CAR (cart abandonment rate) has gained a lot of notoriety after it started to grow across the board over the last couple of years. The leading web analytics companies have sounded the alarm this year, after they noticed a multi-year trend that is headed in the wrong direction.
The speculation is that the CARs are negatively impacted by the rise of sequential screening in the new multiscreen world. Google’s research suggests that about 80% of users start a task, like shopping, on one device and then complete the purchase on the desktop.
Now that the news is out, companies are left scrambling to figure out what to do about it. CAR is a relatively specific metric that measures the rate at which people are falling out of the sales funnel. Before we can find ways to solve the problem we must better understand it.
This blog and few others that will follow, will put CAR under the microscope and help you better understand how to turn this challenge into your competitive advantage.
Just a spoonful of sugar helps the medicine go down
We really like how Avinash Kaushik is trying to motivate digital commerce professionals to pay more attention to CAR:
Site abandonment rate is an adorable metric, to me : ), for these reasons: Money, money, money baby. IMHO there isn’t a metric out there that can tell you a lot so quickly and any improvement you make to it will directly and immediately impact the bottom-line.
One would think that after 20 years of commercial use of the Internet, after the online business has grown to hundreds of billions of dollars in online sales, and marketing professionals spend tens of billions of dollars on online marketing; the picture will be super clear and there will be no confusion about the proper use of the CAR metrics.
Unfortunately, most of digital commerce businesses are still focused on demand generation and CAR metric, as key revenue indicators is not yet a subject of the daily business conversations.
Shouting from the rooftop
CAR = 1 – CCR
CCR stands for Cart Conversion Rate. The most common way of calculating CCR is the session based formula below:
CCR = #ORDERS / #ADD_TO_CART_SESSIONS
Or in plain language CCR is the percentage of all sessions with at least one Add-to-Cart click that resulted in the actual order.
It feels that the person who invented this metric wanted to create something that screams at you, telling you how much potential revenue growth you are losing every day.
No matter whose report you look at, the CAR rate in general is in a bad shape: 55%-80% (see the picture on the left)
Don’t get confused by different definitions of CAR (cart abandonment rate)
In technical terms, CAR is what is called in Web Analytics circles as a calculated metric. It combines goals and conversions to produce a new metric.
No web analytics solution provides CAR metric out of the box and there is no general standard on how CAR metric should be calculated. In addition to commonly used session based CAR formula above here are two additional flavors of the CAR metric formula:
Goal based formula:
The CAR is calculated on the basis of number of the total number of the Add-to-Cart clicks and the number of completed orders:
CAR = 1 – #ORDERS / #ADD_TO_CART_GOALS
This metric is relatively straightforward to implement since click goals and purchases are tracked independently. The problem is that a purchase can have more than one item, which then introduces a significant measurement noise.
Transaction based formula:
The CAR is calculated on the basis of number of transactions where visitor clicked on Add-to-Cart and the number of completed orders:
CAR = 1 – #ORDERS / #ADD_TO_CART_TRANSACTIONS
Since it normally takes more than a single visit (session) to complete the purchase, the transaction based formula is the most accurate and the most complicated way of calculating CAR metric.
CAR Really Matters
Looking at your own global site conversion rate and CAR metrics, it is quite logical to ask a question about which of the efforts below will be more beneficial to you:
- Option 1: focus on the top of the funnel to increase the number of visitors that added something to the cart
- Option 2: focus on the bottom of the funnel and reduce CAR
Translated, is it better to increase the conversion rate at the top or at the bottom of the funnel?
Let’s find the answer through a simple example. Imagine that the numbers below show the key metrics of a typical e-commerce site:
Let’s compare the impact of a 10% increase in conversion at the top of the funnel versus 10% increase in conversion of the cart funnel (10% decrease in CAR):
This simple exercise shows that the percentage improvement in the CAR is twice as valuable as any improvement at the top of the funnel. So, you better put CAR optimization project on your priority list.