Lean startup · Customer Validation

Would you consider the idea of a subscription commerce service validated at 1% conversion rate?

Claudia Goga Founder at CareToPets

June 8th, 2016

For a couple of months We've been working on a subscription commerce service for chocolate in Romania (it's new for Romania).

Our initial test was to see if people will pay for this type of service and we had 1 or 2 paying customers each month (some were repeat customers) at approx. 100 website visitors per month. (~ 1% conversion rate). Those customers gave us positive feedback.

At first it seemed little but comparing to other projects I've worked on, for example, for an affiliate marketing page I had 60 sales for at least 6000 visitors and I saw conversion rates around 1% or even below for some e-commerce sites in Romania.

We are trying to figure out what to do next. What do you think? Should we consider the idea validated and focus on increasing reach or should we focus on more testing (positioning, other ideas...etc) to see if they would bring better results?

Chicke Fitzgerald 𝗘𝗻𝗴𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗲𝘅𝗽𝗲𝗿𝘁 𝘄𝗶𝘁𝗵 𝗮 𝗳𝗼𝗰𝘂𝘀 𝗼𝗻 𝗴𝗶𝘃𝗶𝗻𝗴. 💡 I zig where others zag #͏z͏i͏g͏w͏i͏t͏h͏c͏h͏i͏c͏k͏e

June 8th, 2016

The travel industry routinely sees an average of 1-2% conversion, so the conversion rate itself is not bad.  The reason that it works in travel is that the average amount of the transaction is relatively high.  

You can increase conversion by tweaking the user experience, but not generally by simply driving more traffic.    

You have to make sure that your economics work at the 1% rate, so that if you drove more traffic, that the revenues from the conversion would cover the spending to drive that traffic.   

This is why the cost of acquisition should be one of your key metrics.  

Jerven Carter Founder/Chief Experience Officer JRC Development, LLC

June 8th, 2016

What is your customer acquisition cost for that 1%, and what is the customer life time value? Those two numbers should give you a better sense of it that 1% is viable and sustainable. --- Jerven R. Carter Founder/Chief Experience Officer JRC Development, LLC 877-671-6003[X] carterj@jrcdevelopmentllc.com www.jrcdevelopmentllc.com twitter.com/JRCDevelopmentL facebook.com/JRCDevelopmentLLC PROFLOW FREEDOM - CLARITY - PEACE of MIND

Hoofar Pourzand PhillyTalent.com

June 9th, 2016

Hey Claudia, I have a chocolate subscription business, based in PA. I also own, persianchocolates.com and we are launching a second business for a niche market. When you say 1% conversion, where does this traffic come from? If you are running facebook ads, I think anything less than 4 percent means your business is missing something, try Insta adds they proved better for us, also over three min videos worked better for us on fb, also we had pricing issues that I can better talk about after I see your services. In response to some suggestions saying you should scale up and then study the conversion I say NO, don't do that. Your numbers are very low and you need to fix your ship before setting it offshores sailing.
I will be glad to talk to you and go over your website with you and show you our work as well. Regards, Hoofar

Brendon Whateley Founder at Kugadi

June 9th, 2016

The challenge with the information you have given us is that we don't know the economics involved. If you are running advertising or outbound sales, you could be simply buying customers with no ability to recover those costs. Since you are talking about a subscription model, the answer lies in your unit economics. 
  • What does it cost you to get a customer? 
  • What is the value of that customer?
Many factors figure into those, and you may not have enough information yet to accurately calculate them. For example, you probably have no idea your churn rate because you don't have enough customers. The business is very sensitive to the real values of these values. And if your long term acquisition number is higher than the customer value, then you are "drawing dead." Remember, you can get as many customers as you like by handing them cash in exchange for placing an order! 

For your business to be viable, you need the ability to pay for your fixed costs. Thus, you need to calculate how many customers you need to break even. If that is a large number of customers, your current growth rate is not good enough. You need to get customers faster, get them more cheaply and/or get them to give you more money.

This link may be very helpful: https://www.saastr.com/saas-financial-plan-2-0-from-christoph-janz/ The site saastr.com is an excellent resource for this type of business.

Majed Elass UI Designer, UX Strategist and Interaction Enthusiast.

June 8th, 2016

Try increasing traffic and see what happens. 100 visitors a month isn't much. Try pushing to 100000/month and see if more converts.

Josh Levitan Product & Marketing Guy

June 8th, 2016

Like others have said, try scaling a bit and see if your conversions hold up.

Facebook is generally a good channel for UA for e-commerce.  You can target users in Romania who've liked chocolate-related things and/or other food subscription boxes, see what that costs you per click and if that converts the same.  That will also give you a sense of the potential market size/addressable audience.

Mark Neild Empowering quietly creative people to prosper through innovative yet authentic and engaging business models

June 13th, 2016

Before you scale your marketing you should be trying to refine your proposition, messaging and conversion process.  Try doing some split testing to see if simple changes can improve things.  1% conversion from cold is not bad, but you may be able to improve it by trying some remarketing to people that only partially converted - for example got to your purchase page but did not complete the transaction.  See where else your prospects are "leaking" to see what else you can do.  Also look at where your conversions are coming from and see if you can use that data to help refine your customer "avatar" or channels.  As others have said, do make sure that your acquisition is profitable before doing more - sounds obvious but I often come across people who think that more is better without doing the analysis.

GRAEME COX Engineer, PhD

June 10th, 2016

It amazes me how consistent approx 1% conversion rate seems to be for most sales funnels across a wide range of industries. I have seen it for $10k consulting to $10 product.  
So don't be dissaponted with that but see if you can optimise it and growth hack traffic to the landing page.