For technical leaders in e-commerce, it’s all about the money. More so than in almost any industry, software development decisions in e-commerce need to be justified from a revenue perspective.
With many companies implementing hiring freezes, and as budgets tighten ahead of an “e-commerce winter,” allocating limited technical resources is more important than ever. From the CTO to the front-end lead, everyone needs to ruthlessly prioritize development and tooling choices to maximize store sales rather than opaque technical considerations.
How can engineering teams drive the largest impact on buyer behavior? While site speed and other technical performance factors are often mentioned in this context, it’s important not to get blindsided. If your online store is performing reasonably well, there are other factors you might want to look at. Chief amongst these is personalization, which can offer major improvements to conversion rates at a modest technical investment.
Technical Performance Matters! But …
We’ve all heard the statistics about how reducing loading times can increase conversion rates. There are claims that conversion rates are 250 percent higher if a page loads in under one second (Portent). Others recorded 11 percent to 70 percent impact (Bidnamic). Some mention a relatively modest 2 percent improvement in conversion rates for every one second shaved off page loading time (Walmart). An oft-quoted statistic says that Amazon.com found that every 100ms cost it 1 percent in sales (in 2006).
Other technical metrics often mentioned in this context include time to interact, DNS lookup speed, requests per second, and error rate — again looking at the time it takes for a website to render on a user’s device, and that it renders correctly.
We aren’t necessarily disputing these numbers, or the basic premise. Yes, if a website fails to load while the user is impatiently staring at their phone for 20 seconds, that user is going to get frustrated. Fast checkout experiences reduce friction at a crucial moment in the user journey and are likely to have an outsized impact.
But the Pareto principle applies — roughly 80 percent of consequences come from 20 percent of the effort. The data shows that most of the improvement happens near the bottom end of the scale. The difference between two seconds to four seconds is not as dramatic as the difference between four seconds and eight seconds. There are diminishing returns from chasing every millisecond of improvement. And it becomes more technically challenging to achieve without interfering with website functionality or design.
So what’s the bottom line?
- If your website is very slow (pages take more than 10 seconds to load), or frequently renders incorrectly on popular devices, fixing these problems should be top priority.
- If your website is reasonably fast (loads in under five seconds) and the error rate is low, it’s not clear that performance improvements will have the largest impact on conversion rate.
- If you’re anywhere in between, it’s going to depend on your specific industry, audience and circumstances.
The Impact of Personalization Can Dwarf Other Technical Improvements
If you’re ready to look at other avenues to invest your technical resources, you should consider real-time personalization. This will allow you to shape the user experience on your website — and the result can be more dramatic and impactful than a small improvement in technical performance.
This might seem like a controversial statement, but it shouldn’t be. In fact, it’s quite intuitive that offering a visitor to buy products that matches their buying intent will be more likely to sway them to purchase, compared to shaving off 300 milliseconds from the time it takes a product page to load.
Our own data — which comes from analyzing billions of sessions from leading online brands — supports this conclusion. Sites that have implemented real-time personalization see a 45 percent shorter purchase time, 15 percent digital revenue boost, and 15 percent decrease in journey abandonment. These figures compare favorably to the reported results from modest load time optimizations.
Modern E-Commerce Technology Reduces the Technical Overhead of Implementing Real-Time Personalization
It’s clear that personalization is effective. But that shouldn’t be enough to drive your decision. If you need a team of developers working six months to develop personalization capabilities, it’s going to be hard to justify. You might even think this effort would be multiplied by recent privacy changes that have made collecting user data for personalization more difficult.
While these concerns are valid, they should not be a deal breaker. Modern SaaS offerings can provide a ready-to-use personalization solution that’s implemented in days. By using artificial intelligence and predictive analytics, these solutions can also bypass the challenges of data privacy and cookies being phased out. They can compare sessions on your website to millions of similar sessions, and accurately predict which offers will drive conversions based on session attributes such as on-site journeys, device type and more.
The availability of off-the-shelf software should be a factor in your decision, as it can significantly reduce the total cost of ownership of a personalization solution. Other technical improvements would often require bespoke development work and might take a long time to pay off — making them much harder to justify in a revenue-first world.
Your Mileage May Vary, But Make Your Decisions Based on Data
The answer to most technical dilemmas is “it depends.” The question of how an e-commerce site should allocate IT resources is no different. In some situations, making your site that extra bit leaner and quicker will be the best choice. This would be especially true if your site is currently very bloated and slow, or you’re selling to users on slower networks.
However, it’s important to remember there are other scenarios. If your site performs reasonably well on the technical metrics, you might want to look at other ways to upgrade the user experience. Real-time personalization presents an opportunity to increase conversion and retention rates. It can be implemented quickly and cost effectively with modern SaaS solutions. If you’re looking to drive the most impact from your IT budget, you should take this into consideration.
Ohad Greenshpan is the co-founder and chief technology officer of Namogoo, pioneer of the world’s first digital journey continuity platform.
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