choices merchants make when they build their checkout page and flow can actively encourage shoppers to complete their purchase.

To help you build a checkout experience that converts, we explore learnings from behavioral economics and psychology to understand what motivates customers to checkout and what triggers them to abandon their cart.

1. Ignite the pleasure principle

Part of the boom in online shopping can be put down to the pleasure principle — a Freudian theory that explains why humans take specific actions. In brief, it speaks to the fact that humans are hardwired to seek pleasure over pain by pursuing the immediate gratification of all needs, wants, and urges.

Through an ecommerce lens, that means getting access to the goods and services as quickly as possible and with the least amount of friction. Anything that compromises convenience is unlikely to be tolerated for long as it’s easy for people to find a more pleasurable experience elsewhere.

Instant gratification is by no means a new concept in ecommerce. Merchants spend considerable time and budget creating the perfect online shopping experience. But there’s one area merchants often overlook: the checkout.

This is a big and potentially costly oversight. As many merchants have told us: losing a customer when they’re trying to initiate payment is one of the most expensive mistakes you can make.

So, what aspects of the payment process should merchants prioritize? As a general rule, what’s essential for the rest of the site will also benefit checkout conversion. Speed is critical, and two things matter.

  1. Wait time for a page or form to load. Even a one-second delay in page response can result in a 7% reduction in conversions.Better still if the shopping cart can update ‘on-page’ when consumers add new items, costs and discounts.
  2. Speed of checkout. The average online checkout, and by proxy what a customer is likely to accept, takes five steps. Just as important is not asking a customer to re-enter the same information twice. Achieve this, and you’ll already be in the top half of websites for checkout efficiency.
Quick ideas for a better checkout

Remove unnecessary text and images from the page, so the customer only focuses on one thing.

Don’t ask the customer for information you don’t need, or at least make some fields optional.

Use smart forms and auto-fill software, so the customer doesn’t have to type in their information.

Auto-detect the credit card type (Visa/Mastercard/AmEx) from the card’s first four digits, and allow customers to save and retrieve their card details for future purchases.

Experiment with single-page and multi-page checkouts, learn which your customers like, and tailor their journey accordingly.

2. Ask only for necessary information

When customers reach the checkout, they want to do one thing: checkout. Anything that gets in their way decreases the chance of making a sale. Despite this fact, many merchants insist on making their customers jump through more hoops than needed. And one of the biggest conversion killers is a registration form.

More than a quarter (23%) of shoppers are likely to abandon their cart when forced to register before completing their purchase. Why?

The time it takes consumers to fill out the form delays gratification but the psychological effect goes deeper than the frustration of time. You don’t need to be a psychologist to know the uncomfortable feeling of unwanted attention. And with people increasingly sensitive to data privacy and email inboxes filled with endless newsletters, merchants are usually best advised to let a shopper shop and collect their non-essential details later.

Of course, there are instances where asking a customer to set up an account is unavoidable — subscription services, either for digital or physical goods, is a perfect example. And there are ways to make this process more seamless. Enabling autofill capabilities that automatically populate standard fields like email and physical addresses is one, but only if the customer has enabled that feature and kept their details updated.

There’s also an opportunity for merchants offering subscriptions to make the registration process feel organic and a part of the overall experience of aligning with the brand or service they offer. This might be through gamification or the positive reinforcement of all the great things a consumer can access once they’re onboarded.  

No matter the business, the key for merchants is to understand the minimal amount of information they need from their customers and to only ask for that at the checkout, nothing more. By following that approach, merchants will not only give themselves the best chance of securing the sale; they’ll also provide an experience that will likely bring that customer to their site again and again.

3. Establish trust at every opportunity

Merchants must always balance checkout convenience with security. Mitigating risk is not just prudent business. Research shows that online shoppers are willing to forgo some speed in the payment process for peace of mind.

In fact, when compared with other considerations — such as ease, the availability of different payment options, and speed of completion – online shoppers place a far higher monetary value on security. Our data finds that 71% of consumers say they actively look for encryption details and abandon their cart if concerned about security.

Strategically positioned customer reviews, independent ratings, like Trustpilot, regulatory badges and a clearly stated returns or exchange policy can provide a shopper with that last prod of confidence they need to follow through on their purchase.  

The most successful merchants understand that consumer trust is not only about payment security and will layer other ‘trust triggers’ throughout the shopping process. This includes being upfront about delivery costs, taxes and any other additional costs before their customers even reach the checkout. Doing so means their customers don’t receive any nasty shock at the checkout that may lead them to abandon their carts.

4. Avoid the paradox of choice

Giving customers a choice is usually considered a positive. But psychologists warn it can backfire. Among them is Barry Schwartz, whose 2004 book, The Paradox Of Choice, explains how freedom of choice can leave people feeling powerless and frustrated as they focus on the options they turn down more than the value of what they choose. Eliminating choice can, therefore, significantly reduce anxiety for shoppers.

Applied to an online checkout, the Paradox Of Choice may leave a merchant wondering how many payment methods they should offer. The answer is balance. We find that shoppers who cannot pay with their preferred method are not just more likely to abandon their carts; 56% may never return to the site. But at the same time, you should not overwhelm customers with too much choice.

In practice, that means you need to customize the payment methods you provide to your customers at the checkout to create the smoothest experience. And to achieve this, you need to deeply understand your customers and the ways they want to pay.

The leading merchants are doing this by analyzing their payments to spot trends in how people pay. The more granular you can go, the better. Preferred payment methods clearly differ from country to country. Still, even within a country, there can be subtle differences, especially when you drill down into age, gender and whether or not the shopper is based in a city or rural location.

Keep your eye on future payment trends so you can stay on top of what your customers want. Our research found that, in Europe, 80% of consumers intended using a digital wallet to pay while 53% were planning on using Buy Now Pay Later (BNPL) within the next 12 months. Ecommerce executives are even viewing cryptocurrencies as a necessary payment option with 36% saying customers increasingly want the option.

5. Re-engage distracted customers

Even when a merchant follows all these best practices and creates the best checkout experience possible, customers will still slip through the cracks.

The digital world is awash with distraction – instant messages and email being two of the biggest. Then there are a limitless number of distractions in the physical world — kids fighting, dogs barking and somebody at the door are just a few. There is some scientific evidence that human minds are hardwired for distraction, which means there’s always a risk of focus moving away from the checkout process.

But a customer is never lost — they might come back eventually. And when they do, merchants should allow the customer to pick up where they left off, rather than starting the shopping process again.

There are also opportunities to remind customers what they are missing out on. If the merchant has the potential customer’s details, they can send a cart-recovery email. This can be an effective way to alert them and get their attention back to the checkout page.

Data shows that cart-recovery emails can prompt 5% of ‘lost’ customers to return and complete their purchase. If the customer is shopping through a mobile app, push notifications are another tactic to remind customers to complete their purchases.

A checkout experience that converts

The prize for reducing cart abandonment is enormous. A nine-year study of large-sized ecommerce sites concluded that merchants could gain a 35% increase in checkout conversion by addressing design flaws. This translates to $260 billion worth of additional revenue for the U.S and EU sites alone in monetary terms.

It’s no longer enough for the checkout experience to simply be something that’s tacked on at the end of the customer journey without much care and consideration. Instead, it needs to be considered part of the overall customer experience and recognized as a strategic tool that merchants can use to capture more sales and earn more revenue.

See our case studies to find out how we're helping companies create a checkout experience that converts.

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June 17, 2021 8:04
October 24, 2022 10:04