Every transaction contains myriad insights to help you grow your business, but our customers tell us they aren’t sure where to start to make sense of their payments analytics. The vast amount of data available to you can make it hard to know what to analyze to make smarter business decisions. Yet being effective at turning your payments analytics into actionable insights can help drive the future success of your business and be the difference between you and your competition.
“Businesses that capitalize on the opportunities they find within their payments analytics are winning today,” says Frank T. Young, President, Product, Integrated Services and Vertical Markets.
Reading Between the Numbers
You may have begun to scratch the surface on leveraging payments analytics to inform business decisions. Profits, losses, margins and sales transaction volumes, for example, can enable you to better forecast your business performance.
What else can you glean from your payments data? Here are five questions to consider to give your business a boost:
1. What is my customer lifetime value?
Customer lifetime value (CLV) is a metric that helps you analyze the amount a given customer is projected to spend with your business over his or her lifetime. The higher your customer lifetime value, the better the profits you can expect. This metric shows you the value of repeat customers and helps you predict future revenues for your company.
Here’s how to calculate CLV: Average purchase value x average purchase frequency rate x average customer lifespan = CLV
With this metric in hand, you can work to improve your CLV through customer retention strategies. Just improving customer retention by 5% can increase profits by more than 25%. It also costs five times more to attract a new customer than retain an existing one. Remember to calculate your CLV frequently to recalibrate your strategies based on how the business grows.
2. How are my marketing campaigns, price changes and/or competition affecting sales?
Did you create a new marketing campaign to drive more traffic into your store, onto your website or mobile app? Did you recently change the price on a particular product? Did your direct competitor just launch a new loyalty program or product?
Take these initiatives into consideration when examining your payments analytics. Look at the period of time when that initiative wasn’t in market and compare it to when it was in market. Year over year sales data is best if you have it. What you learn will give you the rationale to beta test in one location before rolling out broadly. Be mindful that external forces like weather, seasonality, economic conditions and changing trends are factors that need to be taken into account as well.
3. What’s leading to my shopping cart abandonment rate?
Shopping cart abandonment represents the number of online shoppers who put an item into a virtual shopping cart without completing the purchase. Calculating this rate can be beneficial to optimize your revenue. To do so, use this simple calculation: divide the number of completed online purchases by the number of virtual shopping carts created.
According to Statista research, shopping cart abandonment ranges from 71-81% depending on your industry. That’s extremely high but not all that surprising. “Studies show that the average person gets one interruption every eight minutes, while the average employee gets interrupted 56 times a day,” said Carl Sednaoui, Director of Marketing at MailCharts.
There are a number of ways you can recapture an online shopper who has abandoned their shopping cart including removing friction from the payment process.
4. What’s driving chargebacks?
Every business that accepts card-based payments is at risk for chargebacks, requests by the card network to refund the loss of a fraudulent or disputed transaction. Reconciling chargebacks is a cost of doing business but there are plenty of ways you can improve your chargeback rate:
- Be clear on your bills and invoices about your business
- Understand reason codes and appropriate responses
- Improve customer service
- Stay up-to-date on security standards and fraud trends
- Dispute chargebacks in real-time
In some cases, customers dispute charges.This happens for a variety of reasons like the merchandise was defective or the customer didn’t receive their online order. In other cases, chargebacks occur as a result of fraud. For example, the cardholder may not recognize the transaction on their credit card statement and informs their credit card provider who then flags it as fraud.
Too many chargebacks can negatively affect your merchant standing with your payment processor and be a cause of lost revenue, so it’s important to analyze your chargebacks and find ways to decrease them.
5. How should I forecast for the next season?
They say that the best predictor of future behavior is past behavior. This age-old saying gives a lens into how you can most accurately forecast for the seasonality of your business. Examine your payments analytics from the prior year over the same time period to study what went well and what didn’t go as planned.From there, you can begin to identify improvements for the next season. This can lead to creating operational efficiencies, increasing profit margins and generating additional sales.
These five questions are just a sampling of the insights you can derive when you shift to a data-driven mindset to grow your business. Once you identify the most high-value payments metrics for your business, make it a regular practice to review them and implement. This will put you in the small fraction of companies using data analytics to win customers and create loyal brand ambassadors.
You may now be thinking, “Where do I start?”
Look for a tool that makes mining your payments data simple like our new Merchant Portal. In addition to transaction reporting, it also offers dispute management to save you time and money, and in several markets, customer analytics that help you gain a broader perspective on your business including monitoring your online reputation via social media and online reviews. This level of insight helps you better align with your customers' needs to grow your profitability.
“Businesses that capitalize on the opportunities they find within their payments analytics are winning today,” said Frank T. Young, President, Product, Integrated Services and Vertical Markets. “Our new cloud-based reporting and analytics tool compiles a wide range of data into one user-friendly portal, making it easy to find and work with the information that will grow your business.”